On 10th May 2020 the Prime Minister announced a roadmap for the lifting or lockdown and a gradual return to work.
The next day the Government published its Covid 19 Recovery Plan setting out a three step plan for lifting restrictions. As part of this plan the Government is encouraging workers who cannot work from home to return to work and has published detailed guidance on how eight sector specific work groupings can safely return.
However the effect of the lockdown and the widely predicted economic recession means that many employers have been considering carefully the market for their products or services and how they could safely operate in the “new normal”. This may involve reduced output and new ways of working. In many cases this will involve changes to terms and conditions of employment. In Part 3 of our series we consider how employers should deal with these issues.
Following the lockdown we anticipate that there will be a reduced demand for our services. However we want to avoid redundancies where possible. What should we do?
The objective of the Coronavirus Job Retention Scheme was to minimise the number of job losses following the gradual lifting of the lockdown. Redundancies in some businesses will be unavoidable but should be seen as a last resort. It may be possible to preserve jobs by looking at other alternatives such as pay cuts, reduced hours, freezes on overtime and pay, removal or deferment of bonuses or commission and other cost saving measures. Where employees are coming back to work employers will be implementing safe working requirements such as social distancing and perhaps requiring changes to working hours to minimise concerns about using crowded public transport or to reduce the numbers in workplaces at any one time. Employers may also be considering making changes to sick pay entitlements, time off work/ holiday policies and remote working practices.
Very often such measures will mean a change in the terms and conditions of employment so employers should proceed carefully.
Where there is a change in terms and conditions of employment how should we proceed?
The first step is to see whether you can proceed with the agreement of employees. Imposing a change to terms and conditions without agreement creates the risk of legal claims. In workforces with significant numbers of trade union members, industrial action could result. In addition staff may resign or become difficult to manage.
There is a clause in the contract allowing the employer to make changes – can’t I use that?
Although these clauses are quite common, they are interpreted very narrowly as a matter of law and would rarely allow an employer to make any substantial changes such as a reduction in pay or benefits. However such clauses may potentially be used successfully where the changes do not involve a reduction in pay or benefits for example changes in start and finish times which do not involve an overall reduction in hours.
What’s the most effective way of seeking agreement?
Make a very clear business case to your workforce and clearly communicate with them. Engage early and convincingly with any recognised trade unions and consider creating an employee consultation group where the changes can be discussed and buy in sought. Explain the benefits of the proposals for example that redundancies may be avoided, jobs preserved, and the chances of the business surviving and indeed making a quicker recovery are increased. For pay cuts and other measures, consider whether these could be put in place for a fixed period as this will increase the chances of securing agreement.
You should also plan how you are going to record the agreement to the changes to terms and conditions of employment. Clarity is key and the changes to terms should be very clearly set out. The best way to do this is to obtain agreement in writing from each employee to the changes by way of either a “side letter” to the contract of employment or issuing an amended contract. However this may be impracticable for large numbers of employees so a different method of recording the agreement to the changes may have to be considered.
What if some employees don’t agree – what are my options?
There are likely to be some employees who refuse to agree or simply do not make a decision. In those cases employers have a number of options. The first is to make the changes anyway and rely on “implied consent”, the idea being that the employee has “impliedly” accepted the change by their conduct in remaining employed with knowledge of the contractual changes. Whilst the law does recognise this as a way in which contractual changes can take place, it is often difficult to predict with any certainty whether implied consent has been effective. For example how long does the employee have to continue to work under the new conditions before implied consent becomes effective? Relying on implied consent creates uncertainty but sometimes can be the best way to proceed.
One of the problems with this approach is that the employee can make it clear that they are “reserving their rights” under the existing contract - it this happens then it is not possible to rely on “implied consent”. In some circumstances the employee maybe able to “stand and sue” which means that they remain employed but they are able to make a claim for the value of the lost benefits under their old contract.
Another problem of imposing the change without agreement is that employees could take their opportunity to resign and make a claim for “constructive dismissal”. It is often not attractive for an employee to resign but for some, this approach may make sense. In particular there is a risk for employers that those employees who have been constructively dismissed will usually have departed free of any contractual restrictions for example agreements not to compete, and poach staff or customers. This can cause problems for employers wishing to rely on such clauses.
Are there any other options?
Yes. Given that “implied consent” creates uncertainties another approach is to terminate employment and offer to re-engage employees on the proposed new terms. This has the advantage of creating legal certainty as employees do not then have the option to “stand and sue”. If they remain in work after the termination then they will be working to the new contractual terms. Adopting this approach can therefore have advantages for employers. However, employers will wish to judge carefully whether terminating employment is the right thing to do, particularly at the present time. If termination is to be considered then employers need to adopt a “fair process” which includes consulting with employees over the business case and considering any reasonable ways in which a termination could be avoided.
Terminating employment also creates the risk of legal claims including claims of unfair dismissal. However, employers may be able to successfully resist these claims if they can show that they had a good reason for termination and that they followed a reasonable process.
Finally, care should be taken in adopting this route in that the law requires employers who are “proposing to dismiss” 20 or more employees at one establishment within a period pf 90 days to collectively consult with either a recognised trade union or with elected employee representatives. This obligation is not limited to redundancy dismissals but would also cover a dismissal and offer of re-engagement in an attempt to bring in a contractual change. It is often difficult to judge exactly when this obligation arises given uncertainties around “proposing to dismiss”. Does this arise when an employer is hoping to seek agreement but knows that dismissals may be necessary or later on in the process? There are also difficult issues in assessing whether the duty is triggered where the employer operates different business units or sites and is proposing dismissals across the business.
Legal claims for a breach of this duty often involve large numbers of employees. Employers who are considering the option of termination and re-engagement should take legal advice as it can be very expensive to get this wrong.
Are you planning on making any changes to your workforce as a result of the return to work following the easing of lockdown? For help and legal advice please contact Lee Jefcott or your usual Brabners contact.
