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Employers should avoid the ‘nuclear option’ when changing terms and conditions

Health secretary Jeremy Hunt's policy of unilaterally imposing new contracts on junior doctors is not a blueprint many employers would wish to follow from an employment relations viewpoint. However, most commercial organisations do need to change terms and conditions from time to time, perhaps because of a shift in the nature of customer demand, or because of economic pressures or competitor activity. The current public sector dispute illustrates the dilemmas involved if staff do not support those changes.

When changes are needed, it is fundamentally important to check whether the existing terms in the employment contracts allow the employer to make those changes. Where an employer has a specific right to make a particular change, for example, to shift patterns or place of work, it can issue a variation to the existing contract.

But there are important limitations to this practice. If an employer wishes to be able to change particular terms, it is necessary to spell it out – the contract must be crystal clear that such a change is permitted. A vague clause suggesting the employer may make any change it considers reasonable is unlikely to be enforceable.

A second limitation is that even where the contract allows this, there will also be an implied term that the provisions will not be exercised in a way that prevents the employment contract being carried out. An example of this is an employer using a mobility clause to change an employee’s work location significantly without reasonable notice, knowing that the employee will not be able to comply. This may well trigger a constructive dismissal claim from the employee.

If employers find that their existing employment contracts do not allow for the changes they need, most will try to gain their employees’ or their trade union reps’ consent to the change, recognising that they cannot impose the change without breaching the employment contract. The change may be agreed, even if it’s only on a temporary basis, if there is a compelling business case for it, particularly if there are severe economic pressures which might threaten job security.

The real difficulty arises if, after discussion and negotiation, agreement cannot be reached by both sides on the need for change. Faced with such a situation, an employer might turn as a last resort – referred to as the “nuclear option” by Jeremy Hunt – of forcing through the changes. This will usually involve terminating all the existing contracts of employment by giving the notice specified in the contract and offering new contracts with the revised terms and conditions. Where this affects 20 or more employees at one establishment within 90 days, termination can take place only after a period of collective consultation of 30 days. If 100 employees are affected at one establishment, a period of 45 days is required.

But this course of action comes with significant risk. Not surprisingly, sacking all your employees and offering them re-engagement on new terms still amounts to dismissal in law and can be challenged as unfair by employees with the two years' service needed for an unfair dismissal claim. Employers can argue the dismissal is fair for ‘some other substantial reason’ but can expect their rationale for the move to be held up to close scrutiny by an employment tribunal.

It seems likely that NHS employers in the present dispute will side-step such action by introducing the new contracts whenever junior doctors come to the end of their existing terms, for example, whenever they have to change NHS Trust. Such a system might reduce the legal risk, but it will not do away with it altogether. There may be claims that the new terms are discriminatory, for example, if female doctors can establish they breach the Equality Act 2010. And even if the health secretary succeeds, the damage to long-term employee relations, not to mention the public relations impact, illustrate why the nuclear option remains the last resort.

Added: 28-04-2016
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