‘The measure of intelligence is the ability to change.’ – Albert Einstein.
One of the biggest changes in the last decade has been in the way we work and the ongoing impact of technology in the workplace, from robots to artificial intelligence (AI).
Regulatory and business drivers also provide change. For example, in the accountancy profession, in response to the UK Competition and Markets Authority’s April 2019 recommendation for an operational split between professional services firms’ audit and consulting businesses, KPMG moved 750 UK employees, including partners, from its advisory business to its audit division.
This article analyses some of the legal implications of workplace change.
Changes to the employment contract
Changes to an employee’s terms and conditions can only be made in accordance with express rights in the contract, or with the agreement of both the employer and the employee. Even if the employment contract allows you to make variations without the employee’s consent, fundamental terms, such as pay or working hours, cannot be changed in this way.
Accordingly, if such fundamental changes are made without express agreement, the employee will be able to argue that their employer has breached both their express terms and the implied term of trust and confidence, enabling them to terminate the contract and claim damages for constructive dismissal.
Alternatively, they could make it clear that they do not accept the new terms, but they will remain working under ‘protest’. This could lead to a future claim against the employer for breach of contract. Where the claim relates to a reduction in salary, the employee may also claim for the unlawful deduction from wages, without having to leave the business.
Any variation to a contract must be supported by consideration. Therefore, if an employer wishes to agree a change, there must be some value given to the employee for their consent. A common example is where an employer introduces or increases the scope of the restrictive covenants for a senior employee at the same time as promoting them.
Ultimately, if the new terms have been offered with valuable consideration and the employee still refuses to accept them, the employer has two options. It can ringfence the employees who do not agree and allow them to continue working on the old terms, or it can give notice of termination under the old contract and offer immediate re-engagement on the new terms.
While a dismissal in this context will not be wrongful, provided proper notice is given under the old contract, it may be unfair unless the employer has a substantial reason for insisting on a change of terms. Mere harmonisation of terms is unlikely to be enough. The risks are such that this is a last resort option and legal advice should always be sought.
Co-working and agile working
As companies are looking to cut fixed costs, the use of co-working spaces and of agile working has grown exponentially. According to new research carried out by Small Business Labs, the number of co-working participants is likely to increase to 3.8m in 2020 and this includes large corporations as well as start-ups and freelancers.
If the workforce is being relocated to a co- working space from a traditional office working location, the usual rules on relocation will apply. If the employment contract contains a mobility clause it will be easier to change the permanent place of work, but there is still a possibility that liability for redundancy will be triggered.
What to look out for
Consider whether you are obliged or willing to offer redundancy packages. Devise a plan for consultation and work out the terms of an acceptable package (for example, to cover increased travel time or cost) in order to bring the majority of the workforce along and to ensure business continuity.
Confidentiality
The primary issue to consider is confidentiality of business information in both shared workplaces and public spaces, and the need to set up policies and procedures around the protection of information online and in shared spaces, where screens and papers could be read by third parties and conversations overheard. Such policies are often non- contractual and can therefore be introduced with minimum formality but, to get buy-in, extensive and timely consultation is a necessity.
Another serious issue is the need to protect workers from misconduct (including sexual harassment and bullying) by third parties. The government is consulting on reintroducing liability for employers who allow a third party to harass their workers. If this becomes law, employers will need to take reasonable steps to protect their staff, and this could include initiatives such as posters displayed prominently in the common areas, paying for employee assistance programmes, making sure you have a robust whistleblowing policy in place and considering shared training with other workforces occupying the same co-working space.
What to look out for
Consider whether you have adequate data protection and protection of information. Policies will need to be put in place or adapted to cover work away from a traditional office environment and you will need to find ways to enforce these policies, including new rules for accountability and proportionate monitoring in accordance with current GDPR and ICO guidelines.
Changes to the business – TUPE
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) will apply when a business changes hands by way of an asset sale or where there is a service provision change. The latter covers outsourcing of an existing service provision, re-tendering by replacing an existing contractor with a new contractor and insourcing when your business takes back an outsourced service from a contractor. Generally, TUPE does not apply to a transfer of shares.
Changing terms and conditions
An employee affected by a TUPE transfer will have a legal right to transfer to their new employer on the same terms and conditions as their existing contract. With some very limited exceptions, the new employer cannot lawfully change terms.
After a TUPE transfer, there is a natural temptation to want to harmonise the transferred employees’ terms with the existing workforce to avoid inequalities. This must be resisted as in most cases harmonisation will be related to the TUPE transfer and therefore unlawful. However, it is sensible for an audit of terms to be carried out to make sure that there are no equal pay or gender pay gap issues which need to be addressed.
Dismissals
An employee has a legal right not to be dismissed where the sole or principal reason for the dismissal is the transfer itself, unless it is for an economic, technical or organisational (‘ETO’) reason entailing changes in the receiving employer’s workforce.
The way to manage this situation is for the transferring employer to meet early with the receiving employer to discuss the transaction in the light of TUPE. If dismissals are contemplated, there needs to be a conversation about when these take place (before or after the transfer), who pays for them and whether any settlement agreements are to be offered to compromise any claims. In some situations, a commercial solution will be needed, such as a retention for an agreed period after the transfer, to deal with any emerging claims.
Consultation obligations
As a transferring employer you must inform the transferring workforce about the transfer and share this information with any employees affected by the transfer, even if they are not transferring. For this purpose, employee representatives must be elected where there is no relevant trade union and those representatives (or the union if applicable) must consult with the workforce.
Tips for consultation
You must consult with a view to reaching agreement if there are any measures connected to the transfer which are being introduced. This can include matters such as a change of the payroll date or variations to the holiday practices. Forming a committee where representatives of the management of the receiving employer are invited to explain the measures are an effective way forward to smooth the consultation process and detailed FAQs can also deal with commonly raised questions.
A failure to inform and consult (if required) could result in an award from the employment tribunal of a compensation payment of up to 13 weeks actual salary per employee, which is a significant liability.
Changes to the business – Redundancies
Relocation/workplace redundancy
In the case of relocation, where there is no valid mobility clause, a redundancy situation arises.
Workforce reduction
Redundancy also arises where you close a part or all of the business or downsize in one or more departments. Depending on the numbers involved, in order to manage a redundancy situation effectively, you need to consider both collective and individual consultation and create a timetable.
Consultation obligations
In all redundancy situations you must consult your employees individually to discuss the reason for redundancy, the selection criteria (if applicable) and any suitable alternative employment or other ways in which the redundancy can be avoided.
If 20 or more employees are likely to be made redundant within a 90-day period, an employer must also carry out collective consultation with either the trade union or the employee representatives. Collective consultation must take place at least either 30 or 45 days before the first dismissal takes place, depending on the total number of employees affected.
Employers failing to conduct collective consultation where required will be exposed to claims for protective awards, which can lead to maximum awards of 90 days’ gross pay per affected employee. Failures in individual consultation can render an otherwise fair dismissal on grounds of redundancy unfair, giving rise to expensive tribunal claims.
What to look out for
Assess whether the collective consultation obligations are triggered and work out a timetable for consultation in advance, including the appointment of reps if needed. Consider all vacancies in the organisation and how suitable alternative employment will be identified and dealt with across the departments affected by redundancy, and any retraining that can be offered. Check whether there is a custom and practice to pay enhanced redundancy payments. Decide whether you will require individuals to work their notice and whether you are offering settlement agreements.
Conclusion
Changes in the workplace often come as a surprise – sometimes they are welcomed changes and in other instances they are the less pleasant kind. Being aware of the legal implications, both as a senior manager implementing change and as an individual employee, will prepare you to navigate change successfully and negotiate key workplace transitions.
About the authors
Merrill April is a partner of CM Murray LLP, specialists in employment and partnership law.
Jennifer Ly is an associate of CM Murray LLP.
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