IMploy | Myth busting: you can vary an employment contract by giving notice

Myth busting: you can vary an employment contract by giving notice

Employment laws generate a lot of comment. Hardly a day goes by without the media reporting scare stories about the employment rights of UK employees, which are depicted as being anti competitive, unduly restrictive and in many cases overly generous.  

Each month, we are exposing some of the most common employment law myths and explaining the reality behind them. We are not pretending that employment law is easy – it isn’t, but generally it should not be difficult to get the basics right.

So far we have tackled the following myths:

1. In order to dismiss an employee, you must follow a particular procedure and if you do so, you can safely dismiss.
2. It’s not possible to retire employees anymore.
3. You can’t make a woman on maternity leave redundant.
4. Parents have the right to work part time.
5. An employer has to accept an employee’s resignation before it will take effect.
6. Employers must provide exiting staff with a reference.
7. Employers do not need to do pre-employment immigration checks on British or EU recruits.

If you missed these, click on the links for the answers.

This month we look at how employers can make contractual changes to their employees’ terms and conditions of employment. 

Myth

You can vary an employment contract by giving notice.

Busted

Generally, an employment contract can only be amended if the contract terms permit the change, or the parties agree.  

Employees are usually happy to accept beneficial changes to their contractual terms such as receiving a pay increase, additional holiday or other contractual benefits without any particular formalities being observed.

Any correspondence setting out these changes will be deemed to be incorporated into the contractual terms without you needing to issue a new contract of employment.

Difficulties can arise if you wish to make changes which the employee does not want to accept, such as reducing their hours, basic pay or location at which he works. Simply giving the employee notice of your intention to make a contractual change will not remove the risks of the employee bringing a claim against you for breach of contract, constructive dismissal or for breaching other legal rights.

The first step is to look at their contract of employment to see if you have an express right to vary the term in question, or if not, whether you have a general right to vary any of its terms and can rely on this to change the contract. 

The clause must be written in clear terms and any ambiguity will be decided in favour of the employee – not you.

However, let’s assume that you do have a clearly worded contractual right to make the change you require. Clearly if you act in reliance of this, you cannot be said to have done so in breach of contract. However, this does not mean that the change will be lawful in other respects. Tribunals will use the existence of implied obligations to restrict the way in which the express flexibility clause can be operated. You will be expected to act in a way that does not damage the implied term of trust and confidence between you and the employee and may also be expected to give reasonable notice of the change. What constitutes ‘reasonable notice’ in this context will depend on the nature of the change and how long it will take the employee to adjust to it.  

It will be more difficult to justify a change that significantly reduces the employee’s income, than one that requires him to work a different shift pattern or from a different location. 

Widely drafted clauses which purport to allow employers to make any changes to the employee’s contractual terms ‘from time to time’ are subject to particular scrutiny. Generally, the more detrimental the change to the interests of the employee, the harder the clause will be to rely on. You will usually only be able to rely on general flexibility clauses to make reasonable or minor administrative changes.

There are ways in which you can enforce significant changes to the employment contract without obtaining the employee’s consent but these are complex and are not without risk and these fall outside the scope of this myth buster.