Variation of Employment Contracts ⚓︎

The issue of the variation of contracts is one which has become all the more important since March 2020.  Employers have been forced to adapt in order to overcome the obstacles that have been presented by the Covid-19 pandemic. This has involved making difficult decisions on how the businesses operate and there have been a number of measures which employers have tried to take to do so through, for example, pay cuts, lay-off and short term working arrangements. The question therefore arises as to the legality of making such changes to an employee’s contract - especially without the consent of the employees who the changes will impact.

Whilst it might be the case that there are exceptional reasons necessitating immediate decisions by employers relating to their employees contracts, this does not allow them to make changes to core terms of employment contracts unless:

1. there is a change in the law; or
2. a contractual provision exists that allows for variation; or
3. both parties consent to the change.

 Change in the Law  ⚓︎

The most straightforward reason which would result in a contractual variation would be a change in the law.  A change in law may give effect to a contractual variation which both the employer and employee must comply with. For example, when the law changes in relation to statutory minimum wage or maternity leave which would in turn vary these terms in employment contracts.

Contractual provision allowing for variation ⚓︎

In certain situations, the employment contract itself may contain a variation clauses allowing for certain terms to be varied unilaterally without further consent. As these are contractual clauses, the employee is agreeing to the possibility of a variation of terms when entering the contract and employment relationship. It is recommended that these clauses should be in the contract as standard, but it is important that employers provide notice of the variation and consult with employees in relation to the change prior to implementing it.

Both parties consent to the change ⚓︎

In the absence of any change in law or contractual variation clause, any proposed contractual changes must be communicated and agreed with the employee. Ideally, employers should attempt to engage and consult with employees in advance, to provide for the reasoning behind the variation to be explained and discussed.

The Terms of Employment (Information) Acts 1994-2014 provides that the employee must be furnished written confirmation of the change within one month of reaching agreement on the new terms. The change can be given effect by way of side letter or amendment to the contract of employment

Failure to notify or obtain consent ⚓︎

An employer risks exposure to legal action in making a unilateral variation to an employment contract.

If an employee is not notified and/or does not consent to the terms of their contract being varied,in the absence of a contractual provision allowing for that change, the variation may amount to a breach of contract upon which the employee can take a claim for damages.

However, while express consent should be sought by an employer, an employee who continues to work under the varied terms of employment without explicit acceptance or objection has arguably acquiesced to the change limiting their ability to take a claim.

If a unilateral variation of a contract relates to the reduction of pay, employees may take a claim to the Workplace Relations Commission (WRC) under the Payment of Wages Act 1991.  This particular point is set to be tested in litigation before the WRC in the coming months, particularly where employees were put on either short-time or lay-off without their consent and without an explicit clause permitting them to do so. The employer may also be exposed to a claim of constructive dismissal.

Conclusion ⚓︎

While businesses continue to experience the effects of Covid-19 and are navigating an ever-changing economic and working landscape, it is important to remember that the law relating to the variation of employment contracts remains the same. Communication and agreement are key components when varying employment terms and conditions and should be adhered to in order to avoid exposure to claims.