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Employment Law

Varying a Contract of Employment

Changes in working relationships can be caused by a change in an employee’s personal circumstances or as result of the employers business altering.

Change can be subtle and is often accommodated by both parties without difficulty. More radical changes in the employment relationship should be recorded.

What is a contract of employment?

A contract of employment is simply an agreement between two parties, the employer and the employee, as to the provision of specific services by the employee for the benefit of the employer in exchange for remuneration and benefits.

A contract of employment can be either written or oral. Both types of contract are recognised by the courts.

The terms of the contract can be:

1. Express – explicitly agreed by the parties, either in writing or orally. This can be by reference to external sources such as the written statement of terms and conditions or employee handbooks, etc.

2. Implied – terms which are not expressly agreed between the parties but it is obvious that they from part of the contract. For example, the implied term that the employee will not steal from their employer is obvious enough not to include it expressly in the contract of employment.

3. Statutory – terms which are included in the contract by exercise of law, such as through an Act of Parliament or Statutory Instrument.

Varying a contract of employment/Reasons for varying

There are various reasons why an employer or employee may wish to vary the contract of employment. For the employer, these include a change in economic circumstances and restructuring or reorganisation of the business. For the employee, the reasons may relate more to improving their employment conditions by requesting extra holidays or for child care or a myriad of other personal and family reasons.

How contracts can be varied

In order to vary a contract of employment both parties must agree to the change. Thus, the employer cannot unilaterally change the employee’s contract of employment. Where an employer unilaterally varies an employment contract this may be considered as a breach of contract.

The best way for an employer to make changes to an employee’s contract is to consult with the employee and discuss the reasons for the proposed change. An employee is much more likely to accept changes if they are consulted. Offering or considering alternatives can meaningfully progress this process.

Variations to a contract of employment should always be noted and agreed in writing.

Some contracts of employment expressly allow the employer to unilaterally make changes to the employee’s terms and conditions. Such clauses can be specific and relate to specific terms or be formulated as a general power for the employer to alter the terms of the contract. Employers who have included such terms in their contracts of employment with their employees should first seek legal advice if they wish to use such a term to vary the employee contract. This is because the courts and tribunals have tended towards a narrow interpretation in order to ensure fairness to the employee.

Employee contracts can also be varied by a collective agreement with the employer and a trade union.

Last resort resolution

If an employer cannot reach agreement on varying the contract of employment they can serve notice terminating the contract and offering the employee a further contract on new terms. This is a last resort method of varying an employee’s contract of employment and should only be considered after a thorough consultation with the employee with a view to varying the contract amicably. In dismissing the employee the correct dismissal process should be followed in order to minimise a claim by the employee for unfair dismissal.

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