Considerations when changing terms and conditions
Business case: When making the decision to change an employee(s) terms and conditions of employment, the first thing an employer needs to consider is what the business case is behind making such a change. Changes should only be considered if there is a legitimate business need to do so. Legitimate business needs could be, for example, reducing an administrative burden or cost saving reasons. Whatever the reasoning is it is important to make this clear and specific to the organisation as this will need to be communicated to employees at consultation stage. Moreover, this business case must be credible, and the company should be in a position to show data to back this up, for example, financial data. Employees are more likely to agree to a change if they are aware of the exact reasons behind doing so.
Plan: When making a plan to change any particular term and condition of a colleague's employment it is important for employers to have a line of sight on when this change is due to take effect. This means that when consulting with employees there is an awareness of the date by which agreement will need to be reached and when the change will be implemented. It is important however, that these planned dates are flexible and take into account any delay that may be caused by non-agreement – identify the unexpected first and put contingency plans in place.
Consultation: As a contract of employment cannot be changed unilaterally it is a requirement that employees agree to the change. It is vital for employers to consult with the employee(s) concerned or their representative early in the process and discuss the proposed change. Commencing this process early gives the employer the opportunity to meet with employees individually if they have particular concerns and consider alternative options. In situations where a group of employees are going to be affected it is useful for an employer to make a group announcement and assign a manager to listen to any individual concerns. In a unionised environment, the importance of consultation with union representatives early in the process should also not be underestimated. The business case is particularly important at this point as it must be able to stand up to the scrutiny of potential aggrieved employees. Employers should keep concise notes at this point and, in particular, should retain minutes of any issues raised by employees.
Mutual agreement: It is recommended for employers to consider what condition, if any, could be improved to offset against any impact the change to the terms and conditions will have. This will need to be considered carefully, particularly in circumstances where the initial change is as a result of financial reasons. Alternatively, employers could consider whether the change can be phased in over a period of time to promote employee acceptance.
Written notification: Once agreement is reached it is crucial for employers to ensure this is followed up in writing. This can take the form of a contract addendum or a letter outlining the changes. Obtaining the express consent should also be sought at this point. Section 5 of the Terms of Employment (Information) Acts 1994 to 2014 states that “the employer shall notify the employee in writing of the nature and date of the change as soon as may be thereafter, but not later than 1 month after the change takes effect”.
It is recommended that employers include a standard flexibility clause within their contracts. Notwithstanding the fact that these clauses are a basic foundation for agreeing to change, they cannot be relied on alone and agreement should still be sought when amending an employee’s terms and conditions.
Contractual terms and conditions or work practices?
When making changes to the way in which work is done, employers should consider whether the change constitutes a change to terms and conditions of employment or merely a change in work practices. If considered reasonable, a change in work practice (a change in the way employees carry out a particular role for example) can be made without an employee’s consent. This point was explored in the UK case of Cresswell v Board of Inland Revenue  ICR 508. In this case a group of employees, whose role involved performing an administrative function relating to the PAYE tax scheme, claimed that the company was in breach of their agreed contract when the scheme was computerised. The employees refused to operate the new scheme and continued to carry out the role in the manual way. The company refused to pay the employees on this basis. The court took the view that although the change to the way in which work was done was considerable, it did not fall outside the original job description and therefore the employer did not breach the agreed terms and conditions.
Similarly, Kelly J delivered a High Court decision in the case of Rafferty, Ward and the National Bus and Rail Union v Bus Éireann and Irish Bus  2 IR 424 surrounding the issue of work practices. In this case the court examined whether the company was entitled to change rostering arrangements and abolish certain tasks while replacing them with other tasks. The employer argued that due to financial difficulties they were left with no option but to put cost saving measures in place. They maintained that as these amendments were not contractual alterations but changes in work practices the company could use its discretion when altering these in the best interests of the organisation. The court acknowledged that the employees were being required to carry out tasks to which they had not previously been expected to carry out however stated that the principal task of the employees, who were bus drivers, remained to be driving. Kelly J went on to state that “in my view Irish Bus is correct in saying that the changes which it seeks to bring about are ones which involve work practices rather than changes in conditions of service”. Accordingly, the court found these were changes to work practices, which the employer was entitled to make.
Custom and practice and implied terms
Many employment relationships will involve some degree of terms and conditions established through custom and practice. In practical terms, rights established through custom and practice may be rights to sick pay or ex-gratia redundancy payments. These are terms that are not expressly agreed however are notoriously well known within the organisation or industry. The ‘custom and practice’ test was adopted by Maguire P in O'Reilly v Irish Press  71 I.L.T.R 194. In this case it was established that the practice must be “so notorious, well-known and acquiesced in that in the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties…it is necessary in order to establish a custom of the kind claimed that it be shown that it was so generally known that anyone concerned should have known of it or easily become aware of it.” This test was adopted by Hedigan J in McCarthy v HSE 21 ELR 165 in a case in which a public servant sought to challenge a decision of the HSE requiring her to retire at age 65. The High Court held that the existence of a retirement age of 65 in the public service is so well known that it would have to be regarded as an implied term in every public servant’s contract of employment. It is critical therefore, as the case law reaffirms, that employers not only view the written contract of employment when considering changes but have a deep understanding of any implied terms that may also exist.
Making a change unilaterally
The case of Patrick Holden v Holden Plant Rentals Limited UD105/2015 displays the difficulties that can arise when an employer changes an employee’s terms unilaterally with no consultation. The worker commenced employment in January 2013 and his hours of work were 8am to 6pm. There was a dispute between the parties as to when the worker received his contract of employment. The company was of the view that the contract was given upon commencement of employment however the worker contended that he did not receive his contract until October 2014. The contract stated that the employee's hours will be allocated ‘as and when’ available. Following this the claimant was informed that his hours of work would change as a result of a new commercial contract. The worker contended that he could not work the new hours as it was not suitable to his personal circumstances. Following this the worker began attending for work at his normal time and on each occasion, was told to go home. The worker queried was he being ‘let go’. It was the Managing Director’s evidence that staff are generally flexible in terms of working hours and the claimant was the only employee who refused to change his hours. The Managing Director put forward that the worker continued to attend for work at 8am and he became extremely aggressive and abusive towards his colleagues. The Managing Director contended that the worker departed the employment of his own accord and was not dismissed. The Tribunal found that it was a term of the worker’s unwritten contract that his hours of work were 8am to 6pm Monday to Friday. Furthermore, it was found that the company sought to unilaterally change a fundamental term of the worker’s contract, namely, his working hours, without any consultative process or effort to secure agreement on the part of the worker. The company acted unilaterally and without any regard for the position of its employee. The Tribunal found that the worker was unfairly dismissed when he objected to a fundamental change to his terms and conditions of employment being imposed on him. The company was not entitled to change the workers terms of employment due to the legitimate fact that work practices needed to be changed to meet specific requirements of a new client. The worker was awarded €30,000.
The issues that arise when changing terms and conditions in an employment contract remain complex. Employers should be cognisant that any change that is dealt with incorrectly can not only result in a claim under employment rights legislation such as under the Payment of Wages Act 1991 or a constructive dismissal claim under the Unfair Dismissals Act 1977 to 2015, it could also potentially result in industrial relations issues or a breach of contract claim in the civil courts. Member companies are advised to contact their Ibec executive for further information and advice.
Ibec Knowledge Centre
Wednesday, 24 January 2018