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Variation Procedures for Contracts of Employment

Employment Contract Variation Procedures

You may consider that a term in the employment contract needs to be changed in respect of an individual employee, or for some or all of your work force.

You will need to consider, firstly whether the change is one which you may make unilaterally and, if not, whether the change is within your contractual rights.

Reaching Agreement

If a variation is necessary, the written agreement of the affected employees should/must be obtained. You may need to buy out unwanted terms by providing something in return for employees agreeing to a change. Additional consideration is necessary in the case of certain changes, e.g. new restrictive covenants.

In any event, it would be necessary to consult with the affected employees in order to avoid constructive dismissal claims.

Risks of a Disputed Variation

If an employee still does not consent to a change which is material in nature, the employee concerned can work on under protest and take legal action seeking compensation for breach of contract or for an unlawful deduction of wages. Alternatively he can resign and claim compensation on the basis that he was constructively dismissed and that the dismissal was wrongful or unfair.

In the event of an unfair dismissal claim, you would have to show one of the five "fair" reasons for dismissal set out in the legislation. In this context, the applicable reason would be "some other substantial reason". You would also need to show that a fair procedure had been followed. An employment tribunal would consider whether, in all the circumstances, the employee's refusal to accept the new terms was reasonable.

Implementing the Variation

Once a meeting of minds has been reached, an appropriate legal procedure might be to draft a letter of the variation of the employment contract and obtain the signature of each of the employees concerned signifying their agreement to the change.

If an employee does not agree to changes you may decide to terminate the old employment contract by giving the contractual notice and then introducing a new, varied contract on the expiry of that notice period. However, this could potentially bring a claim for unfair dismissal. Where employees' contracts are terminated statutory consultation with appropriate representatives before you give notice of termination is likely to be necessary.

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