Terms and conditions of employment – are employers entitled to unilaterally vary such terms and conditions?
In short, the answer is no.
Firstly though, lets take a look at what are the terms and conditions of employment and how they arise.
Terms And Conditions of employment
An employee’s terms and conditions of employment may be a mix of those terms that are
- clearly set out in his/her contract,
- those implied by custom and practice and the employer’s duty to act reasonably,
- those which are incorporated through collective agreements and
- those which derive from statute (such as the right to minimum wage or annual leave) which apply automatically.
(This is part of the employment law in Ireland series of articles)
Amending terms and conditions of employment-historically
Where an employment contract does not expressly enable the employer to vary the terms of employment, employers may either:
1. Obtain the employee’s express agreement to the change (recommended);
2. Terminate the employee’s employment on due notice and offer re-engagement on new terms (not recommended); or
3. Attempt to impose the change unilaterally (not recommended).
Options 2 and 3 above are not recommended and leave the employer at significant risk to a successful claim for unfair/constructive dismissal/non payment of wages claims.
Unilateral variation of an employee’s terms and conditions of employment to the employee’s detriment may give rise to:
1. A claim of constructive dismissal under the Unfair Dismissal Acts 1977-2007 or at common law;
2. A claim for damages for breach of contract;
3. A claim in respect of an unlawful deduction under the Payment of Wages Act 1991;
4. A “trade dispute” under the Industrial Relations Acts 1946-2004,
5. Industrial relations issues, and
6. Injunctive proceedings to prevent the unilateral variation.
What is contractual, and not merely a work practice, may not be varied unilaterally.
Such variation must be agreed between the parties regardless of whether the term is express or implied.
In practice, whether or not an employee benefit constitutes a term or condition of employment may be somewhat academic if changing it is likely to give rise to industrial relations issues and human resources problems.
In Neville v Waters Munster Glass Ltd RP558/2003, the claimant, having refused to accept a reduction in salary and to work a reduced three day week, was consequently made redundant.
Although the claimant argued that he had been unfairly dismissed, the tribunal held that a genuine redundancy situation existed.
It is clear from a UK case, GAP Personnel Franchises Ltd v Robinson UKEAT/0342/07, that where employees do not accept a unilateral variation by the employer, especially one that has an immediate impact (e.g. the reduction in pay or benefits), they should make it clear, preferably in writing, that they do not accept the change and are working under protest.
Otherwise the employee may eventually be held to have implicitly accepted the change.
Variation of terms and conditions of employment in a recession
With unemployment rising to a rate of 8.3% and FÁS forecasting that this rate will exceed 12% during 2009, resistance to changing terms and conditions was low.
There has been no change in the legal requirement to obtain employee consent for such variation, however many employees are accepting paycuts where they are being implemented in a genuine effort to avoid job losses and to try to ensure the employer’s survival.
However, it is significant to note that workers opting to accept a paycut, in order to avoid the threat of job losses, may find themselves being made redundant if the employer is ultimately forced to close down.
The statutory redundancy payment is based on the employee’s current wage which will mean a lower statutory severance package than the employee would have received on the previous higher wage.
Amending terms of employment in Practice
In the course of varying terms and conditions employers should:
1. Maintain clear communication with employees;
2. Provide employees with reasonable notice of any variation to terms and conditions;
3. Be able to explain why the change is necessary and inform the employees of the alternative (i.e. a more formal re-structuring and ultimately possible job losses);
4. Consider whether the new terms can be imposed in stages as opposed to implementing all variations at once. This may help to ease the transition and allow employees to plan for the change; and
5. Consider whether an incentive can be suggested to assist employees in accepting the change. This does not necessarily have to be a financial benefit.