Minding your T&Cs

A number of local authorities are looking at changing their employees’ terms and conditions, with a view to saving money but also reducing the number of job losses they have to make. Clare Hedges sets out some of the issuescouncils will need to bear in mind if they are to implement this complex strategy.

Employment costs are a significant part of every council’s budget. Given the need to make savings, local authorities are reviewing these costs and assessing how they can be reduced. Some have identified that rather than implement redundancies, greater long-term savings may be achieved by retaining employees, but on less generous packages.

Recent press reports include examples of councils proposing salary cuts and the removal of benefits. Council workers faced with these proposals are understandably disgruntled and are beginning to question if their employer really can implement such changes.

Non-contractual changes

Non-contractual changes can be made without the employee’s consent and are therefore the easiest type to implement. However, it would be wrong to assume that an employer is free to do whatever it pleases. Changes still need to be implemented reasonably to avoid a breach of the implied term of trust and confidence, which could result in an employee resigning and claiming constructive unfair dismissal.

In practice, councils are also likely to find that the changes they want to make are to express, implied or incorporated terms of the contract of employment.

Contractual flexibility clauses

If the employee’s contract of employment contains an express flexibility clause, the employer may be able to rely on this to impose a change.

This option recently came under the spotlight in the Employment Appeal Tribunal’s decision in the case of Bateman and others v Asda, where Asda successfully defended its right to exercise its discretion to harmonise pay scales. This case surprised many observers as Asda was able to make changes by relying on a broadly worded provision in its staff handbook.

The EAT’s decision appears to have been influenced by the fact that none of the employees suffered any immediate reduction in pay as a result of the harmonisation. Also, Asda took time to consult before implementing the change. Finally, it should be noted that the employees missed the opportunity to argue at Tribunal that there had been a breach of the implied term of trust and confidence in the way the change was implemented, so this was not considered by the EAT.

Where an employee’s contract contains a flexibility clause, it will always be worth exploring whether this enables the employer to make the desired change. However, it would be dangerous to assume this is an easy short-cut. In the Asda case, the EAT stated that if the right to impose the change had led to an “unreasonable” result, then they would have sought to avoid that result. This suggests that depending on the facts, tribunals will take a purposive approach to achieve what they consider to be a reasonable outcome.

Agreeing the change

The safest way of changing a contractual term is to obtain the employee’s express consent. Agreement may be reached individually, or if the relevant terms are incorporated from a collective agreement, then a council will need to negotiate with the relevant unions to amend that collective agreement.

Employees and trade unions are understandably reluctant to agree adverse changes. Nevertheless, in the current climate councils are finding that employees will agree to a change if this is presented as a way of avoiding redundancies. In practice, the likelihood of obtaining agreement is greater if the employees have come up with the alternative solution themselves.

Implied agreement

In the absence of express consent, agreement may be implied if the employer unilaterally imposes the change and the employee then continues to work, effectively accepting the new terms. However, this is only useful for changes that have immediate impact on the employee. If the change is something that will not become an issue for some time, for example a reduction in sick pay that does not become relevant until the employee is off sick, then there will be no implied agreement until the relevant change has affected the employee and he/she has not objected to it.

It is also possible that the employee will keep working, but clearly state that they do not accept the change, thereby reserving their contractual rights. There are certain claims they could bring whilst still in employment, for example a claim for unlawful deduction from wages.

Imposing a change will amount to a breach of contract. An employer who adopts this approach runs the risk of the employee resigning and bringing a claim of constructive unfair dismissal. There is also a practical issue, which is that if a change in employee behaviour is required – for example, adoption of a new shift pattern – if the employee refuses to co-operate, there is little the employer can do other than dismiss them.

So, whilst it may be appropriate to adopt this approach when bringing in minor, non-contentious changes, a council looking to make significant changes to save costs will normally find this method high risk.

Dismissal and re-engagement

If a council wishes to change terms and conditions and does not have the contractual right to do so, or the actual or deemed consent of the employee or trade union, then the only remaining option will be dismissal. This is normally coupled with an offer of re-engagement on the new terms.

The normal rules about unfair dismissal still apply. This means that any employer adopting this approach needs to establish a fair reason for dismissal (usually “some other substantial reason”) and follow a fair process. A clear business case explaining the need for the change is also required.

Councils need to exercise particular caution, as in certain circumstances dismissal and re-engagement may trigger not only an obligation to make a redundancy payment, but also a liability under the terms of the Local Government Pension Scheme.

Timetable for dismissal and re-engagement

Local government lawyers should remain alert to the requirements of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULR(C)A”). This stipulates that if an employer proposes to dismiss 20 or more employees within a period of 90 days “for reasons not related to the individuals concerned”, then collective consultation obligations arise, along with a duty to notify the Secretary of State. The penalty for a breach is up to 90 days’ actual pay per employee, so any error could wipe out the costs savings achieved by the change.

If a council hopes that most, if not all, employees will sign up to the change and expects only to be dismissing and re-engaging a handful of them, a judgement call is required. Should you commence a collective consultation process immediately to start the clock running, even if you may find later that it was unnecessary because there are only a few dismissals? Or should you wait and only consult if required, thereby adding another 30-90 days to the process if you do hit a collective consultation trigger? The answer depends on how tight the timetable is, the relationship between the council and the unions and also the council’s attitude to risk.

The situation is more complicated where a council proposes that if a certain number of employees agree to new terms and conditions it will force the change through by dismissing and re-engaging the dissenters, but if insufficient numbers agree, the council will implement redundancies instead. In this scenario careful planning is required to run the redundancy consultation and the dismissal and re-engagement consultation in parallel.

When preparing a timetable for change, local government lawyers should factor in the need to give notice so as to avoid claims of wrongful dismissal.

Respecting collective bargaining

Finally, councils who are offering new terms and conditions need to be careful they do not breach section 145B of TULR(C)A. This section prohibits an employer from making an offer to an employee where the sole or main purpose of the offer is that the employee’s terms and conditions will not (or will no longer) be determined by collective agreement with a trade union. Councils need to be clear about which terms they are changing and why and should highlight that they are still willing to collectively negotiate terms and conditions in the future.

Clare Hedges is a solicitor at Birketts. She can be contacted on 01223 326605 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..