Changing Terms of Employment
• Employers may want to vary the terms of a contract for various reasons
• to react to economic circumstances ( e.g. “a credit crunch” )
• to respond to changes in the market place and/or technological advances
• to reorganise the business to make it more efficient or profitable
but please remember making the business more profitable by itself is unlikely to be seen as a sufficient legal reason - the employer should be under some kind of pressure to make the re-organisation or change.
• In particular, an employer may seek to change terms relating to;
• pay or benefits,
• working hours or shift patterns,
• duties or place of work.
• introduce or change restrictions on activities after termination of employment~ restrictions on competition ~
Change initiated by employer ?
• An employee who refuses a proper change may, ultimately, be dismissed.
• For that dismissal to be fair the employer must have a sound good business reason for the change
Catamaran Cruisers Ltd –v- Williams (1994).
• Practical point
• The employer must follow a proper procedure and there must be proper consultation.
• Practical point
• Establishing this reason is very likely to involve the employer in sharing financial and business information with the affected employees.
• Legal Phrasing and Framework
If a justified change cannot be agreed the employer may have to consider a dismissal.
• It is not dismissal for capability, conduct, ill-health, redundancy etc. Redundancy may however be an alternative.
• Dismissal of an employee for refusing to accept a change – defence is known as the “some other substantial reason” (“SOSR”)
• The normal rule : Tribunals must not substitute their own views but, instead, must consider whether the employers’ reason/s could legally constitute “SOSR” and, if so, whether the employer's decision to dismiss was a reasonable response
• a change in terms and conditions may be fair if the employer has a “sound, good business reason” for the change and follows a fair procedure ( the some other substantial reason or SOSR defence)
• an employee who refuses to accept may be dismissed and this may be
justified and upheld in Tribunal
(Catamaran 1994; Hollister v National Farmers' Union [1979] IRLR 238,
CA).
• The employer must have evidence of the advantages of the changes but
he need not show that the variation was essential.
(Banerjee v City and East London Area Health Authority [1979] IRLR 147,
EAT),
• Changes to wages ? Making the business more profitable in itself is unlikely to be seen as a good business reason - the employer should be under some kind of pressure to make the reorganisation.
Practical point :
If it is anti-competition ,the employer may be dismissing when the stable door is be open without much protection
• Opposing interests
• The tribunal will also take into account the interests of the employees when determining whether the employer had a good business reason for dismissal.
• The reasonableness (or otherwise) of the employee's refusal will also be relevant
• In one reported case the employer wanted to introduce a new contract which included an obligation to work mandatory and unlimited overtime. The EAT found that there was no evidence of an immediate need to introduce that requirement and that it was reasonable for employee to refuse to agree (his dismissal was, therefore, unfair).
Evans-v- Elementa
Introducing or Changing Restrictions on activities after termination
Restraint of trade and competition clause
• A number of employees were dismissed for failing to accept variations to their contracts that imposed new and more demanding post-employment obligations.
• In deciding whether the dismissals were unfair, the courts had to consider
2 questions:
1 Was there justification ~ a fair reason in law for the dismissals :
was there an SOSR defence;
2 Did the employer act reasonably?
What was the employer trying to achieve ? Introduction of clauses
that stopped ex-employees
• 1 year recruiting other staff
• A 6 month 10 mile geographical ban on joining any competing business
Clause 3 Anti-combine
"The Employee will not at any time during his employment and for a period of 12 months after the termination of his employment, seek to entice, persuade, solicit or employ, or provide any work, whether directly or indirectly, through any company firm, person or other entity, or for the benefit thereof, or agree to provide any such work to any person who was for the period of 6 months employed or engaged by the Company and who by reason of his employment is likely to be in a position to solicit or deal with Customers or Suppliers of the Company or cause harm to the business which is in competition with the Company or Group."
Clause 4 Anti-compete
• .. to prevent employees, for a period of six months after the termination of employment, in respect of any business which is or is likely to be wholly or partly in competition with the business of the employer, and which has any office situated within a ten-mile radius of any office of the employer at the date of termination of the employment, from doing in any manner any of the acts set out in clauses 4.1.1 to 4.1.3,
• 4.1.1 The employee shall not hold any position as director,officer,
employee, consultant, partner, principal or agent, which is the same or
similar to the position that he had when he was an employee of the Company,
or which, will or may involve him using confidential information in order
to fulfil the duties of that position.
• 4.1.2 The Employee shall not have any direct or indirect control or
ownership of any shares or debentures, whether jointly or alone in any
such business, save for investment purposes.
• 4.1.3 The employee shall not give any financial assistance whether directly or indirectly to any such business.
• Employer was imposing new and more demanding post-employment covenants
• “Other issue” (important in this particular case) Overall did the employer act reasonably?
• Employer argued that the changes were for a substantial reason, were justified and so was dismissal for refusing
• In the Employment Tribunal ( lowest “court”)
• The tribunal decided the covenants were unreasonably wide and therefore unenforceable, so that there was no substantial reason to justify these dismissals.
• In the Employment Tribunal the employer fell at the 1st hurdle.
• the dismissals would have been unfair anyway due to the unreasonable way in which the employer had behaved : the 2nd hurdle :
• the director responsible for introducing the new terms had been;
• verbally and physically aggressive and intimidating during discussions
• failed to warn staff that they might be dismissed if they did not sign
• behaved in a demeaning and hostile manner
….amongst other things …
On Appeal to EAT (next level) and then to the Court of Appeal
• The EAT and CA both held that the tribunal had been wrong on
“failing at the first hurdle”
• The question of whether or not the dismissal was for a fair reason.
• Seeking to introduce or extend a restriction on competition which is refused by the employee can be a reason for dismissal
• It held that, even if the employer’s new clauses were not legally sound, the dismissals could still be said to be for a potentially fair reason : the new clauses should not be scrutinised too closely
• However, on the facts in this case as the employer’s procedure had been
unreasonable, the employer lost.
(Willow Oak Devts Ltd –v- Silerwood 2008 )
Whether or not the employer’s new covenants are reasonable is relevant in deciding the fairness of a subsequent dismissal for refusing to agree, but not decisive .
• The EAT said and the CA agreed that tribunals should avoid getting embroiled in complex discussions about whether covenants are technically enforceable.
• However no matter how reasonable the proposed changes staff must be consulted properly and treated decently.
Summary
An employer who folllows a fair procedure has considerable scope to introduce an anti-competition clause into a contract
The employee’s choices and responses
• The EAT has issued a ruling setting out the 4 options an employee has when an empoyer makes a unilateral variation of contract
(Robinson –v- Tescom, February 2008)
4 choices : ARRS
• Accept the variation;
• Refuse to work under the new terms, and force the employer to take what steps it thinks appropriate;
• Resign and claim constructive dismissal;
• Stand and sue, by working under protest and seeking damages (either for breach, or for unfair dismissal).
Practical Point
• DON’T “mix & match” by agreeing then refusing
• In one recent case the employee agreed to the changes 'under protest' but then refused to work under the new terms.
( Robinson –v- Tescom Feb 2008 )
• The EAT held that the decision to dismiss him was fair as, having agreed (albeit under protest), he could not renege on his agreement - therefore he was refusing to obey lawful and reasonable instructions.
• The employee having “stood”, should have sued!!
Other seminar papers
- Discipline & Grievance Rules April 2009
- Privacy in work place
- Sickness in the Workplace March 2009
- Stress at work
- Variation of Terms by Employer
.......................................................................................................................................................
By Peter Miller, Head of Employment Law at Bowling
& Co
62 Broadway, Stratford, London E15 1NG
Tel: 020 8221 8000 Fax: 020 8519 5504
Direct Telephone: 020 8221 8065
Email: Peter.Miller@bowlinglaw.co.uk
Website: www.bowlinglaw.co.uk
This Article is written as a general guide and is not a substitute for
professional advice.
You are strongly recommended to obtain specific professional advice before
you take any action.