How should an employer weigh up its options where only a small number of employees have agreed to a proposed contractual variation?

Where an employer has consulted with its employees and their representatives at an early stage, considered offering incentives to encourage acceptance of the new term, taken steps to address employee concerns and highlighted the consequences of failing to reach an agreement, but few affected employees have agreed to the proposed contractual variation, the employer should give careful thought to its next steps.

The employer could choose to:

  • enforce the variation unilaterally;
  • dismiss the employees with notice and offer to re-engage them under the new terms and conditions; or
  • withdraw the proposal.

The practical difficulty with the first option is that the employer may be faced with a large number of employees refusing to accept the new terms and conditions, possibly resigning and bringing claims for breach of contract, unlawful deductions from wages and/or constructive dismissal.

The benefit of dismissal and re-engagement is that the employer retains control over the process. If the employer gives each employee his or her contractual notice, there will be no liability for wrongful dismissal. Further, if employees accept the offer of re-engagement, there will be no liability for continuing losses. If employees claim unfair dismissal, the employer could argue that there was a genuine business reason for the change and that the dismissals were for "some other substantial reason" (one of the potentially fair reasons for dismissal under s.98(1)(b) of the Employment Rights Act 1996). However, the employer should take account of the employees' reasons for rejecting the change when considering whether or not it is acting fairly in dismissing the employees and offering re-engagement.

If a large majority of the workforce is not prepared to accept the new term or condition, the employer should consider whether or not there are alternatives to the proposal. If the reason for proposing the variation was to avoid redundancies, the employer could consider whether or not a redundancy exercise would be more appropriate in the circumstances.