Dismissal and Re-engagement

Accept the Status Quo?

Some employers may accept that some employees will not accept a contract change. If numbers are few and the changes not too controversial, many employers allow employees to work under their old contract terms. However, one must remember that this could cause divisions within the workforce and possible inequalities. For others the prospect of having a two tier workforce could cause too many problems and dealing with the dissenters could be the better alternative; however, uncomfortable. Having that difficult conversation may be inevitable and it’s important to get the process right to avoid suggestions of unfairness.

Imposing a change

Imposing a change of terms – sign or be sacked – is not advisable as this would undermine trust and confidence and could lead to arguments that an employee has been forced to resign or is working under protest. Far better to approach this issue of change with an open approach and a spirit of dialogue, wanting to reach a solution with the employees (or group).

Dismissal and Re-engagement – the numbers?

If dialogue fails, and employees refuse to sign, one of the most important things to consider will be how many people are refusing the proposed new terms as the numbers involved will affect the way in which this is dealt with, and may add additional steps or time to the process.  

In the event that you have 20 or more employees in one establishment who do not agree to the changes in terms, and the alternative to simply accepting their dissent is to “dismiss and re-engage” this will likely trigger the obligation to collectively consult, and the need to file a form HR1. 

But we are not making people redundant? While the issue of changing terms is not a redundancy in the traditional way, the wording of the legislation is sufficiently wide to catch the circumstances where employees are dismissed under their old terms and re-engaged on new terms. 

Form HR1

!STOP THE PRESS! The government have recently published a new version of the Form HR1, along with updated guidance. The new form can be found HERE: https://www.gov.uk/government/publications/redundancy-payments-form-hr1-advance-notification-of-redundancies

This form will need to be filed with the Redundancy Payments Service (RPS) no later than 30 days (for 20-99 employees) or 45 days (for 100 or more employees) before the first dismissal takes effect.
This requirement may seem like a straightforward, tick box exercise. However, failure to file the form may lead to criminal liability for the business or its directors. It is therefore vitally important that this is filed at the appropriate time.

If you are unsure whether you will be required to file a Form HR1, you should seek advice as to your business’ specific circumstances. 

Collective consultation

Where the obligation to collectively consult arises, the duty is to consult with “appropriate representatives” of the “affected group of employees”. These representatives could be:

• representatives of the trade union (if any) that is recognised for the purpose of collective bargaining for the affected employees;
• if there are no such trade union representatives, elected employee representatives for those affected employees. This could be:

1.  standing employee representatives who have authority from the affected employees to receive information and be consulted on redundancies,  
2.  employee representatives specially elected for this purpose (and an appropriate election process would need to be conducted)

Once the representatives are identified (and appropriately elected, if necessary), the consultation will need to begin in good time to allow for meaningful consultation. There is a minimum consultation period of 30 days for 20-99 employees, and 45 days for 100 or more employees. However, the consultation does need to be meaningful and therefore there can be circumstances where these minimum periods will need to be extended to comply with the obligations. 

The consultation should consist of a two way dialogue to help employees to understand the proposed changes and to explain why they are necessary. Employees should be given the opportunity to raise their concerns and to have these responded to. This may lead to more employees accepting the proposals and therefore not needing to be dismissed and re-engaged. 
Consultation could involve:

• considering alternatives to the proposed contractual changes;
•  considering alternatives to the way in which the changes are to be implemented; 
• explaining why there are no other alternatives;
• the consequences of non-acceptance.

While consultation does not mean that proposals need to be changed, a failure to consider alternatives may undermine the meaningfulness of the consultation.  

Whether your business is caught by the collective consultation obligations or not, one should also factor in individual consultation meetings to discuss issues and concerns about changing contracts and the consequences of non-acceptance.  Employees should understand the consequences and risks to their on-going employment by failing to accept the change.  This might also involve asking the employees to see a solicitor or seek professional advice with the employer contributing to the costs. This will be really important in showing any dismissal (see below) is fair and to avoid both individual and collective consultation litigation/compensation risks.

Dismissal and re-engagement - notice

Whether your business is caught by the collective consultation obligations or not, if there are still employees who do not accept the proposed changes, notice may be served to terminate their employment in accordance with their old (current) contract, provided fair and meaningful consultation has been carried out.  This dismissal will be on the grounds of “some other substantial reason”, which is a potentially fair reason within the Employment Rights Act. Redundancy pay does not need to be paid. 

At the same time as serving notice, a new contract can be offered to employees, on the new terms, to commence on the expiry of their notice period. 

Risks

This approach can lead to the risk of unfair dismissal claims against the business. This is the case whether the employee accepts the new contract or not. 

The consultation process is important to mitigate these risks. If managed correctly, this should provide a defence to any claims and the business should be able to show that it has done all it can to avoid dismissal. Collective consultation also avoids protective award claims too. 

In the event that employees do not accept the new terms, you should have undertaken a fair process for their dismissal and their employment will come to an end at the end of their notice period for a fair reason. They may also be seen to have unreasonably failed to mitigate losses by refusing the offer of employment, therefore reducing the value of any claim.  Employers should also act in a way which is not discriminatory.  

If the employee does accept the new terms, they may still be able to claim that they have been unfairly dismissed. However, if the new terms come into effect immediately after the expiry of their original contract, their losses should be mitigated (either fully or mostly).

Should you require any assistance in preparing for, consulting on or implementing a change to your employment contracts, please contact our employment team by email on [email protected].