Published 04 August 2012
A recent employment tribunal case has highlighted how difficult it can be for employers to change an employee’s contract of employment and has also shown how employers need to check that their standard employment contracts give them enough flexibility.
The case involved the high street chain, Boots, and the amount they pay to their employees for working on a Sunday.
Employees who had worked for Boots since before 1st October 2000 were paid double-time for hours worked on a Sunday, while their colleagues who had started with the company more recently were paid less. Boots wanted to harmonise the rates of pay and move the double-time employees onto the same lower Sunday rates that applied to their colleagues, and in April 2011 the company wrote to the employees informing them of this change.
This then led to some of the employees whose pay was being reduced bringing employment tribunal claims and the tribunal had to decide whether in reducing the rate of Sunday pay, Boots was breaching the employees’ employment contracts.
The tribunal decided that for those employees who had started with Boots before 1st October 2000, pay at double-time for hours worked on a Sunday was a contractual entitlement and so by reducing that rate of pay the company was varying the employees’ contracts and was doing so without their agreement.
The tribunal said that the only way in which an employer can change an employee’s contract of employment without breaching that contract is either to get the employee to agree to the change or alternatively to make the change by using an entitlement under the contract allowing it to be changed without consent. However, that second option is only available to an employer if the employee’s employment contract makes very clear that the employer has the power to change the contract. In Boots’ case, the employees’ contracts did not contain such a power and so by changing the contract without the employees’ agreement, Boots was acting in breach of contract.
Breaching an employment contract in this way is risky, as it can possibly lead to employees resigning and making claims of unfair constructive dismissal. Alternatively, the employees can choose to stay put, but still make tribunal claims for unlawful deductions from pay.
Employment partner at Berg, Nigel Crebbin, comments: “This case shows how important it is for employers to make sure that they review their standard employment contracts. It’s best for the contract to give the employer very clear flexibility to make changes to the contract if the needs of the business require it.
“However, it’s also important to tread carefully even if the employment contract allows for changes to be made. Implied into every employment contract is an obligation on the employer to maintain a relationship of trust and confidence with its employees and if the employer uses a power to vary the contract and does so in a sudden and arbitrary way, this can then lead to problems. Even if the employment contract contains a power for the employer to make changes, it’s still best for employers to consult with their employees before making any significant changes, so that the employees understand why the amendments are needed and are given plenty of advance warning. That makes sense both from a legal point of view and also in terms of staff morale and good industrial relations.”
(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.)
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