Any business is likely to develop or restructure its operation over time. These changes can take many forms. The most extreme might involve the selling off or closure of part or even the whole of the business, or the contracting out of part of its operation. At the other end of the spectrum, the company might simply need to make minor amendments to the way in which its employees work.
Whatever form business change might take, it is likely to involve some kind of alteration in the company's relationship with its workforce, and that may entail changing employment contracts. This section of the Guide summarises the employment law issues that arise when implementing change. Companies that are planning to implement change may find it useful to contact their Association for detailed advice.
The flowchart at the end of this section summarises the contractual questions that arise when implementing business change. It may be useful to refer to this flow chart when reading this section, which follows the same structure. The starting point is to establish whether the implementation of the change will require any alteration in employees' contracts. No alteration will be needed if the change falls within the scope of management's right to set workplace rules and standards and working methods ( The scope of management prerogative ), or if it merely involves the company using a power it already has under a term in employees' contracts to implement change (express terms requiring flexibility). This highlights the value of including clauses requiring flexibility in employment contracts. There is specific legal obligation on employers to consult before a decision is made to implement certain changes to their pension provision (consultation on pension changes)
In some circumstances, however, a company may be seeking to introduce change that goes beyond employees' current contractual obligations or alters employees' existing rights. In these cases, the company can implement the change if it has the employees' agreement. Agreement can be obtained either at the collective level, through negotiation with a recognised trade union (change through collective bargaining ), or at the individual level, through the consent of each employee (individual agreement ).
If employees will not agree to a change and the company decides to impose it on the workforce, it may face legal claims. This section explains what those claims might be (imposed change and its dangers). Another option would be to terminate employees' existing contracts and offer them new ones. This section also explores the legal repercussions of this approach (offering new contracts).
Other parts of this Guide deal with more dramatic forms of business change, such as the implementation of redundancies, which can arise through the restructuring, relocating or shedding of jobs or the closure of the whole or part of a business (redundancy). The Guide also deals elsewhere with the principles of employment law involved in the sale of the whole or part of a business or the contracting out of its operations, including the possibility of changing terms and conditions in that context ( Transfer of undertakings ). The specific legal obligation on employers to consult before a decision is made to implement certain changes to their pension provision is covered here (consultation on pension changes )
This section makes frequent reference to the need for companies to consult with employees when introducing change. It is therefore worth noting how the courts and tribunals that enforce employment law interpret the meaning of consultation. They assume that, if a company is to consult meaningfully on a proposal, it must:
- enter into the consultation process with an open mind;
- provide employees with clear information on what is being proposed and why;
- give employees adequate time to consider that information and to prepare their responses;
- give proper consideration to employees' responses, and take them into account in finalising the proposal
- be undertaken with a view to reaching an agreement.
Consultation is therefore a two-way process, involving a considered exchange of views between company and workforce, rather than a one-way process of informing the workforce of what is going to happen.