Legal

Can employers rehire redundant workers on different terms?

20 Aug 2020 By Alana Penkethman and Molly Dilling

Alana Penkethman and Molly Dilling explain the potential pitfalls involved in dismissing and re-recruiting employees on new contracts

British Airways (BA) was heavily criticised for wanting to dismiss its employees and rehire them on contractual terms it said that it can afford, given the precarious position the coronavirus pandemic has placed it in.

However, while the unions may complain, it is likely that many more businesses would like to implement similar actions to save operations that could be viable given reduced costs. Similarly, it is likely that many of their employees would rather retain their jobs, albeit on a reduced salary, than face the prospect of unemployment.

A typical scenario faced by most companies in a downturn involves an individual or small group in a specific role who are unduly impacted: for example a sales team, or where a division or larger operating unit is unviable without cutting overheads, as appeared to be the case for BA.

In both scenarios these are the procedures that employers considering a similar survival strategy should adopt. 

To effect change to an employee’s terms of employment, their employment contract needs changing. While employment contracts do occasionally require updating to reflect changed circumstances, such as new holiday arrangements, what employers are looking to do now is much more drastic, involving reductions in pay, changing hours or introducing longer shifts.

Actions for individual or small teams 

As an employer, if you are looking at making changes to the terms for just one individual or team then first check whether their existing contract has a flexibility clause. The existence of a flexibility clause will often mean that employers can vary their employees’ contracts without obtaining their consent. However, employers must be wary of making unilateral changes as the employment tribunals have been reluctant to enforce these contractual provisions unless it can be shown that they are sufficiently clear and unambiguous. 

If there is not a flexibility clause, then an employee’s consent to the change is obligatory. The employer should consult their employees and be upfront and transparent about the financial reasons for wanting to implement the changes. Employers should ensure that all employees understand the reasons for making the change and are that they are able to address their concerns. Employees can either give express or implied consent to the change. Express consent is preferable as an employee explicitly tells their employer they agree to the change. Implied consent is where the employee either continues to work or where a period of time has passed with the employee not taking any action.

Variations made as a result of implied consent run the risk of future claims from their employee, because what constitutes implied consent is subjective. Parties will often not know whether the acts or omissions of the employee constituted implied consent until it is determined by a judge. 

If an employee refuses to accept a contract variation, then financially an employer may have no option but redundancy. But as with any redundancy, you must ensure that you don’t run the risk of being subject to unfair dismissal claims (from employees who have been employed for over two years). This can be avoided by ensuring that the correct redundancy process is followed in line with Acas guidance.

Actions for whole business units and many individuals 

The challenge many businesses will be facing is where whole operating units are not currently financially viable without significant financial savings. This requires a much more radical approach including mass redundancy and then re-recruitment.

The process is relatively simple as long as standard redundancy procedures are followed and a fair and robust recruitment procedure is practised. 

First and foremost, employers should maintain good communication with their employees and be honest about the financial challenges the business faces and the options available. Critically, it must be shown that there are no other viable options and it cannot be challenged in the way that BA’s decision has been. As Unite’s general secretary Len McCluskey said: “We cannot tolerate BA using this crisis as cover to impose a long-term plan to slash jobs, pay and conditions.”

Transparency and good communication

This is a difficult time for many businesses and while the government has provided support packages many companies will still be facing substantial financial shortfalls that can only be addressed by cutting costs.

If an employer believes that one viable option is to make reasonable adjustments to an employee’s working arrangements then this should be discussed. Many employees would rather retain a job in the hope that their employers’ fortunes will improve rather than face the prospect of a future of Universal Credit. Plainly the future success of such a scheme is predicated on goodwill by both sides. When the market improves, employees will rightly expect their goodwill to be recognised.

Alana Penkethman is a chartered legal executive and Molly Dilling a trainee solicitor at Parker Bullen Solicitors

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