Employment law is predominantly concerned with protecting the rights of wor-kers but it also recognises that businesses require flexibility from their employees. When it comes to changing terms and conditions of employment – and where there is a pressing need for business change – the law will not simply allow the employee to stay on their existing contractual terms forever. The need to allow changes to be made while protecting an employee’s contractual rights is seen as a “balancing act” by the courts. How this process works in action has been helpfully re-stated in the recent case of Scott & Co v Andrew Richardson.
The case concerns a change to shift patterns. Scott & Co runs a debt recovery service in Scotland. Richardson was employed to collect debts by Scott & Co. He acted as a door-to-door operative (known as a sheriff officer) and he worked standard daytime hours, with occasional overtime in the evenings when required. A change in the way that debt recovery was carried out in Scotland encouraged Scott & Co to change employee hours in order to move onto a shift system. An emphasis on negotiating repayment, rather than seizing goods, meant that some employees regularly had to work an evening shift rather than doing overtime. Richardson objected to this change.
The perils of unilateral change
UK employment law doesn’t allow an employer unilaterally to impose changes to an employee’s contract of employment. Normally, any change requires the employee’s agreement. To secure this agreement, employers will normally consult with their employees over suggested changes.
Where all else fails and a reluctant minority refuse to agree to a change, an employer can only implement the change by dismissing those employees and offering re-engagement on the new, amended terms. Of course, this approach carries inherent risks. Employees have no obligation to accept; they can choose to claim unfair dismissal instead and an employment tribunal will then have to rule on whether the dismissal, based on the employer’s reasons and approach, was fair or unfair. Such was the case with Richardson. In his view, the move by Scott & Co to a shift system was an excuse not to pay overtime. Although his colleagues largely accepted the proposed change, Richardson held out against it and was ultimately dismissed.
The tribunal’s decision
At the initial tribunal hearing, Richardson succeeded in his claim for unfair dismissal. Scott & Co said that there was a sound business reason for dismissal. Legally this fell into the fair category for dismissal known as “some other substantial reason”, a catch-all provision normally invoked where there is a genuine business need to implement a change that might otherwise result in an unfair dismissal. However, the tribunal disagreed, based on the circumstances. It found that there was no fair reason for dismissal. The employment appeal tribunal overturned that decision and re-emphasised the degree of discretion that an employer has when seeking to re-organise its business. It found that unless a decision to change terms and conditions is “trivial” or “whimsical”, an employer should normally be able to pass the initial stage of proving that there was a potentially fair reason for dismissal.
When proving that potentially fair reason, an employer’s commercial discretion over its own business practices will be respected. It must be appreciated, however, that having made out a potentially fair reason for dismissal, an employer must go on to demonstrate that it acted fairly in all circumstances. This is a “balancing act” between the interests of employer and employee. The appeal tribunal went on to consider the factors from previous case law, which indicate whether a dismissal is reasonable in these circumstances. These are likely to include:
the benefit to the employer from the changes;
whether the dismissal could be considered reasonable in light of the number of employees who accepted the changes;
(where relevant) whether a trade union accepted that the change was reasonable and was ready to recommend it.
On this point the appeal tribunal decided that Richardson’s case should be sent back to another tribunal for reconsideration. As the consultation process adopted by Scott & Co had convinced Richardson’s colleagues to accept the change, then applying the guidance from the appeal tribunal, it appears that he might have some difficulty in winning his claim the second time around!
In light of the indications given above, how will an employer normally implement contentious changes to terms and conditions of employment? Normally, an employer will engage in a process of consultation to sell the change to employees. This consultation will commonly take place with employees and/or their representatives, allowing the sound business reasons for change to be presented to the workforce and any incentives offered for the change to be explained. Only when consultation is exhausted without full agreement would the remaining employees have their existing contracts terminated upon notice with an offer of re-engagement upon the revised terms.
Clive Day is a solicitor at Eversheds LLP.