Changes in a Employment Contract

An employment contract, or contract of employment, is an agreement between an employer and an employee which sets out their employment rights, responsibilities and duties. These are called the ‘terms’ of the contract. It can be recognised by the problem question that Nabby’s employment has been altered significantly as well as a cut in salary and replacement of a generous sick pay scheme by statutory sick pay. One of the fundamental changes is that Nabby will get a cut in salary. These are unilateral changes in her employment, as she has not herself agreed to them. Neither is she happy. An attempt to unilaterally vary the contract without the consent of the other party may amount to a breach of contract, as in Lee v GEC Plessey Telecommunications [1993] [1] . In certain circumstances a variation clause can justify alterations in the nature of employment however rights not have unauthorised deductions made from wages [2] .

One can lawfully change the contract without the consent of the other party by the insertion of a term in the contract, which gives power to either party to vary it. These can be in the form of express or implied terms. It must be noted that if an employer exceeds these powers, he will be in breach of the contract, which was the issue in United Bank Ltd v Akhtar [1989] [3] . Here it was found that it was not the fact that the variation was unreasonable, which caused the breach. It was the unreasonable use of the power to vary the contract, which breached the implied term of mutual trust and confidence. As a result If Agewell exceeds the powers given to them in the contract to vary the rights and obligation embodied in it; they will be in breach of the contract. Therefore this power should only be used reasonably [4] .

The courts may identify circumstances in which the implication of an implied term is ‘necessary’ in the employment relationship. Such circumstances were found in Scally and others v Southern Health and Social Services Board [1991] [5] . Implied duties can be imposed by statutes, or by the operation of common law. Others may be specific to the contract, which is at issue. There are also those, which are found in all contracts of employment. One implied duty is the duty ‘not to destroy the relationship of mutual trust and confidence’ without good reason. An employer must treat the employee with consideration and tolerance that is necessary to enable the contract to be carried out. This implied trust was clearly expressed in the Employment Appeal Tribunal’s decision in Wood v W.M.Car Services Ltd [1981] [6] . Merely unreasonable behaviour would not suffice, but if that unreasonable behaviour harmed the trust and confidence of the employee; this will equate to a breach of contract. The modifications in Nabby’s contract, and the fact that she is not happy about them, may amount to a breach in mutual trust and

confidence and therefore breach her contract. A counter argument is that the way in which an employer must oblige to his implied duties in law, so must an employee. One of

the implied duty for an employee is that they must adapt to reasonable requirements and changing methods or techniques of working. In Creswell v Board of Inland Revenue [1984] [7] , it was held that the employers were not in breach of the contract by requiring employees to use a computerised system.There is also a change of a generous sick pay scheme by statutory sick pay. This is so significant, if an employer attempts to revert back to the SSP, the employee could claim for unlawful deduction of wages as well as breach of contract and constructive dismissal after resigning.

The rules used to make a grievance are set out in the ACAS [8] Code Of Practice 1 [9] . A grievance is described as a complaint by an employee, about any act or omission, which his employer has taken or is contemplating of taking in relation to him’ [10] . There are new statutory dismissal, disciplinarily and grievance procedures, introduced in the Employment Act 2002, which are incorporated in every contract of employment. The grievance procedure will be used as a mechanism to deal with the problems that have arisen in the course of employment, before they develop into major problems and potentially larger disputes.

The first step of the procedure is the written statement, which must be submitted to the employer stating what the grievance is. The employer should then invite the employee to a meeting, which is situated at a reasonable place and time, so as to discuss the grievance. The employee should be allowed to set out their case and answer any allegations that may have been made against them. They should also be allowed to ask questions or queries [11] . After this meeting, the employer must inform the employee of their decision and their response of the grievance, along with their right to appeal against the decision if the employee is not happy with this decision. If the employee does appeal, a meeting for this will also be organised, to which the employer is invited. Following this final meeting, the employer must inform the employee of their final decision. This very same procedure shall be applied in Nabby’s case; therefore she must make a written statement in which she can explain that she is not happy with the various modifications in her employment. The requirements for this statement are minimal, as was stated by the EAT in Shergold v Fieldway Medical Centre [2006] [12] that is as long as the grievance is in writing and states the general nature of the compliant.

If an employee is dismissed without the employer following the statutory procedure, explained above, and then makes a claim to an employment tribunal, providing they have the necessary qualified service and they are not prevented from claiming unfair dismissal

by virtue of age, the dismissal will be automatically ruled unfair [13] . If Nabby’s employer does not operate an effective procedure, they will be in breach of an implied obligation at common law to have a grievance procedure.

Employee who voluntary resign as Nabby did will have no claim for unfair dismissal because resignation is not a dismissal. As a result Nabby can seek to rely on constructive dismissal. Constructive dismissal arises where an employee elects to terminate the contract with or without notice, in result of the employers conduct [14] . In these circumstances the employer’s behaviour constitutes a repudiation of the contract and the employee accepts by resigning. Nabby is only entitled to treat herself as constructively dismissed if Agewell is guilty of conduct which is a breach of a significant term, either implied or express. If Nabby continued to work she may be have deemed to have waived the breach, and cannot bring a claim subsequently based on the employer’s repudiation, as the law does not allow her to ‘have his cake and eat it’ [15] . However if Nabby protests about the breach, as a grievance, but stays on until she can find herself another job, then this will not be regarded as an acceptance of the employer’s breach [16] . It can be recalled that employers have an implied duty of mutual trust and confidence, and therefore any action which breaches this trust can amount to constructive dismissal.

The remedies available for the unlawful variations in Nabby’s contract are varied. She may bring an action for an injunction to restrain her employer from breaching the contract, or seek a declaration as to what her rights are under the contract. Alternatively the Employment Tribunal can seek to re-instate or re-engage the employee who has been unfairly dismissed. To re-instate an employee the tribunal will have to ask ‘whether it is practicable to do so?’ [17] .

If she has not been offered to be re-engaged to a similar position with the employer, she may claim for compensation. Compensation for unfair dismissal will unusually consist of a basic award and compensatory award. The basic award will be calculated in the same way as a redundancy payment and then be reduced by the amount of redundancy payment received [18] . This however can be reduced if Nabby unreasonably refuses an offer of re-instatement, if proposed.

Many employers protect themselves against damaging competitions and misuse of confidential information by an express restrictive covenant. This comes into affect after the termination of employment and restricts the work for an ex employee does in the future and where it is done. As such it gives rise to the theoretical difficulty as to how, given that employment is generally thought to be defined by reference to contracts of employment. In employment cases the court attempts essentially to hold the ring between

the interest of the employee to be employed in the future as he wishes, and the employer’s interest to preserve its business from disclosures by an ex employee. Restrictive clauses must go no further is reasonable for the protection of the employer’s business interests [19] and must serve the public interest.

In WAC Ltd v Whillock (1990) [20] there was a clause in the employer’s contract prohibiting him from carrying on any business in competition with the company, this did not prevent him from acting as a director or employee or a competing company. A court will only enforce a restrictive covenant if it protects a legitimate business interest (trade secret or confidential information, client base, key employees or supplier relationships) and if it extends no further than is reasonably necessary to protect that interest [21] .

An employee has an implied duty of good faith and fidelity, which includes a duty not to compete with the employer. This duty was breached in Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] [22] . As a result an injunction was granted restraining the defendant from employing the claimant’s employees.

A contract in restraint of trade is one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses. It is well-established that the onus of satisfying a court that a covenant that operates to restrain trade is reasonable as between the contracting parties lies on the party seeking to rely on it. If he discharges this burden, the onus shifts.

The law distinguishes the difference between an employee intending to compete and an employee merely carrying out preparatory activities to compete. Mere preparatory activities may not amount to a breach in the implied duty of good faith and fidelity. This was found in Laughton and Hawley v Bapp Industrial Supplies Ltd [1986] [23] , where writing to the employer’s suppliers for a price list, who intending to commence trading in the future was not a reason to dismiss the employees. Here there was no abuse of power by employees, or disclosure of private trade secrets, neither a breach of any covenant in restraint of trade. However the matter is entirely different where a managing director tries to influence current employees to leave their employment to join him, and persuades his employer’s major client to transfer business to him [24]

In the case Fitch vs Dewes [1921] [25] where the defendant was a solicitor’s managing clerk the principle here is where there is an express term in the contract of employment it is more likely to be enforced where it relates to trade secrets and customer information. The clause will not be valid if it merely protects an employer against competition from an ex-employee.

It made clear by the Privy Council in Stenhouse Australia Ltd. v Marshall, Williams, and Davies & Phillips [1974] [26] , The Privy Council said that the employee is entitled to use to the full any personal skills or experience even if this has been acquired in the service of his previous employer [27] .

If Nabby is merely planning or thinking of setting up a business, this will not constitute a breach of good faith. However if she takes some form of action and set-ups a rival business or works for them that will harm her employer, she will be in breach of the duty of good faith and fidelity towards her current employer. However Nabby has the right to work for any employer who is willing to employer her [28] .If Nabby works for a business which is or is likely to be wholly or partly in competition with the company Agewell can compensate damages from Nabby if they can provide evidence that Nabby is the cause of decrease in the business. However Nabby may argue that she was unfairly dismissed and the restrictive covenant does not come into force [29] .The terms that were put in Nabby’s contract were to restrict her from engaging in the industry, this is considered reasonable as Nabby could benefit from Agewell’s business connections and trade secrets.

In conclusion, I believe that Nabby’s employee has made such radical changes to her employment, which is so substantially different that they stretch the contract, as to the effect of destroying the basis of the old one. She should be able to raise this in a grievance meeting, which can enable the employer to re-consider these changes and reach a compromise. If this cannot be reached, or the employer does not carry out the grievance procedures accordingly, Nabby will be able to seek constructive dismissal and claim compensation.

(2)

Whether Phil is employed or self-employed depends on the terms and conditions of his work. Phil will be classed as an employee if he is working under a contract of employment. A contract need not be in writing and it exists when he and his employer agree terms and conditions of employment. It can also be implied from his actions and those of the person he is working for. His contract will normally set out what he is expected to do. As an employee, your employer is obliged by law to deduct Income Tax and National Insurance contributions from your wages you are also entitled to all minimum statutory employment rights [30] .

If Phil is self-employed he does not have a contract of employment with his employer. You are more likely to be contracted to provide services over a certain period of time for a fee and be in business in your own right. You will also pay your own tax and National Insurance contributions however you do not have employment rights as such if you are self-employed. You are your own boss and can therefore decide, for example, how much to charge for your work and how much holiday to give yourself, but you do have some legal protection [31] .

Phil is an employee and not self employed. This I proven by his employer provided him with his cleaning equipment and paid his wages into his bank account, deducting National Insurance and income tax.

Phil has been dismissed, without notice, after allegations that he had stealing cleaning products from the company depot. His employer can argue that this is acceptable as a summary dismissal. This kind of dismissal does not require any notice to the employer. In order to justify summary dismissal, Phil must have been in breach of an important term of the contract, i.e. guilty of gross misconduct. As Phil was dismissed without other members of staff being spoken to and before a colleague who admitted doing the same thing was only reprimanded and had his wages docked is not fairly treated but if his employer can show that ‘on the balance of probabilities’ the employee did that of which he is accused then that is enough.

Bay Cleaning Services is entertaining a reasonable suspicion amounting to a belief in the guilt of Phil of that misconduct at that time. In approving this test in Weddel and Co. Ltd v Tepper (1980) Stephen Lj did emphasize that belief on reasonable grounds entailed that employers must not form their belief hastily without making appropriate enquires [32] . Phil is being suspected, In the case of suspected serious negligence in McPhie & McDennot v Wimpey Waste Management Ltd [1982] [33] and generalized in Distillers Co Ltd v Gardner [1982] [34] . It should be remembered that Burchell was decided before the burden of proof on the reasonableness issue was removed from employers even though there may still be occasions when it is the duty of the employer to provide some evidence as in the case Scottish Daily Record and Sunday Mail (1986) Ltd v Laird [1996] [35] . The need for a reasonable belief in the guilt of Phil’s employer is illustrated in Ferodo Ltd v Barnes (1976) [36] as the applicant was dismissed when it was thought that he had committed an act of vandalism in the company toilets, the fact that the employers could not prove that the employee had actually committed it is not relevant save as evidence that the employer acted reasonably or otherwise in concluding that the employee had so behaved.

If summary dismissal is justified there is a specific exemption from any requirement to give notice (ERA 1996 s.86 (6)). In such a case is not enough that the employer simply asserts that he was entitled to summarily dismiss the employee. In case of dispute there must be a factual finding by a tribunal to that effect as in the case Ball v Prudential Corporation PLC [1999] [37] .

For the dismissal to be fair, Phil’s employer must also show that it followed a fair procedure.  Section 34 of the Employment Act 2002 inserted a new Section 98A into the Employment Rights Act 1996. This sets down the minimum procedural requirements and provides that a breach by the employer of a statutory procedure on dismissal will mean that the dismissal is automatically unfair; this reverses the rule in Polkey v Dayton Services Limited [1988] [38] .

The law on unfair dismissal does no more than give employees a legal right to be treated in the way in which a fair and reasonable employer would treat them anyway. For Phil’s employer to dismiss him fairly, they must have both a valid reason for dismissing him, and act reasonably in treating that reason as a sufficient reason for dismissing him, however they should not normally dismiss before the employee has been found guilty, Securicor Guarding Ltd v R [1994] IRLR 633 [39] . Nevertheless, his employer can justify dismissing Phil without notice if his commits a serious breach of the contract. The employer does not have to have proof of the theft, suspicion is enough. The cleaning services can also rely on evidence that is only found after the dismissal [40] .

If you have a problem at work that cannot be resolved, you may consider making a claim to an Employment Tribunal by filling an ET1 claim form. Employment tribunals are judicial bodies established to resolve disputes over employment rights. As for time in most cases a claim must be brought within three months of the date when the matter you are complaining about happened [41] .

In conclusion I believe that Phil may have a claim for unfair dismissal as he had a good conduct [42] and his case wasn’t investigated and enquired at all by his employer. Nonetheless they had suspected him reasonably and on the balance of probabilities as the cleaning product were depleted more than usual and may be able to dismiss him to a belief in the guilt. If his employer is found guilty of unfair dismissal Phil can claim to the Employment Tribunal by filling the ET1 form.