Changes to Terms of Employment - Legal Issues

Changing terms of employment

The terms of employment for a specific employee will usually be subject to some form of change during the course of their employment. For example when an employee is provided with an increase in their pay the terms of their employment will have changed. This is a change which clearly benefits the employee and so any change in this manner is unlikely to be met with resistance on behalf of the employee.

In certain cases, however, there may be various possible changes to an employee’s employment which will not benefit the employee in a desired manner where the employee may be less willing to accept. In cases involving a change in this manner it is imperative that the employer makes this change legally to ensure it is legally binding on the employees.

Employment Contract

Some changes to the employment of employees may involve a change in the employment contract of those employees. Not all changes to employment, however, will involve a change in the employment contract – this is a decision which must be made by the employer.

What happens if a change will require an amendment to an employment contract?

If a change in employment requires an amendment to the employment contract then this amendment can only be done in accordance with the agreement of both parties to the contract.

Do all changes involve the amendment of a contract?

Some changes to the terms of employment will not involve or require an amendment to the contract and thus will not need the direct agreement of both parties. For example some changes will simply be changes to the various practices undertaken by the company.

What should an employer do when wanting to make changes to the terms of employment?

When an employer has decided to make changes to the terms of employment they must decide first whether these plans involve amending the employment contracts of those employees.

The first step in doing this involves identifying the existing terms of the contract. The existing terms of the contract may be one of the following:

  • Express
  • Implied
  • Incorporated

Express Terms

Express terms are terms that have been agreed explicitly between the parties either orally or in writing.

Implied Terms

Implied terms can become implied for a number of different reasons whether this is simply done through custom or company practice.

Incorporated Terms

Certain terms will be incorporated into the contract by statute such as the Equal Pay Act 1970 which will imply an equality clause into each and every employment contract by way of a collective agreement.

Will all terms be part of the contract?

Not all terms will be part of the contract. One of the best examples of this is whereby employees are given certain benefits from working with a company. These benefits may be stated to be non-contractual and are simply in place due to the policies of the company.

Can a term be contractual even if it is stated that it is not?

A term can be contractual even in the circumstance where it is stated that it is not. If an employer makes changes to non contractual aspects of the relationship they may open themselves to a claim that they have breached their implied duty of mutual trust and confidence.

Will an employer always need to make amendments to the employment contract?

If any variation which is proposed by an employer affects existing terms of the contract the employer will not be required to amend the contract in the following circumstances:

  • In a situation where the existing contractual terms are sufficiently broad to accommodate the employer’s proposals  
  • In a situation where there is a specific right for the employer to vary the contractual terms in this manner
  • Where the contract itself gives the employer a general power to vary its terms

It may be advisable that employers insert a clause to this effect when drafting standard employment contracts for their employees in line with the last point above.

Are there any legal issues that an employer must be aware of when inserting a clause such as this?

When inserting a flexibility clause an employer must be aware of the following legal issues:

  • That if there is any ambiguity in the terms of the contract then these will be construed against the employer
  • Specific flexibility clauses within an employment contract will be given a restrictive interpretation by the courts and in certain situations may be limited to the terms which are implied into the contract
  • Flexibility clauses which are deemed minor can in most cases only be used to make reasonable or minor administrative amendments that are not viewed as detrimental to the employee