The battle of Asda

The supermarket, Asda, is currently locked in a battle with approximately 12,000 of its staff, represented by the GMB trade union, who have refused to sign new employment contracts. The new contracts were given to 112,000 staff with the vast majority agreeing to sign them. Those who have refused to sign the new contracts have been given notice to terminate their employment and been offered the new contracts. 

Can an employer make changes to contractual terms?

An employer can make a change to an employment contract if the employee agrees to the change or the employee’s representative (usually a trade union representative) agrees to the change.

In addition the Court of Appeal has held that an employer can reserve the ability to change a particular aspect of a contract unilaterally, but clear language is required to do so. Where there is such a right it must be exercised in such a way that it does not breach the implied term of trust and confidence. Asda were successful in 2010 in persuading the EAT that it had the ability to review and replace contractual policies in its handbook on the basis of a well drafted variation clause.

Where the proposed change cannot be agreed the employer can dismiss and re-engage employees under a new contract. Where such action is taken the employer runs the risk that the employees’ dismissal will be unfair.

Flexibility clauses

Employers should first check the contract to see if it has a flexibility clause in it allowing the desired change. Flexibility clauses usually cover matters such as the place of work and hours worked.

Checking flexibility clauses will let the parties know what can be changed, if there is any process to follow when making the change and if notice has to be given to make the change.

Even when a variation to a contract is permitted by a flexibility clause, employers are advised to consult with the affected employee(s) before making any change. Consultation will allow the business to explain why the change is necessary and to obtain any feedback from the employee before making the change.

Agreed contractual changes

If there is no flexibility clause covering the proposed contract variation, the parties can agree the change.

Employers should consult with the affected employee(s) or their representative so they understand why the change is required, how the change affects them and to obtain any feedback on the proposed change. Constructive two-way consultations with the employee(s) will demonstrate the employer’s fair approach to agreeing on the change and in many cases will result in the proposed change being agreed.

Trade unions can also agree contract variations on behalf of employees where the contract allows for this or where the employer normally agrees contractual changes with the trade union, an implied term of the contract.

When changes are agreed

When a variation is agreed, it can be a verbal or written agreement, though it is advisable to record the change in writing.

If the variation relates to anything that must be included in the employee’s contract, for example working hours or pay, the employer must confirm the variation in writing within a month of the change taking effect.

When changes are not agreed

If the proposed variation cannot be agreed, the employer can force the change by dismissing and rehiring the employee(s).

Where the decision to dismiss is taken, the employer should ensure it follows a fair dismissal procedure, if there are more than 20 employees being dismissed consult with any recognised trade union or employee representatives (a legal obligation), serve contractual notice on the employee(s) and give the employee(s) the right to appeal the dismissal.

Once the employee has been rehired, the contractual variation can take place. 

Dismissal and rehire should only take place as a last resort and only where the variation is necessary. Even where the dismissal process was conducted fairly, the employee(s) may still be able to pursue a claim in the Employment Tribunal that dismissal was unfair, because there was no fair reason for dismissing.

TUPE

If an employer wishes to make a change to contract terms in the light of a TUPE transfer the ability to do that is limited by the provisions of the TUPE Regulations. The difficulty of making changes to contracts do not exist only at the time of the transfer but persist subsequently.

With the GMB and its Asda members currently refusing to agree to the proposed contractual changes, the 12,000 staff will have their contracts terminated on 2 November 2019. If this occurs it is likely to result in a further examination of an employer’s ability to introduce changes to contracts of employment.