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How to Change an Employment Contract

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Employment contracts outline the employment conditions, rights, responsibilities and duties for both employer and employee.

The process for an employer making changes to one or more employment contracts is different from an employee requesting changes to their contract. An employee is entitled to insist on certain changes if those changes are a statutory right. For example, employee’s in certain types of work are entitled not to work on a Sunday.

The terms of a contract

The rights and obligations or ‘terms’ covered in a contract can fall into 3 categories: express terms, implied terms and statutory terms.

Express terms – These can be established by referring to sources like collective agreements, written statements or company handbooks.

Employers may have included a flexibility clause as an express term in an employee’s contract, enabling them to change either a general or specific part of the contract. However, tribunals and courts often have a narrow interpretation of flexibility clauses so it is wise for employers to consult a legal professional if they are relying on a flexibility clause to change a contract.

Implied terms – These are considered too obvious to be included in the express terms of the contract e.g. an employee who is employed to drive must have a valid drivers’ license. These terms are considered so obvious that they are often not in writing.

Statutory terms – These are terms that are either implied or imposed by an Act of Parliament or Statutory Instrument. Any terms or changes in terms in a contract which conflict with statutory terms are likely to be void under the law.

Why change an Employment Contract?

Working relationships can change for a multitude of reasons. Employers will usually wish to change the terms of contracts with employees based on economic circumstances or a reorganisation of the business. The most commonly changed areas of a contract include:

  • Pay rates
  • Hours or days of work
  • Duties of work
  • Place of work
  • Supervisory relationships

Consult with your employees and representatives

You need to consult with every employee whose contract you wish to change as well as with their representatives. Representatives would usually be from a trade union or staff association.

The aim of the consultation is for you to reach an agreement with the employee in question. To do this the employer will need to explain the reasons for wanting to change the contracts and listen to alternatives. This process of consultation may well include some negotiation and it is sometimes wise for you to offer incentives for the employee to agree to these changes.

After an agreement is reached

Once a compromise has been reached you need to get written consent to the changes from the employee. This would usually either be a letter or an email response.

You also need to provide a written statement including the changes to their written statement of terms and conditions within one month of the change coming into effect.

If you cannot reach an agreement

If you do not reach an agreement with your employee it is wise not to impose the changes unilaterally on the employee as this may be a breach of contract and result in:

  • Your employees making a legal claim against your company for constructive dismissal (especially if the changes made are significant)
  • Your employees claiming damages for breaches of contract at a civil court
  • Your employees bringing a case against you at an employment tribunal
  • Negatively impacting employees moral and performance

If you have had extensive consultation with the employee and their representatives and still cannot come to an agreement then the right course of action would be to serve the employee notice to terminate the existing contract and offer to re-engage them on new terms. It is important to note that this is considered a last resort and by doing this you are dismissing the employee and therefore must follow a fair dismissal process.

Deal with contract changes delicately

The consequences of changing a contract without an employees’ consent or under a flexibility clause can be serious and far reaching. For this reason it is always advised that you consult a legal professional before taking action and dealing with a contractual situation. For free and impartial legal advice contact us now on 0161 115 6164.

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