Practical Guidance - Changing Contracts of Employment: The Law

It’s normal for employee's terms of employment to alter, for example, their pay or holidays may increase, and most changes will be uncontroversial, but what happens when employers want to change something the employee will be less inclined to accept? 

Employers don’t panic there are options available to you, you can make changes but you need to know how to do so safely. This blog highlights what employers need to be aware of, how best to go about varying contracts of employment and how to make the changes legally binding while minimising any possible disruption. Any questions at all please contact the writer, Rebecca Hardy on rh@kidwellssolicitors.co.uk.

                                                                                  Implementing Change…

A contract can only be amended in accordance with its terms or with the agreement of the parties. Some changes won’t need the contract itself to be amended as they will be changes in practice or can be dealt with by an annex, some however will need specific wording looked at and amended.  

Tip: It is always worthwhile to have a clause in the contract reserving the right to amend terms, this doesn’t give you open access to change whatever you feel like but it will assist with the variation process.

Affecting the contract…

The employer should first decide if its plans involve amending the contract itself. This involves identifying the existing terms of the contract, which may be: 

• Express. These are terms that have been explicitly agreed between the parties (either orally or in writing).
• Implied
• Incorporated. Terms may be incorporated into the contract by statute (for example, the Equality Act 2010

Tip: Just because it is not written down in the contract, it doesn’t mean to say it is not a contract term of employment.  

Some terms will not be part of the contract. These include, for example, benefits that are stated to be non-contractual and policies which merely provide guidance on how the contract will be carried out.  

Tip: Sometimes a policy can become contractual even if it is not stated to be, for example, through custom and practice, so to vary without following proper procedure may land you in hot water. Employers should also avoid altering non-contractual policies in a manner that is likely to destroy trust and confidence, since this will breach an implied term and you may end up facing claims for breach of contract and constructive dismissal.

Contractual right to vary the term…

If the proposed change will affect existing terms of the contract, the employer will not need to amend the contract if: 

• The existing terms are sufficiently broad to accommodate the employer's proposals.
• There is a specific right for the employer to vary the contract in this way.
• The contract gives the employer a general power to vary its terms. 

However:

• Any ambiguity in the terms of the contract will be construed against the employer.
• Any specific flexibility clauses will be given a restrictive interpretation by the courts and may be limited by an implied term (for example, an obligation to exercise the clause reasonably).
• General flexibility clauses can probably only be used to make reasonable or minor administrative amendments that are not detrimental to the employee.

Implementing a binding change…

What happens if you want to make a change but there is no contractual right or the employee doesn’t agree?  

1.   Express Agreement  

Get express agreement to the new terms i.e consult with the employee, explain what is happening and why the changes are necessary. Employees appreciate being kept in the loop, they will feel valued and will be more inclined to work with the Company if the reason to vary is transparent.  

Always get the employee’s agreement in writing.  

Offer some form of benefit/consideration in return for the variation. For example, an extra days holiday.

2.  Unilaterally imposing the change and implied agreement 

Unilaterally impose the change and use the employee's conduct to establish implied agreement to the new terms. 

This strategy is more likely to be effective if there is an immediate practical effect on the employee (for example, a pay cut) and they continue to work without objecting.  

Tip: Employers should not assume that silence is sufficient to indicate implied agreement, especially if there is no immediate impact on the employee. If you are unclear speak to an Expert.  

If the employer imposes the change it will be a breach of contract. The employee can  

1. Comply with the new terms but work "under protest" and claim for breach of contract or (if their wages have been reduced) unlawful deductions from wages.
2. If the change is sufficiently fundamental, resign and bring a claim for constructive dismissal.
3. If possible (for example, where there is a change in duties or hours), refuse to work under the new terms.

 3.  Terminating and offering re-engagement on new terms

 If the employee does not agree to the change, terminate the existing contract and offer continued employment on the new terms. If you want to follow this option PLEASE get advice first.

 This approach avoids the risks involved in unilaterally imposing the change on the employee. However you must remember the risks of potentially facing the following claims:

1. Wrongful dismissal, unless the employer gives the appropriate period of notice (or makes a payment in lieu of notice).
2. Unfair dismissal, unless the employer can establish a potentially fair reason for dismissal and show that it acted reasonably in deciding to dismiss the employee for failure to agree to the change.

A refusal to agree to a change in contracts will usually amount to some other substantial reason for dismissal under section 98 of the Employment Rights Act 1996 (SOSR), provided there is a sound business reason for the change.  

Acting reasonably includes following a fair procedure and so the employer must give the employee sufficient information about the reasons for their possible dismissal, and the opportunity to state their case at a hearing.

 Tip: If you’re proposing to make changes to several employees' contracts, the dismissals will be treated as redundancies for certain purposes therefore it is important you get advice on what procedure to follow as it is different from normal practice.   

Potential headaches

If the employer is proposing to make changes to an employee's terms in connection with a transfer of an undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 apply, then additional issues arise. Any changes will be void if the sole or principal reason for the change is the transfer itself or a reason connected with a transfer which is not an economic, technical or organisational reason entailing changes in the workforce.

Tip: If you’ve gone through a recent TUPE transfer seek advice before you make any contractual changes.

Claims of indirect discrimination could arise if the proposed change impacts unfairly on a particular employee or group of employees by reason of their sex, race, disability, religion or belief, sexual orientation or age.

Royal Voluntary Service celebrating 75 years

Today, 75 years on from its founding as the Women’s Voluntary Services, WRVS is dropping the W from its name and relaunching as the Royal Voluntary Service with a pledge to help two million older people over the next 10 years.

The decision to change its name comes as the charity recognises the need to meet the demands of an ageing population and to be more visible to men as well as women. And fresh research reveals the scale of this need – 26% of over 75 year olds say that they think they will need support in future in order to stay living independently in their own homes, with almost a third of men (29%) stating that is the case.

They support older people by giving time and practical help to help them get the best from life. All the volunteers – ordinary men and woman of all ages and ethnicities – love spending time with the older people.

Founded as the Women’s Voluntary Services in 1938, the organisation was initially formed to help recruit women into the Air Raid Precautions movement, helping civilians during and after air raids by providing emergency rest centres, feeding, first aid, and assisting with the evacuation and billeting of children. By 1943 the organisation had over one million volunteers and was involved in almost every aspect of wartime life from the collection of salvage to the knitting of socks and gloves for merchant seamen.

After the war Royal Voluntary Service transformed to become a leading organisation in the field of social care, pioneering many of the practices that formed the cornerstone of modern social services. Since then, the work of Royal Voluntary Service has evolved and the charity now provides practical help to older people that enables them to enjoy an improved quality of life.

For full article go to http://www.royalvoluntaryservice.org.uk/

Employment Law Case Update

Equality Act covers post-employment victimisation after all (EAT)

Onu v Akwiwu and another UKEAT/0022/12 

The EAT has held that the Equality Act 2010 protects individuals against post-employment victimisation, departing from its previous decision in Rowstock Ltd and another v Jessemey.

In the EAT's view, the natural meaning of the Act suggests that post-employment victimisation claims are permitted although even if this were not the case, the relevant wording is sufficiently ambiguous to enable it to be interpreted as providing post-employment victimisation protection, as required by EU law.

Continuous Service

Koenig v Mind Gym Ltd UKEAT/0201/12

The EAT has upheld an employment judge's decision that an employee's continuous employment did not begin until the date on which their contract provided they would start work. The fact that they had attended a meeting before that date at the employer's request did not bring the start date forward.

The EAT held that the question of when an employee starts work for the purposes of determining their continuous employment is a question of fact and degree.

It appears unlikely that attendance at ad hoc events, at which their attendance is not required (despite being encouraged to go) and for which they are not paid, will lead to the conclusion that they had in fact started work for continuous employment purposes

Where significant activity is performed for the employer's benefit by someone in anticipation of being in employment, it will be easy to infer that the parties had agreed that the activity would be performed under a contract. However, the activity has to be evaluated and it will be a matter of fact and degree whether that gives grounds for, or compels, the conclusion that it was done under a contract of employment. Even then, that could be a contract of employment separate and distinct from the one that the parties had previously agreed was due to start on a subsequent date.

Collective Redundancy Consultations

Kelly and another v Hesley Group Ltd UKEAT/0339/12

The EAT have recently considered whether a tribunal erred in concluding that an employer complied with its duty to consult collectively in respect of proposed redundancies.  

The EAT has held that a tribunal erred in concluding that members of a pre-existing consultative body were "appropriate representatives" for the purposes of collective redundancy consultation. The tribunal failed adequately to consider whether the representatives had authority from the affected employees to be consulted about the proposed dismissals. In particular, the tribunal did not have regard to the purposes of the body; did not address the fact that some of the members of the body were co-opted rather than elected; and surprisingly stated that it was irrelevant that the body was expressly "non-negotiating". The EAT remitted the matter to the tribunal for further fact-finding and consideration. 

However, the EAT upheld the tribunal's decision that the wording of TULRCA as to when the collective consultation duty is triggered (when the employer "is proposing to dismiss" 20 or more employees as redundant) must be given its natural meaning. This was despite that fact that the Collective Redundancies Directive states that consultation obligations are triggered when redundancies are "contemplated" rather than "proposed".

 Appeal

Chaplin, Ladele & McFarlane

In January 2013, the ECtHR rejected the complaints of Mrs Chaplin, a nurse whose employer prevented her from wearing a crucifix on hospital wards because of health and safety; Ms Ladele, a registrar who was dismissed by a council for refusing to conduct civil partnership ceremonies; and Mr McFarlane, who was dismissed by Relate for refusing to counsel same-sex couples.

It is reported that Mrs Chaplin, Ms Ladele and Mr McFarlane will submit papers to appeal the ECtHR's decision to the Grand Chamber of the court. They are purportedly claiming that British courts are applying double standards towards Christians for "political" reasons. 

ECJ Clarifies scope of “Disability” and “Reasonable Accommodation”

HK Danmark, acting on behalf of Ring v Dansk Almennyttigt Boligselskab and another

Guidance has been given under the Equal Treatment Framework Directive, taking account of the EU's obligations under the UN Convention on the Rights of Persons with Disabilities

The ECJ has delivered a judgment on the scope of "disability" and "reasonable accommodation" in the Equal Treatment Framework Directive, drawing on the provisions of the UN Convention on the Rights of Persons with Disabilities, which is binding on the EU.  

The court held that the concept of disability does not necessitate a person's complete exclusion from work. A person who can work to a limited extent, or who is fit for work albeit only part-time, can still be disabled. Neither is disability limited to congenital conditions or those caused by accidents. The origin of the disability is irrelevant; a limitation resulting from a temporary illness that hinders full and effective participation in professional life may suffice, if its effects are sufficiently long-term. 

The court also held that the concept of reasonable accommodation in Article 5 of the Directive refers to the elimination of barriers that hinder the full and effective participation of disabled persons in work on an equal basis with others. A reduction in working hours may be a reasonable accommodation, if it enables the worker to remain in employment. It is for national courts to decide whether the burden on the employer is disproportionate, taking account (among other things) of any costs entailed, and the employer's size and financial resources.

Disability Discrimination Strike Out

Patel v Lloyds Pharmacy Ltd UKEAT/0418/12

The EAT has upheld an employment tribunal's decision to strike out a claim of direct disability discrimination where there was nothing to indicate that those who interviewed the claimant had any knowledge, or could be imputed with knowledge, of his disability.

 Although discrimination claims are fact-sensitive and strike-out is a "draconian step" that should only be taken in exceptional cases, the EAT upheld the strike-out on the basis that the claim had no reasonable prospect of success. The mere fact that there are unresolved factual issues does not automatically mean a case should proceed. Taking the case at its "reasonable highest", the EAT held it could not succeed, even though it was theoretically possible that one of the respondent's witnesses might admit to discrimination under skilful cross-examination. It would be wrong in principle to allow an apparently hopeless case to proceed purely in the hope that "something may turn up" during cross-examination.

For facts and decisions of any of the above cases please contact Rebecca Hardy rh@kidwellssolicitors.co.uk

Enterprise and Regulatory Reform Act 2013

Commencement dates

In a press release published on 25 April 2013, BIS published commencement dates for ERRA 2013. Section 103 of ERRA 2013, entitled "Commencement", reflects some of these dates.

On 25 April 2013, section 10 came into force prohibiting Acas from disclosing information relating to a worker, employer or trade union in connection with the provision of Acas services.

Section 98 also came into force on this date, which allows the government to legislate to give tribunals the power to order an equal pay audit.

On 25 June 2013, the following reforms will come into force:

• EAT judges will sit alone (section 12).
• The qualifying period for unfair dismissal will not apply where the main reason for dismissal is the employee's political opinions or affiliation (section 13).
• The power to vary the unfair dismissal compensatory award (section 15).
• Changes to whistleblowing legislation in sections 17, 18 and 20, such as the introduction of a public interest requirement and the removal of the good faith requirement. However, section 19 seemingly does not yet have a commencement date. This section will introduce personal liability on employees who victimise colleagues who have made protected disclosures and make their employer vicariously liable for their actions.
• The introduction of tribunal powers to make deposit orders in relation to claims or responses, and award both costs and expenses to litigants in person (section 21).
• Changes to the way in which increases to the limit on a week's pay is calculated (section 22).
• The curbing of the EHRC's remit (section 64).
• The abolition of the Agricultural Wages Board for England and Wales (section 72).
• The power to make caste an aspect of race discrimination (section 97).

Kidwells will continue to keep you updated and invite you to contact Rebecca Hardy or Sarah Everton should you have any questions or wish to discuss the 2013 Employment Law changes further.

Shami v Shami

(2013) EWCA Civ 227

LEGAL POINTS

Legal Charges- priority-declaration in foreign court as to beneficial interest

SUMMARY

A declaration obtained by a wife in divorce proceedings in Israel to the effect that her husband held a property in London on trust for them both was not binding on a third party charge who was accordingly entitled to registration of his charges.

FACTS

This is a complicated family property dispute involving a residential property in London and matrimonial property proceedings in the Israeli civil courts. The husband was the sole registered proprietor of the property in which the wife claimed a beneficial interest. The husband had granted two legal charges to his brother, in 1995 and 2006. The wife disputed the registration of the 1995 charge by a caution. She disputed the 2006 charge by a restriction to prevent its registration. The Adjudicator directed that proceedings be commenced in the High Court. The court had to determine whether the wife had a beneficial interest and whether the brother was entitled to protect his charges by registration.

At first instance, the deputy judge held that the husband was bound by finding the Court of Family Affairs in Tel Aviv that the property was jointly owned by the husband and wife, but that this finding did not bind the brother who was not a party to the proceedings. The deputy judge went on to uphold the registration of both charges. The wife appealed, contending that the 1995 charge be removed from the register and that the registration of the 2006 charge be refused.

HELD

On the facts as found by the deputy judge, there was no challenge to the sums secured by the 1995 charge, and no pleaded case that the 2006 charge was no genuine. The wife’s allegation that the brother was not a purchaser in good faith was irrelevant. The brother was not bound by the Israeli judgments and that as against the brother the wife had not established that the property was jointly owned. Accordingly the brother was entitled to register his charges.

COMMENT

For a note of the first instance decision see the February 2012 Update. The first instance decision involved one notable point of law which was not touched upon an appeal-that where a wife asserted a beneficial interest in a residential property in priority to a legal charge, the judge made a finding (amongst others) that even if the wife had a beneficial interest which was protected by actual occupation, it would be overreached by a legal charge taken to secure debts, in which there were no capital monies payable at the time of the charge (applying State Bank of India v Sood  [1997] Ch 276 and Dearman v Mylocare [2001] 1 All ER (D) 376 as noted in Fisher & Lightwood, Law of Mortgage, 13^th Edition, para 40.2).  

The decision on appeal emphasises the limitation that a declaratory relief or order as to the beneficial ownership of property obtained by one spouse against the other in divorce proceedings will not per se bind a third party charge unless she can assert an overriding interest on normal principles pursuant to Paragraph 2, Schedule 3, Land Registration Act 2002.