Variation of contract

Publication date

Wednesday, February 22, 2017

Approval date

In this article, Kathy Daniels, employment law author and lecturer, looks at the options that are open to you from an employment law perspective when there is a need to vary an employee’s contract of employment.

As businesses grow and develop, it is quite possible that you might want to change an employee’s contract of employment. This could be because you require employees to work different hours, to work at different locations or you need to make a similar change to their contractual terms. In all such situations, this will be a variation of contract. However, a contract of employment cannot be varied without agreement and hence care needs to be taken.

An important starting point is to look at the employee’s contract of employment to see if there is a flexibility or mobility clause that is applicable. If there is, it will make the change much easier. However, do not presume that you can make any changes due to the clause being in place. You must still act reasonably. For example, if the issue is relocation, the distance that you are asking the employee to relocate must be reasonable even if there is a mobility clause.

This was shown in the case of United Bank v Akhtar [1989]. The employee did have a mobility clause in his contract requiring him to move at the employer’s request. However, he was given less than a week’s notice to move from Leeds to Birmingham, was offered no financial assistance and his wife was unwell. He refused to move and resigned claiming constructive dismissal. This claim was successful because the actions of the employer had breached the mutual trust and confidence which is implied in all contracts of employment. There is a requirement, therefore, to ensure that you always act reasonably and that you address any individual concerns about a proposed change to a contract.

If there is no flexibility or mobility clause, the variation is more difficult but not impossible. In all situations, you must start by consulting with employees. If 20–99 employees are affected, you should consult for a minimum of 30 days and if 100+ employees are affected, you should consult for a minimum of 45 days. This consultation should be with employee representatives. In addition, you should consult with employees individually. It is important to be mindful of any individual circumstances which make the proposed change difficult, particularly if there is a possibility of a discrimination claim.

In Williams-Drabble v Pathway Care Solutions Ltd [2005], the employees were asked to change to work a new shift pattern which would have involved working some Sundays. Williams-Drabble was a Christian and wanted to attend church on Sunday, and the shift pattern would have made this impossible. She successfully argued that this was indirect religious discrimination because the employer was not able to show that it was essential for her to work the shift pattern.

If less than 20 employees are affected there is no requirement to consult with representatives, but you must consult with employees individually. This consultation must be for a reasonable amount of time, and you must try to address any concerns that the employee has.

However, there will be some occasions when consultation does not resolve the situation and the employee still does not agree to the change. In this situation, you really have three options.

  1. Abandon the change.

    This is not defeatist, but sometimes it is the best option. Consider whether the change is essential or whether there is a different way that the same result could be achieved. If you are going to pursue either of the other two options, you will need to have a good business reason and if your proposed change is a “nice to do” rather than a “need to do”, you might struggle with this.

  2. Impose the change.

    You could decide to impose the change and simply give notice to the employee that it will be happening. In the case of Robinson v Tescom Corporation [2008], the Employment Appeal Tribunal ruled that the employee has four options when a change is imposed.

    1. Agree to the variation.

    2. Resign and claim constructive dismissal (this would be arguing that the change is a breach of contract).

    3. Refuse to work under the new terms.

    4. “Stand and sue” (continue to work, but under protest and while seeking damages for the impact of the change). For example, in the case of Wethrill and others v Birmingham City Council [2006], the employer changed the car policy and a number of employees protested but continued to work. As they had protested from the very time that the change took place, it was agreed that they had not accepted the variation.

  3. Dismiss the employees and offer them re-engagement on the new terms.

    Another option, which is also risky, is to dismiss the employees and offer them a new contract on the new terms. If there is a good business reason for doing this, the dismissal could be fair for the reason of “some other substantial reason”.

In the case of Scott & Co v Richardson [2005], the employee was told that his hours were to change to include more evening work. As he was a debt collector, it was thought that he would be able to be more successful as people were likely to be at home in the evenings. He refused and after seven months of discussions, he was dismissed. This was found to be fair.

It is not for the employment tribunal to decide whether a strong business reason is “strong”, but you would have to show that you had a good reason for taking the action that you did, and that this is the reason for the action and there was no ulterior motive.

When deciding to impose a change, or to dismiss and offer re-engagement, it is always recommended that you take legal advice. In both situations, you could be left with no employees and a number of claims to face. So, it is always best to ensure that you are acting correctly before taking any action.