Dismissal & re-engagement is still dismissal shocker

…pretty obvious really. An employer will often wish to unilaterally vary a contract, and it may have good or bad reasons for doing so. A key moment when this might happen to a small business is with pay intervals. Many small construction / engineering businesses still have weekly paydays. Obviously this is expensive and increasingly rare, and movement to monthly pay intervals can save a significant amount of money. Some employees bitterly oppose this move however, and I’ve worked with several businesses trying to bring this in. The legal point arises because employees can point to their contracts, which will often state (as it is required to do by s1 ERtsA 1996) that pay is weekly. Moving to monthly pay therefore represents a unilateral variation of a contract, which of course is impossible under contract law.

The remedy is to consult with staff, and look at different methods of softening the blow. In the face of impacable hostility simply serve notice of termination of the old contract with an offer of immediate re-engagement on the same terms save for the pay interval.

This is a huge simplification but if it’s done right and the reasons on the business are pressing enough then the exercise works well – there’s no breach of the contract, there’s no unilateral variation. The employee is offered a choice – sign up to the new contract or don’t, and go home. The employer takes his chance withn unfair dismissal claim. On the facts above the employer would have a good shot at a fair dismissal, with the principal reason for s98 being Some Other Substantial Reason. This type of termination has reared its head in reports, usually surrounding introduction of restrictive covenants to existing staff, or organisational restructures. Obviously the process is fraught with worry and peril, the usual allegation against the employer being that it’s used to mask redundancy or an employee is being “managed out”.

In the recent case of Darby & Anor v. The Law Society [2008] UKEAT the employer, who should have known better, botched up this exercise by muddling its correspondence with words like ‘variation’. That’s fine at a negotiating stage – no-one wants to go through the process if unnecessary – but the cleanness of the procedure was lost. The case is a bit fact sensitive, but this sort of argument should never arise in the first place.

• Record contractual variations in writing, and assume they don’t exist until this happens;
• If you dismiss someone, be sure you’ve done it and communicate the reason and the circumstances. If you haven’t dismissed someone, but it might be taken that you have, affirm the employment relationship in writing.

Automatic unfair dismissal wasn’t raised in this appeal, but the statutory procedures would apply equally as they do to other dismissals.