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Failed attempts to amend contracts without employee's consent

All change please, or rather it wasn’t for the National Audit Office when it attempted to rely on a contractual clause enabling them to amend employee’s contracts without their agreement. Unfortunately the Employment Appeal Tribunal decided the variation clause in Norman and Anor v NAO simply didn’t do the trick. Click here to understand more about how these clauses can enable employers to achieve change (and to check your own contracts enable this).

For months the National Audit Office had tried to negotiate a reduction in sick pay and privilege terms with the PCS union, but having failed to get agreement, it instead decided to unilaterally impose the changes on 80 employees believing that the following term in their employment contracts gave it the right to do so:

"Terms and conditions are subject to amendment and changes will be notified to employees as necessary."

The Employment Tribunal agreed, but the Employment Appeal Tribunal overturned this decision observing that the clause, which was effectively a ‘unilateral variation clause’ was nowhere near strongly worded enough to allow detrimental contractual changes without the agreement of the employees concerned.

An earlier case saw Asda supermarket changing bonus terms to be much less beneficial, but there the Company had (as indeed all myHRdept contracts have) unambiguous wording that made it clear that Asda had a contractual right to vary terms without agreement including if necessary detrimentally to their employees.

Small businesses are prone to contractual paralysis and so it is important to build in as much power to vary contracts as is lawfully possible, though an even, well written clause should still not be used unreasonably – by which we mean that changes covered should have a genuine business case attached to them (efficiency in Asda’s case.)

Why are small businesses particularly prone to contractual paralysis? Simply because by their nature the business changes rapidly from inception into growth mode. The terms offered in the early days to initial employees (or allowed to develop in the absence of a written contract) will inevitably not be suitable when the business has 5, 10, 20 employees, but unfortunately because small business owners normally don’t take the time to secure flexibility, the terms are normally locked and can only be unlocked with employee’s express written agreement.

It pays for all business owners and leaders to check their contracts for a strongly worded universal variation clause, and if one isn’t there….time for new contracts – at least for new employees coming on board, possibly for everyone. Of course myHRdept would be happy to draft your employment contacts for you, either as a fixed cost project or as part of our retained HR and employment law advisory services.

If you're thinking of outsourcing your HR why not contact myhrdept.co.uk. With full service Premium Plus packages for medium sized companies typically from only a few hundred per month (and from only £75 per month for smaller companies and start-ups) and fixed price HR support options available for one-off issues, we believe we offer the best combination of quality and price available in the UK. Call us on 01628 820515 to discuss your requirements or email us here and we’ll call you back.