The perils of unilateral variation of a contract

5th October 2023

The perils of unilateral variation of a contract

When an employer is wanting to make changes to an employee’s contract of employment, unless the contract permits the change, it has three options:

  1. Seek the employee’s express agreement to the new terms (either on an individual basis or through a collective agreement which is binding on the employees concerned);
  2. Unilaterally impose the change and rely on the employee’s conduct to establish implied agreement to the change; and
  3. Terminating the employee’s employment and offering re-employment on the new terms.

An employee that has their employment contract unilaterally varied, has the option of:

  1. resigning and claiming constructive unfair dismissal, subject to qualifying service and showing that the breach was repudiatory;
  2. waiving any repudiatory breach/affirming the contract and agreeing to work under the new terms;
  • depending on the nature of the change, refusing to work under the new terms and effectively “dare” the employer to dismiss them;
  1. working under protest and bringing proceedings for breach of contract and/or any shortfall in wages; and
  2. working under the new contract but asserting that dismissal from the old contract, which – subject again to qualifying service – can form the basis for a complaint of unfair dismissal (a Hogg dismissal).

In a recent case (Jackson v University Hospital of North Midlands NHS Trust), the Employment Appeal Tribunal (EAT) looked at whether a Hogg dismissal (so called as the principle was derived in the case of Hogg v Dover College) will occur where a variation of a contract, done without agreement, is such as to amount, in reality, to a termination of one contract and its replacement by another.

The Facts

The claimant was employed as a band 6 specialist nurse. The Trust proposed to restructure its nursing provision, by removing the specialist nurse function and creating a smaller number of band 6 senior nursing posts, with the remaining posts being at band 5. The claimant was unsuccessful in obtaining a band 6 post and was informed on 13 November 2018 that she would be moved to a band 5 post effective from 3 December 2018. She was issued with new terms and conditions which she was asked to sign, but she refused. She said she should be made redundant and paid enhanced redundancy pay instead since the specialist nurse function had disappeared. When the Trust refused to make her redundant, she raised a grievance arguing that the post that had been offered to her was not suitable alternative employment. The Trust rejected the grievance, so the claimant resigned and appealed the grievance decision. Her appeal was successful, and she was told that if she withdrew her resignation, she would receive 8 weeks’ notice of termination for redundancy and that redeployment would be explored in the meantime. She withdrew her resignation but argued that her 8 weeks’ notice should apply from 3 December 2018 (the date that she had been told she had been put into the Band 5 role). The Trust disagreed and on 25 January 2019, sent her a letter thanking her for withdrawing her resignation and confirming that her employment would terminate by reason of redundancy after a period of eight weeks’ notice. This would take her to 22 March 2019.

The claimant then re-instated her resignation from 28 December, arguing that she had been unfairly constructively dismissed, with her employment ending on 28 January 2019. She would have been eligible for an enhanced contractual redundancy payment however the terms of the scheme rules were that she ceased to be eligible if she left her employment before the end of her notice period. The Trust told her that because she had left before the expiry of the 8-week notice period, which it said would have been on 22 March 2019, she had forfeited her entitlement to any contractual or statutory redundancy pay.

The claimant brought claims for constructive unfair dismissal, a statutory redundancy and a contractual redundancy payment. She argued that the unilateral termination of her old contract and imposition of the new contract was of itself a dismissal. In making this assertion, she was arguing that there was a Hogg dismissal on 3rd December 2018 and that as she was still in employment at that point, she was entitled to contractual redundancy pay. Unlike in the context of a repudiatory breach in response to which an employee can resign and treat themselves as unfairly constructively dismissed, where an employee risks being deemed to have affirmed the contract if they do anything to the contrary such as delaying too long before resigning (thereby preventing a claim), this enables them to claim unfair dismissal notwithstanding the continuation of employment. This sort of dismissal can only be argued where the changes imposed on the employee are sufficiently significant to amount to a termination of the old contract and imposition of a new one.

The Employment Tribunal Decision

Whilst agreeing that she had been unfairly dismissed, the employment tribunal decided that she was not entitled to the enhanced redundancy pay. The employment tribunal took the view that the imposition of the new band 5 contract on the claimant was not a radical change in her terms of her employment, and she therefore could not treat herself as constructively dismissed. In the circumstances, there was no dismissal on 3 December 2018 as her employment continued until she resigned the second time. Further, by withdrawing her original resignation and seeing through her grievance to the appeal stage, she affirmed her contract of employment. The tribunal concluded that she had been expressly dismissed by the letter of 25 January 2019 (which meant her notice period expired on 22 March 2019) and that by resigning effective on 28 January 2019 she had left before the expiry of her notice period; she was not entitled to the contractual redundancy payment. The claimant appealed to the EAT.

The EAT Decision

The EAT confirmed that an employee cannot affirm a contract that has been terminated, by working under a new contract. If the claimant’s original contract was terminated by the Trust on 3 December 2018, she was also dismissed on that date. The EAT said that the tribunal had taken the wrong approach, confusing constructive dismissal with a Hogg dismissal. The question was not whether the claimant’s employment was continuing, but whether her old contract had been terminated.

The EAT held that the tribunal needed to do a proper before-and-after comparison of the band 6 post and the band 5 post to ascertain whether the new terms were sufficiently different to amount to a withdrawal of one contract and its replacement by another. The EAT held it doesn’t have to be a particularly severe breach of contract to amount to a Hogg dismissal. The normal position on repudiatory breach applies.

The EAT remitted to the tribunal the question of whether the imposition of the band 5 role on 3 December 2018 amounted to a Hogg dismissal (and therefore whether the claimant was entitled to enhanced contractual redundancy pay).

Although these types of cases are thankfully rare and the facts are complicated, this case is worthy of particular note because it demonstrates the risks employers face in unilaterally imposing changes to terms and conditions on their employees.

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