Amending the Employment Contract – a guide to the relevant factors

One of the features of Covid 19 has been the impact which it has had on many businesses.

There has been little or no effect on some business, some businesses have had to close completely while other businesses have had to survive by seeking to amend or vary the terms and conditions of their employees.

In this article, we consider some of the questions that arise in this context and hopefully provide some helpful advice for you whether you be an employer or an employee.

The fundamental point is that an employer cannot change an employee’s contract without the employee’s consent.

We now look at the following issues:

  1. Circumstances where an employee can change a contract where the employees’ consent has been forthcoming
  2. Where an employer can change an employee’s contract where prior consent has been given i.e. by the insertion of a variation or mobility clause in the Contract
  3. Steps to be taken by an employer where prior consent of the employee has not been given.

Where the employee’s consent has been given

The two most fundamental aspects to an employee’s contract are the hours to be worked and the payment conditions. These cannot be amended without the employee’s consent .Failure to do so can give rise to claim for constructive dismissal or a claim under the payment of wages legislation.

To avoid a risk to a legal challenge the employer should obtain the employee’s written consent prior to the proposed change.

An employer should also record in writing the reasons for the change, the commercial rationale behind same so as to avoid any possible allegation at a later stage that the employee was in some way coerced into agreeing. It would be advisable that there be some form of addendum to the contract to reflect this change. If the change arises as a result of a temporary factor such as Covid, the employee should insist on having this recorded i.e. that the change to which the employee has agreed is a temporary change only.

If an employee accepts the position without argument, then it would be much more difficult for him/her to bring a claim at a later stage.

 

Flexibility/Variation clauses

 It is not unusual for a flexibility/variation clause to be inserted in an employment contract to give an employer some discretion in relation to changes to the Contract . This does not however give the employer free rein as to the changes that can be made and any such changes much be exercised reasonably. It would be the generally held view that such clauses would not permit the unilateral reduction in wages or a change to core terms such as hours worked.

Mobility clauses

 Mobility clauses are often inserted in employment contracts to give an employer some flexibility in relation to the location where the employee is deemed to work. Again, these clauses must be reasonable in their content and also bed exercised reasonably by the employer. Regard must be had to the circumstances in the Supreme Court decision of O’Byrne -v- Dunnes Stores where the employee was directed to move from the employer’s shop in Tallaght to their shop in Blanchardstown without any prior advance notice or consultation.

In order to successfully rely on such a mobility clause, the employer should give as much notice as possible to the employee, provide detail of the commercial rationale for the proposed changes and allow the employee an opportunity to make representations in relation to the proposed changes.

Factors to be taken into account where an employee’s prior consent has not been obtained

 Many of the factors as outlined above must be adopted by an employer if he or she wishes to be able to justify making changes to an employee’s contract without consent i.e. consultation and engaging extensively with the employee and taking on board his/her concerns, explaining the nature and commercial rationale and the effect of such changes. Any decision to make changes to an employee’s contract must take into account the likely impact on the employee and the extent to which the burden of such changes is being shared between the employer and the employee.

Employers should be under no doubt that any unilateral changes to an employee’s contract of employment may give rise to a successful claim by the employee for constructive dismissal or (in the case of a reduction in salary) an award under the Payment of Wages Act.

Engagement and consultation with the employee are of considerable importance in all of these types of situations.

 

For any further advice on this or any other employment matters please don’t hesitate to contact Brendan Dillon or Conor White on 01-2960666