Changing terms and conditions of employment contracts fairly

In the New Year there has been great media speculation about whether we are heading towards a double dip recession. This is unwelcomed news for employers and employees who will both be faced with difficult decisions.



If you are an employer who as a result of a downturn in work is considering how to effect changes to your employees' terms and conditions then you might be in luck the EAT has provided you with some guidance in Slade and Others v TNT (UK) Ltd [2011] UKEAT/0113/11/DA. In this case, the four claimants were test cases for some 183 cases.

Slade and Others has expanded on the case law history surrounding the definition of 'some other substantial reason' which is a ground for fair dismissal (under section 98 of the Employment Rights Act 1996). The employer in this case found that they needed to cut costs due to the economic downturn; therefore they decided to discontinue the bonus it had previously paid to their employees.

The employer entered into consultation with the employees union and offered a settlement payment as an incentive for employees to enter into a new contract of employment which excluded the bonus. However when a mutually acceptable solution could not be reached the employer terminated the employees' contract of employment

The employer then offered to re-engage the employees under new terms and conditions, excluding the bonus payments and initially proposed settlement payment. The employees (bringing the claim) then accepted the new contracts but did so under protest and reserved their right to bring an unfair dismissal claim.

The tribunal were asked to decide:

1. Whether the dismissals were fair and

2. Whether the employees who did not accept the settlement payment were entitled to it.

The Employment Tribunal (ET) held in the employers favour on the basis that the employer had a valid business reason for dismissing and re-hiring its employees on the new terms. Further they held the employees who did not accept the settlement payment were no longer entitled to it, since they had not compromised their position to bring their potential claims unlike the employees who had accepted the settlement payments.

The EAT upheld the ET decision.

Therefore providing (and this is important) an employer (a) is trying to change the terms and conditions of his existing employees for 'some other substantial reason' (b) consulted has taken place and (c) an offer to effectively 'buy out' certain existing rights was made then the dismissal maybe fair.

If you are/have been effected by a similar situation and would like some further information in respect to this matter please do not hesitate to contact me on 01133 504030 (free initial consultation) or add a question on my blog.