Solicitor unfairly dismissed for refusing to agree changes to her employment contract during the pandemic

Failure to explore negotiations with employee were key factor.

The Covid-19 pandemic has led to many employers having to make changes to employees’ terms and conditions of employment in order to take advantage of the Coronavirus Job Retention Scheme (CJRS) and/or to enable them to survive the economic challenges of the pandemic.

As Wrigleys highlighted early on in the pandemic, initial confusion about the CJRS and what it did and did not allow employers to do meant there was a risk that employers exposed themselves to claims if they forced through contractual changes (see our article Unlawful deductions from wages claims and the furlough scheme, available from our website).

It is not possible to unilaterally vary an employment contract.  In the absence of a contractual right to make changes, then changes can only be made by agreement between the parties. However, where employees do not agree, employers may try to force through changes unilaterally in breach of contract or choose to dismiss the employee with or without an offer of re-engagement on new terms. This is referred to as “fire and rehire”.

If the employer has a sound business reason for requiring the change in terms, it may be able to establish ‘some other substantial reason’ (SOSR) as a potentially fair reason for dismissal. ‘Reasonable’ in this context does not mean that a Tribunal has to agree with the reason, rather the Tribunal must find that the reason for dismissal is something a reasonable employer would consider as reasonable.

Even where the employer has a fair reason, a dismissal for failure to agree to the new terms may still be unfair where the employer has not followed a fair procedure, including  consulting with employees over the proposed change and considering any alternatives to dismissal.  Immediate urgent business pressures will not change the need for a fair procedure, although it may justify the process being curtailed.

Case: Khatun -v- Winn Solicitors Limited [2020]

After seeing a downturn in work at the onset of the pandemic, Winn Solicitors decided to place around half of its staff on furlough.  Miss Khatun was one of the solicitors who was selected to keep working and, following a discussion with her head of department, it was explained that everyone would need to agree variations to their contract which were non-negotiable. 

Miss Khatun was then e-mailed the following day along with all the other staff at the firm with instructions to sign and return the new contract variation within 24 hours or face likely dismissal.  The variation gave the firm the freedom to place the employee on furlough or to unilaterally reduce their hours/ pay by up to 20% on five days’ notice.  This power was stated to be effective until the start of October 2020, with the possibility of an extension by a further three months based on business need. 

The following day Miss Khatun replied saying that she was unwilling to agree the variation as she was continuing to perform the job she had been contracted to do and that if she was to be furloughed or any other unexpected situation was to arise, she would consider a variation of her terms at that point. The firm’s HR director replied urging her to sign the variation and then consider any changes at the point they were introduced. Miss Khatun declined.  The head of department later reiterated the firm’s position that the changes were non-negotiable and that she would be dismissed if she did not agree.

The chief operating officer then instructed the HR director to terminate Miss Khatun’s employment immediately with no notice, pay in lieu or accrued holiday pay on the basis that she had been ‘inflexible and clearly not someone interested in the firm or her colleagues’.

The firm later accepted that it had been in breach of contract and paid her notice pay and holiday pay, however Miss Khatun continued with a claim for unfair dismissal. 

The Employment Tribunal accepted that the firm had ‘sound, good business reasons’ for implementing the variation to the contract.  It had been reasonable and not premature for the firm to want to implement the measures that it did at the time that it did, given the effects of the pandemic on the business.  The dismissal therefore met the test for an SOSR dismissal.

However, the Tribunal found that the firm had not acted reasonably in treating this reason as sufficient reason for dismissal in all the circumstances. 

In particular, the Tribunal found that there had been no meaningful consultation with Miss Khatun, rather the meetings between her and her superiors were a one-sided conversation in which the terms of the variation were simply put to her and her reasonable alternative suggestions to this were dismissed out of hand. 

The Tribunal was not convinced by the firm’s argument that it simply did not have time to negotiate with over 300 members of staff. In fact, as all other staff had signed, the firm only had to engage in discussion with Miss Khatun.  In addition, the Tribunal found that based on the evidence provided, the firm had not reasonably explored alternatives to dismissal.  Rather, the directors of the firm decided that if Miss Khatun did not agree, they would proceed straight to dismissal without any process being applied. Finally, no right of appeal was offered, and the tribunal did not accept the argument that an appeal process would have been pointless.  As the tribunal observed, both parties’ attitudes may have been more amenable by the time of the appeal hearing, making a resolution possible.

In view of all these factors the dismissal did not fall within the band of reasonable responses of a reasonable employer, and was therefore unfair.

Wrigleys' comment

So-called “fire and rehire” tactics have been raised at the highest levels of government during the pandemic. Indeed, the practice has come under considerable scrutiny for its use at such a difficult time.  Whilst there have been calls to outlaw or limit this practice, so far no firm steps to do so have been taken, though ACAS has just released a report on the practice.

During a parliamentary debate on the 27 April 2021, the relevant government minister had been very clear that fire and rehire practices are “completely unacceptable” and that the threat of dismissal should only ever be a last resort and not simply used as an opening gambit in a negotiation to alter terms. 

At this time, the views the minister gave are not reflected in the law on unfair dismissal. Rather, the focus of the law on this topic is on the reasons for the proposed change and whether the employer was reasonable in all the circumstances to propose them, whether they explore alternatives and whether they consulted with employees to try and find a negotiated solution. Even where an employer threatens or warns that failure to accept terms may result in dismissal, this will not in of itself mean that a subsequent dismissal is unfair, even though there may be questions over whether this is a reasonable negotiation tactic because the balance of power (usually) lies with the employer.