How easy is it ‘in practice’ to change a Contract of Employment?
I often get asked if you can change an employee’s terms and conditions of employment. More simply put ‘can I reduce what I pay one of my employees?’ “I want to keep them but need to reduce pay (or hours of work or something else)”.
Can you change terms and conditions of employment?
The short answer is ‘not easily’. A contract of employment is a contract and can only be changed by mutual consent. If you are prepared to go through a consultation process, in some circumstances, it is possible. Otherwise, you are left with hoping that the employee agrees to the change or quite the opposite. If the change really ‘has to happen’, you may be faced with a decision to dismiss and reengage (referred to as ‘fire and rehire’) on new terms and conditions. This is a very risky position to find yourself in and is fraught with risk and potential litigation.
So what happened in this case?
Ms Khatun was employed by Winn Solicitors who are a firm of solicitors who deal with road traffic accident claims. Due to the Pandemic, the workload had significantly reduced and the employer, like many others during this time, decided to furlough half of their staff.
The staff were advised that they were required to agree to a variation in their terms and conditions and accept a 20% reduction on their pay and some would also be put onto furlough leave. The reduction in pay was a unilateral decision even if the employee was not furloughed. If the staff did not agree, they were advised that they would be dismissed. A ‘take it or leave’ scenario.
Why is this relevant?
As we know, 2020 was an unprecedented time for employers and many had no alternative but to furlough their staff. There were, however, a huge number of variations in how employers achieved this.
This particular case happened in March 2020, so very early in the Pendemic. At this time, many employers were just in ‘reaction mode’. Some employers were draconian in their approach, others much more consultative. Some just ‘did it’ and hoped for the best and some followed a fair procedure to achieve the result they needed.
This case is probably a first of many that will be tested by the Employment Tribunals system.
I am not sure which of these categories this employer fell into (I have my suspicions), but the outcome was not one that they would have wanted to achieve, I suspect. Every member of staff at Winn Solicitors did agree to the change that was proposed, with the exception of one, and that was Ms Khatun.
What happened next?
Ms Khatun was sent the new terms and conditions of employment and told to sign them and return them within 24 hours or she would be dismissed. She objected to this request and advised her employers that she was not willing to agree to the new terms because she was still performing her role as she was contracted to do.
If she was to be furloughed, she would consider the request, but this option was not afforded to her, so she refused to sign the new terms because they would have meant a 20% reduction in her pay.
This enraged her employer and the company’s Chief Operating Officer ordered for her to be dismissed without notice, pay in lieu of notice or any accrued holiday pay. The COO felt justified in making this decision because of Ms Khatun’s ‘inflexibility and perceived disinterest in the firm or her colleagues’.
Ms Khatum’s IT access was terminated that afternoon and she was only informed that her employment had been terminated when she queried why she could not access her IT remotely.
Hindsight is a wonderful thing, is it not?
One piece of advice I always give my clients is ‘think before you take action’ regardless of how angry, frustrated or desperate you feel at the time. A dismissal is a dismissal.
It is not easy to recover the situation once a dismissal has happened. You can make all the excuses you like, but if the procedure or decision was flawed, the dismissal is likely to be unfair regardless of the crime (as long as the employee has at least two years’ continuous service).
The clock starts ticking as soon as the employee has been dismissed and the employee then has three months from the date of the dismissal to bring a claim to an Employment Tribunal, after ACAS conciliation.
Ms Khatun did just that.
She decided to bring a claim against her employer for unfair dismissal and she WON.
The Employment Tribunal decided that the dismissal was unfair because the employer had failed to undertake a proper dismissal procedure. They did not accept the excuses given by the employer when trying to justify their reasons for the dismissal.
Interestingly though, this dismissal could potentially have been fair had the employer gone about it in the right way. If employers can demonstrate a sound business reason for making a contractual change then any dismissal as a result of an employee’s refusal to sign new terms could be deemed as ‘fair’ using what is known as an ‘SOSR’ (Some Other Substantial Reason’) dismissal.
There are only five potentially fair reasons for dismissal of an employee who has more than two years’ continuous service. They are Conduct, Capability, Redundancy, Statutory Illegality or SOSR.
In this case the ET decided the dismissal was unfair because:
- There had been no consultation with the employee over the contractual change.
- They did not give the employee the opportunity to talk through her reasons for refusing the new terms.
- They did not offer an appeal against the decision to dismiss.
Every case that proceeds to an Employment Tribunal is very ‘fact specific’. Tribunals will examine every element of the case and consider the individual facts of each case so there is no ‘one decision fits all’.
That said, many cases and outcomes could be avoided if employers just took time to consider the consequences of their actions and to adopt a correct procedure to achieve a desired outcome.
No matter what the circumstances, if employers do not adopt a correct and fair procedure, or act in a reasonable manner, even an excuse of a serious pandemic will not avoid a finding of unfair dismissal. Regardless of how bad things have become for that business, all employment tribunals will still expect you to act fairly and reasonably under any set of circumstances.