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3. We are currently reviewing our Employee Handbook. Do we need to ask our employees to consent to any changes?

Julie Austin
26/05/2017

Locations

Ireland

As a matter of contract law, unless specifically provided for, a contract cannot be amended unilaterally and the consent of both parties is required. Therefore, if the Handbook is expressed to form a part of the employees’ terms and conditions of employment, the consent of the employees is technically required. Furthermore, the Terms of Employment (Information) Act 1994 provide that changes to an employee’s contract of employment must be notified to the employee no later t... As a matter of contract law, unless specifically provided for, a contract cannot be amended unilaterally and the consent of both parties is required. Therefore, if the Handbook is expressed to form a part of the employees’ terms and conditions of employment, the consent of the employees is technically required. Furthermore, the Terms of Employment (Information) Act 1994 provide that changes to an employee’s contract of employment must be notified to the employee no later than one month after the change. Even if the Handbook (or part of it) is expressed to be contractual, most employment contracts contain a “Variation Clause” which, if drafted correctly, allows amendments to be made to the contract without the employees’ consent. However, these clauses are limited in that they will only allow the employer to make reasonable changes to non-material terms and conditions of employment. Similar to a “Variation Clause” in a contract of employment, most Handbooks will contain a provision allowing the employer to amend, revise or change the Handbook from time to time. Again, these clauses are limited in that they will only allow the employer to make reasonable changes to non-material terms and conditions of employment, even where the Handbook does not form a part of the employees’ contract of employment. In this particular case, you would need to verify whether the Handbook specifically states that it is contractual in nature. If it is not contractual, the company is entitled to make reasonable and non-material amendments to the Handbook without consent. However, there is a risk that employees may argue that they are entitled to certain terms and conditions under the Handbook as a matter of custom and practise, or that the changes made required consent. Although the organisation could argue that consent is not required as the Handbook is not contractual, the company should notify and consult with staff in advance of any proposed changes.

What are the implications if consent is required, sought and not provided?

Most organisations do not seek consent when changing an employee Handbook even if the Handbook is expressed to form a part of the employees’ contract as, if they were to do so, there will always be a small fraction of employees who will not, for good, bad or no reason, provide their consent. If consent is sought and it is not forthcoming, an organisation would find it difficult at that stage to proceed with implementing the changes across the board. In reality, the dissenting employees would be need to be “red circled” i.e. remain subject to the old version of the Handbook. This is not practical or feasible from a commercial perspective.

What are the risks of not asking the employees for consent?

The risks of amending a contractual Handbook without securing the explicit consent of employees can include: Claims for Constructive Dismissal An employee could resign and claim constructive dismissal. The claim would be that the company acted unreasonably, and/or that the company breached their contracts of employment by amending the Handbook without consent. The Workplace Relations Commission (the “WRC”) can award up to 2 years’ remuneration for constructive dismissal. However, the award would be based on financial loss and is subject to the employee’s duty to mitigate this loss by finding alternative employment. In reality, an employee would only succeed in this claim if the organisation failed entirely to consult with or notify employees in respect of the changes and if the changes were material and significant. Claims under the Payment of Wages Act 1991 If any of the amendments to the Handbook result in a deduction in the wages payable to employees, an employee may bring a claim to the WRC under the Payment of Wages Act 1991 (the “1991 Act”). These types of claim were quite common during the recession when employers imposed wages cuts unilaterally. For the purpose of the 1991 Act, “wages” means any sums payable to the employee by the employer in connection with his employment, including any fee, bonus or commission, or any holiday, sick or maternity pay and any sum payable to the employee upon the termination by the employer. It does not include expenses, pension payments, redundancy payments, death benefits, or benefits in kind. Declaratory Relief / Damages A disgruntled employee could technically apply to the civil courts seeking an injunction preventing the changes being made to the Handbook without consent and/or seeking declaratory relief (i.e. a declaration that the company has acted in breach of contract). If an employee suffers any damage as a result of the company’s actions, they could also claim damages for breach of contract. The risk of this is relatively low however, it did occur in the UK recently in the case of Sparks v Department of Transport, [2015] EWHC 181 (QB). The employer in that case was the Department for Transport (“DfT”). Seven employees from different agencies within the DfT brought the claim. Each of the DfT agencies had a staff Handbook which followed the same standard format across each of them. The policy which caused the problem with the employees in this case was the attendance management procedure, which was expressed to form a part of the employees’ contract of employment. In 2012 the DfT notified the trade unions that they would be changing the attendance management procedure across all agencies and making it into a standard procedure. The changes proposed meant that the attendance management procedure would be triggered after fewer absences than previously. This could then lead to dismissal of an employee much sooner than under the original procedure. The employees applied for, and were granted, the following declarations by the High Court:
  • The terms of their contracts were set out as before the change;
  • The new procedures did not vary the original terms, and were not contractually binding;
  • The DfT committed an anticipatory breach of contract in imposing the new procedures; and
  • If the DfT applied the new procedures in any individual case, they would commit a breach of contract.
As stated earlier, the risk of this type of action is low. A claim of this nature would be very unusual and would generally only be brought where a significant change which is detrimental to the employees is made, or where the employer was unionised/a State body. Possible difficulty relying on the Handbook If an employee challenges any new aspect of the Handbook, either during the course of employment or in any proceedings, the employer may encounter some difficulties relying on that new aspect of the Handbook if they have not sought consent to the change. For example, if a company were to terminate an employee’s contract due to conduct expressed as constituting gross misconduct in the revised Handbook (and this conduct was not formally expressed as constituting gross misconduct), the employee may argue in any subsequent unfair dismissal case that he did not consent to the change. The WRC may take issue with the fact that the employee did not explicitly consent to the change, and this may be one factor taken into account when the reaching its decision. However, it is unlikely to be the only or most significant factor. Of all of the above identified risks, this is the most significant risk, but one which is sometimes outweighed by the risk in seeking consent and it being withheld. If employees are notified of the revised Handbook and do not object, the company could argue that employees gave their implicit consent or acquiesced to the amendments. However, if the company asks for specific consent and this is rejected, the company cannot at a later stage rely on this “implied consent” argument.

Conclusion

While employers are technically required to obtain the consent of employees before changing any contractual terms in a staff Handbook, this approach is usually not commercially practical, and it is an approach that does not tend to happen in practice other than in public sector. Instead, the standard practice is to notify employees of the changes and to keep a record of the efforts made by the employer in this regard. It is important that a company is able to produce evidence at any hearing that employees were notified of the changes. Preferably, this can be done by asking employees to sign an acknowledgement that they were notified of and understand the changes. Asking an employee to sign an acknowledgement in itself could present challenges and is an action that the company may not wish to take. At the very least, an employer should take some other action to notify staff of changes by, for example, sending an email to all staff attaching the Handbook or directing the employees to the Handbook on the intranet, or wherever it is stored. This article first appeared as part of Legal-Island’s employment law update service. Find out more: www.legal-island.ie

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