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Can I change my employees’ terms & conditions when they are working remotely?

Permanent or temporary changes to terms and conditions of an employee’s contract can occur:

• With the employee’s consent.
• Without the employee’s consent, but in reliance upon a contractual provision allowing for changes of the contract, such as a variation or mobility clause.

Variations with Employee Consent

The provisions of an employment contract most affected by the impact of COVID-19 relate to remuneration, working hours and location of work.  Remuneration and working hours are fundamental terms of any employment contract (as is work location but to a lesser degree).  It is a general principle of contract law that the terms of a contract cannot be altered without the agreement of both parties, meaning that unilateral alterations of these provisions by an employer would generally amount to a breach of contract.

Employers must also consider the statutory protections afforded to employees.  Reducing an employee’s pay and without consent may also expose employers to claims under the Payment of Wages Act 1991 before the Workplace Relations Commission, or employees may resign and claim constructive dismissal.

To implement a valid reduction in pay or working hours, without the risk of legal challenge, employee consent or agreement should be sought.  In practical terms this should involve communicating with employees regarding the financial impact of COVID-19 on the business, outlining the rationale behind the proposed changes and consulting with the employees well in advance of the proposed changes to obtain the necessary agreement to reduce pay or working hours.

Once consent or agreement has been obtained, employers should record the agreed variation to the terms and conditions in writing.  This can be done by way of a side letter or addition to the contract which must be provided to the employee no later than one month after the change takes effect.

Variations Through Reliance on Terms of Contract:  Flexibility and Variation Clauses

Many employment contracts include a flexibility or variation clause that aims to allow employers to vary the terms and conditions of employment without any input from an employee.  While the existence of such a clause in an employment contract may be of some comfort if changes are proposed, it should not be relied upon in isolation to impose changes without consultation.  The Irish Courts, while accepting, that in certain circumstances alterations to terms and conditions are necessary for commercial effectiveness, have consistently held that such clauses must be exercised reasonably. It is generally accepted that such clauses are intended to permit minor non-material changes, which do not relate to core terms, such as updates to reflect changes in law or statute or a change in a work practice. Imposing pay cuts, even of a temporary nature, without consultation or consent, by reliance on such clauses is unlikely to be viewed by a Court as reasonable.

Variations: Mobility Clauses

With remote working, or some form of hybrid arrangement between home and workplace set to continue, many employers have already taken steps to reduce the capacity of their physical workplace.  Reliance on a mobility clause post lockdown to relocate employees to work from home permanently, or, to introduce a hybrid working arrangement where employees are opposed to such changes is not without risk of legal challenge.

In order to successfully rely on a mobility clause to introduce significant changes to a work location, employers should provide employees with as much notice as possible of the proposed change, provide detail on the commercial rationale for the proposed changes and afford the employees an opportunity to make representations in respect of the changes before introducing such measures.

Can Employees Who Refuse to Accept Changes to Terms and Conditions be Lawfully Dismissed?

Section 6.1 of the Unfair Dismissals Act 1977-2015 (the Acts) provides that dismissals are deemed to be unfair for the purpose of the Acts unless “having regard to all the circumstances, there are substantial grounds justifying the dismissal”. Can a dismissal for refusal to accept material changes to terms and conditions, which an employer claims are essential to the survival of a business, qualify as “substantial grounds” so as to make the dismissal lawful?

The commercial rationale and full effect of the proposed changes should be sufficiently and clearly explained to employees.  Given the importance of fair procedures in the Irish context, it is likely that the procedural fairness followed by an employer in seeking to introduce changes to fundamental terms of the contract will be critical.

Consideration should be given to the extent to which the burden of the proposed changes is being shared between management and employees below management level.  Ideally any changes should be across the board and not targeted at lower paid employees or middle management while senior management remain unaffected. Targeting specific groups of employees can also lead to potential discrimination claims and should be avoided.

Key Takeaway: Engage and Consult

To avoid potential claims, employers who propose to implement changes to employee terms and conditions, on a permanent or temporary basis, should consider putting in place arrangements to engage and consult with them in advance.  Where agreement cannot be reached, evidence of reasonableness, consultation and negotiation by the employer will be critical in successfully defending any legal challenges that may ensue.

Need more help? Voltedge Management team can help you to get advice on all aspects of human resources and management. Email Ingrid at info@voltedge.ie or ring our offices at 01 525 2914.