Changing Terms & Conditions of Employment

Imposing changes in terms of conditions of employment, including introducing pay-cuts, unilaterally increasing or decreasing hours of work or demoting an employee can make an employer liable for claims of breach of contract or unfair (constructive) dismissal. In a unionised environment or one where there are employee representatives such changes are typically negotiated collectively and agreed between the employer and the affected employees' representative(s).

On an individual basis, employers can avoid potential litigation by entering into a consultation process with the employee concerned. As with disciplinary and grievance hearings the consultation process must be conducted fairly. The employee should:

• Be informed in advance of the consultation meeting of the proposed changes;
• Have the right to be accompanied by a work colleague or representative at the meeting;
• Have the right to both propose alternative arrangements to those proposed and have these considered seriously;
• Have the right to appeal against the final decision made.

If the consultation process has been conducted fairly and the employer can demonstrate sound business reasons behind the changes and the employee still refuses to accept the changes, the employer can be relatively safe in dismissing the employee and immediately offering to re-employ him or her on the changed terms.

In such a situation, there is no breach of contract but there is a dismissal. The employer should in such circumstances be able to demonstrate that the dismissal was fair because the changes proposed were based on sound business reasons and the process leading up to dismissal was also fair in the way it was conducted. As adherence to correct procedure would be critical in such circumstances, it is recommended that legal advice is sought before a decision to dismiss is implemented.

Fire & rehire
This controversial practice is employed by some employers to try to ease the path to making detrimental changes to an employee's Terms & Conditions of Employment.  By dismissing an employee and immediately offering fresh employment at inferior terms, the employer limits the employee's 'loss' (and therefore the value of any potential claim) to the difference between the old terms and new terms of employment.  As there is no significant break in employment, the period of continuous employment is unaffected.  It is possible that this practice will be made unlawful in due course.