A guide to individual consultation in an employment contract variation exercise

When undertaking an employment contract variation exercise, consultation with employees individually is a key part of any process that an employer will need to follow.

This is even more crucial where it becomes clear that employees are not prepared to voluntarily agree to the variation and where the employer is ultimately prepared to proceed with a ‘fire and re-hire’ process in order to get the change through.

Let’s have a look at some dos and don’ts for individual consultation in a contractual change scenario.  

Do I have to consult individually with employees if I have already consulted with a trade union or other elected representatives?

In short, yes, if your collective consultation has not reached an agreement which is binding on individual employees about the proposed variations to the employment contract. This is likely to be the case in all collective consultation scenarios save where there is also collective bargaining arrangements with a recognised trade union.

What is the purpose of individual consultation with employees?

The purpose of individual consultation is, ultimately, to try to seek the agreement of the employee to the contractual variation that you are proposing without having to resort either to imposing the change or by giving notice of termination of employment and offer of reengagement on the new terms to the employees.

You should carry out consultation with a view to trying to reach agreement where possible, but at the same time be prepared for it not to be possible to reach agreement, in which case you also need to have a plan for “what now?”. Where you have a compelling underlying business reason for the contractual variation you are seeking to introduce, this “what now?” may include you ultimately being willing to give notice of termination of employment, with an offer of continued employment being made.

This is a step with potentially significant implications on the business, both in terms of possible claims for unfair dismissal but also staff turnover and potentially not having sufficient numbers of employees to carry out work required; it is not a decision that should be taken lightly and requires careful thought and planning.

The timing of giving notice of termination, and the factors that employers need to consider before doing it, is a critical one in processes like this and outside the scope of this piece. If this is something that you are considering, then please do get in contact with the team, we would be happy to help.

Are there any particular things that I have to do when I am consulting individually with employees?

Bearing in mind what we have said above about the purpose of consultation being to seek to obtain the agreement of the employees to the variation you are proposing, you ought to consider the consultation exercise as a sales pitch. Your aim is to sell the benefits of the variation against the potential consequences of the variation not being accepted.

You ought to outline the entirety of the changes, so where you are implementing, or proposing to implement, a suite of changes, some of which are objectively beneficial to the work force, or where any positive aspect of the change is not fully understood, you really should emphasise this.

If any incentives have been included in the proposed new terms in response to points raised earlier in the consultation process, or for instance, a commitment to delay implementation of some of the proposed changes, then you should make this point in clear terms.

That said, there is no specific list of things that have to be included in consultation with employees in this scenario. For instance, we do not, as at the time of writing this article, yet have sight of the proposed new Acas Statutory Code of Practice on contractual variations. For now, the main guidance comes from previous case law about dismissals of employees for refusing to accept a contract variation and which employers have then sought to defend on the basis of the dismissal being a fair one for “some other substantial reason”.

What are the main things to consider in individual consultation with employees?

Consultation should be meaningful. This doesn’t mean that you must reach agreement with the employees about the proposed change, although that is ideally what you do achieve. The starting point of meaningful consultation is explaining the business reason underpinning your need to ask employees to accept new terms and conditions of employment.

The next element is the proposed variation itself.

Without clear understanding of these two elements, employees could quite rightly argue that they are being asked to accept something that is potentially quite detrimental to them, but without understanding why you have decided it is necessary. You can’t expect employees to agree to put themselves in a worse position without them understanding this minimum level of information.

In addition to providing the employees with details of the business reason why you want them to accept changes in their contract and details of the proposed change, consultation with them should factor in:

• appropriate time and opportunity for the employee to ask any questions about the proposal and any concerns about their ability to accept the proposal, and
• time for you to consider these, and to respond to the employee accordingly.

Case law has established that a fair process involves not just considering your reasons for wanting a change but also the reasonableness or otherwise of the employee in not being willing or able to accept it.

Meaningful consultation also means you being able to show that you have assessed what the impact of the change is likely to be on employees and that you have considered alternatives to the change proposed.

Meaningful consultation also involves you considering the employee’s reasons for not being willing or able to accept the variation, making changes to your proposal, if possible, to address (wholly or in part) some of the concerns the employee has raised, and also considering any alternatives that the employee may have. In this regard, failure to consider and respond to alternatives that the employee may put forward could mean that you have not followed a fair consultation process. This could be sufficient for any subsequent dismissal to be found to be unfair.

Do I have to get the employee’s agreement during consultation?

No you don’t, but that is of course what you should aim for. Listen to any concerns they have raised about the proposal and respond to them where you can. If you reach the end of the consultation process, having listened to employees’ concerns, responded to those (and where you have been able to do so by making changes to the proposal in response to points raised by the employees), you have given yourself the best opportunity to secure the employees’ agreement to the variation.

If, despite consultation, you are unable to reach agreement, then while this is not ideal it is not an insurmountable problem. You will need to decide at what point you are going to close off the consultation and what period you are going to give employees to decide once and for all whether to accept the proposed new contract before deciding on your next steps.

However, even before you start consultation, you should consider what action you might take, and be prepared to take, in the event of any employees not being willing to accept the new contract terms proposed.

At what point will you consider that you have enough of the employees having confirmed their acceptance of the proposed new terms of employment that you might be willing to proceed by giving notice of dismissal and offer of reengagement to the remaining employees?

The answer to this might be that you don’t realistically want to do that, perhaps because when push comes to shove, the proposed change is more of a ‘  nice to have’ than a  business-critical one. However, if the proposed change is one that you consider business-critical, then you should  give consideration at the outset as to what will be the tipping point at which you have sufficient numbers of employees having agreed to the change that it will not have a substantial adverse impact if you end up dismissing the remaining ones and they all refuse your offer of reengagement.

Do I have to warn employees that dismissal is an option?

Yes. If you give notice of termination of employment to an employee who has refused to accept new contract terms without having warned them in advance that one outcome of the consultation exercise might be that this happens, dismissal is likely to be unfair.

Remember to couch this in suitable terms, e.g., dismissal is not your preferred outcome, it may be a last resort in the event that you are unable to reach agreement with the employee about the proposed new contract and even then it will be accompanied with an offer of continued employment.

How many meetings will be involved in an individual consultation process and over what timeframe?

In many respects this depends on how many employees you are having individual consultation with. It stands to reason, however, that for any consultation to be “meaningful” it needs to be a genuine two-way dialogue, and this means more than one meeting.

The minimum number of meetings therefore with each employee would be two, which may be appropriate if there has been lengthy and effective collective consultation before individual consultation commences. However, where that is not the case then our recommendation would be a minimum of three consultation meetings, spread out over a period of time (so that, for instance, the individual consultation process itself from beginning to end lasts at least two weeks).

As indicated above, you would need to forewarn the employee that one outcome of the final meeting may well be the termination of their employment. This is something that we would recommend flagging up no later than the penultimate meeting, with the fact that this may be the outcome also being put in writing prior to the final meeting.

Does the employee have the right to be accompanied to consultation meetings?

The Acas Code of Practice on disciplinary and grievances at work does not apply to dismissals for refusing to accept new contract terms, so as things stand, no they don’t have the right to be accompanied. This may change when the proposed Acas Code of Practice on contractual change is issued.

Even if this is not a point that is included in that Code of Practice, it is sensible to allow an employee to be accompanied to consultation meetings by a work colleague or a trade union representative.