As the economic hit caused by COVID-19 pushes the UK closer to a recession, employers are starting to consider how to handle the crisis within their workforce by making redundancies and or changing terms of conditions of employment to reduce operating costs.
Last week, British Airways hit the headlines when it was reported that they were in dispute with unions in relation to a proposal to terminate employment contracts and re-engage employees’ on new terms. Whilst a mass dismissal and re-engagement exercise is generally the last resort, often it is the only option to push through changes that employers consider necessary for business efficiency reasons.
This article explores how changes can be made to terms and conditions of employment and sets out considerations for employers when managing a process of dismissal and reengagement, when that becomes the only option.
Changes to individual contracts of employment can be made in three ways, by consent, unilateral variation or dismissal and reengagement. Consent will always be the first point of call but where proposed changes relate to a reduction of pay and benefits, employers are likely to find consent is not forthcoming. It is always worth reminding employees of the alternative to reducing costs in this way which may ultimately be redundancies. As such, a reduction in pay may be considered the lesser of two evils.
In certain circumstances employers can consider unilaterally imposing a change, but generally unless the proposed change is a minor one, this is not advised. This is because employees can either resign and claim constructive unfair dismissal in response to the change, or remain in employment but bring a breach of contract claim, either at the point the change is made or in the future.
Only if an employer is not able to obtain consent, should they follow British Airways’ approach and seek to dismiss and reengage their employees on different terms. In doing so a fair process must be followed in order to be able to defend claims for unfair dismissal (which can be brought whether or not an employee accepts reengagement). A fair process would include a period of consultation, a chance for employees to make representations in relation to their proposed dismissal, but also proper notice being served to terminate the contract.
For senior employees or those with long service, this could be up to 12 weeks’ notice which will need to be factored into any timeframe for implementation of the changes. Due the drafting of legislation, a mass dismissal and reengagement exercise of over 20 staff at one establishment would also trigger the requirement to collectively consult and serve a HR1 notice which adds an additional element of complexity and administration.
In an effort to prevent and reduce redundancies, many of our clients have been in contact with us, requesting advice on how to change their employees’ terms and conditions of employment to reduce operating costs whether temporarily or permanently. As set out above, save for obtaining consent, there are risks associated with implementing changes and we suggest legal advice is obtained.
If you would like advice on which approach best suits your organisation, assistance with understanding collective consultation requirements and or how to mitigate the risk of claims, please contact any member of the team.