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Variations to Contract

Introduction
A contract of employment is like any other contract - the starting point is that the terms are established at the outset and cannot normally be changed by either party without the agreement of the other. For example, a pay rise is a change in the terms of the contract, but one to which employees will invariably agree!

Employers may wish to change the terms of a contract because of changed economic circumstances or due to a reorganisation of the business. Possible areas of change could include pay rates, hours or days worked, duties, supervisory relationships or place of work. If there is any decision upon the part of the company to implement changes of any kind it is important that full consultation with the employees takes place so as to minimise the of litigation.

Potential Issues
If an employer purports to change the terms of the employment contract without agreement, then the employee may in certain circumstances have a claim for unfair constructive dismissal, or possibly for unauthorised deductions of wages. They may also be able to reject the purported change and to continue to work in accordance with the original contract.

How Can Contracts be Varied?
An existing contract of employment can normally only be varied with the agreement of both parties. Changes may be agreed on an individual basis or through a collective agreement (ie an agreement between an employer or employer's association and a trade union(s)). An employer who is proposing to change an employee's contract of employment should fully consult with that employee or his or her representative(s) and explain and discuss the reasons for change.

Variations of contract can be agreed verbally or in writing. It is preferable for any agreed changes to be recorded in writing. Where a variation in the contract has been agreed and the changes concern an item which must be included in the written statement of particulars of employment, the employer should give written notification of the change to the employee, within a month of the change taking effect.

Collective Agreements
A contract of employment is in law an agreement between an employer and an individual employee. Variations in the contract need that individual's agreement. However, an employer and employee can agree, either expressly through a clause or reference in the employee contract, or through an implied term, that relevant changes in terms negotiated by a trade union are incorporated into individual employee contracts. This may be the case whether or not the employee is a member of the relevant trade union.

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Express Terms
A contract may contain express terms which allow an employer to make changes to the contract. Through mobility or flexibility clauses, for example, an employer may expressly reserve the right to require an employee to work at a different location, or to alter the employee duties. The contract may therefore be drafted to permit foreseeable changes to be made within the terms of the existing contract, e.g. where there is a potential need to transfer an employee to a different workplace. Employers should note that any change in a contractual term may be challenged as discriminatory or unreasonable and must be objectively justified.

Sometimes tribunals and courts may consider that the contract contains implied terms which may authorise or prevent alterations of working onditions. For instance, it would be usual for an employee to be expected to work within reasonable daily travelling distance of his or her home.

Variation without agreement
If an employer imposes changes in contractual terms without the agreement of the employee, there will be a breach of contract. The employee can accept the breach and continue to work under the amended contract. However, where an employee continues to work under revised terms without objection, then in due course he or she may be regarded as having agreed to the changes.

Where an imposed change involves a significant change to the contract, e.g. a reduction in pay or alteration of working hours, an employer may well be acting in fundamental breach of contract. Where there is a fundamental breach, the employee may treat the breach as bringing the contract to an end. In such circumstances and subject to having the necessary qualifying service, the employee may make a claim of constructive dismissal to an employment tribunal. In coming to a decision the tribunal will take into account whether the employer acted reasonably in all the circumstances of the case. Alternatively, the employee may continue to work within the varied contract but under protest and making it clear that he or she does not accept the terms. In these circumstances the employee will retain the right to seek damages from the employer for a breach of contract.

Whether or not the breach is a fundamental one, the employee may sue for damages for breach of contract in the civil courts, or if the employment has terminated, the claim can be made to an employment tribunal, which can award damages up to a maximum figure, currently 25,000.

Termination of Original Contract
If, after consultation, agreement on a variation of contract has proved to be impossible, an employer can - having observed any relevant procedural agreements and consultation requirements - terminate the original contract, with proper notice, and offer a new contract to the employee, including the revised terms. Normally this will not constitute a breach of contract and if the employee accepts the new contract, continuity of employment is preserved. The termination of the original contract will be a dismissal and it will be open to employees to claim unfair dismissal before an employment tribunal, subject to having the necessary qualifying service. This will be the case whether they leave employment by refusing to accept the new contract or are dismissed. The tribunal must then decide whether the dismissal was fair or unfair in all the circumstances.

Help and Advice
It is imperative that Contracts of Employment are formulated correctly. Here at Pure Employment Law, we are able to offer you that service. For users of the Transport's Friend website we can also offer free initial advice to discuss your requirements. You can contact us on 01243 836840 or visit our website www.pureemploymentlaw.co.uk

Further Reading
Please use the links below for further advice and guidance.

Variations to Contract - ACAS PDF logo
Contracts & Variations
Varying a Contract - Labour Relations Agency PDF logo

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