Employment contracts are not static documents. As businesses grow and adapt, employers may need to update terms and conditions to reflect changes in the workplace, business operations or legislation. This might include changes to working hours, pay structures, job responsibilities, hybrid working arrangements or employee benefits.
However, what happens if an employee refuses to sign the new contract?
Many employers assume they can simply introduce new terms, while some employees believe they can reject any proposed changes without consequence. In reality, the legal position is more nuanced.
This article explains when employers can change employment contracts, what happens if an employee refuses to sign, and the steps businesses should take to minimise legal risk.
Can an Employer Change an Employment Contract?
An employment contract is a legally binding agreement between an employer and an employee. This means that, in most cases, neither party can simply change the terms without the agreement of the other.
If an employer wishes to introduce new contractual terms, they should first consult with the employee and explain the reasons for the proposed changes. Open communication is often the most effective way to reach an agreement.
Many contractual changes are accepted without issue, particularly where they benefit employees or reflect changes that are necessary for the business to operate effectively.
However, if the proposed changes reduce pay, alter working hours, change an employee’s place of work or significantly affect their role, employees may be reluctant to agree.
Employers should avoid assuming that continuing to work automatically means an employee has accepted new terms. Although continued working may, in some circumstances, amount to implied acceptance, this will depend on the facts of the case and should not be relied upon without legal advice.
What Happens if an Employee Refuses to Sign?
An employee is not legally required to sign a new contract simply because it has been presented to them.
If they refuse, the employer has several options.
The first is to continue discussions and attempt to reach a mutually acceptable agreement. Employers should explain why the changes are necessary and consider whether any compromise is possible.
In some situations, the employer may decide not to proceed with the proposed changes.
Where the changes are essential to the business, employers may consider terminating the existing contract and offering re-engagement on the new terms. This process, sometimes referred to as “dismissal and re-engagement”, can carry significant legal risks and should only be considered after taking professional legal advice.
Employers should also be aware that changing contractual terms without agreement could result in claims for breach of contract, unlawful deduction from wages or constructive dismissal, depending on the circumstances.
Before taking any action, employers should ask themselves:
- Have I properly consulted with the employee?
- Are the proposed changes reasonable and necessary?
- Have I considered alternative solutions?
- Have I taken legal advice before implementing the changes?
Employers who are unsure about their legal obligations can also use platforms such as NakdLaw to better understand common employment law questions before seeking tailored legal advice.
How Can Employers Reduce the Risk of Disputes?
The best way to avoid disputes is through early communication and careful planning.
Where changes are anticipated, employers should involve employees as early as possible, explain the commercial reasons behind the proposals and provide sufficient time for employees to consider them.
Having clear, well-drafted employment contracts from the outset can also reduce uncertainty. Some contracts include flexibility clauses that allow limited changes in certain circumstances. However, these clauses must still be exercised reasonably and do not give employers unlimited discretion to alter contractual terms.
Businesses should also ensure managers understand the importance of following a fair consultation process. Decisions made without proper communication are far more likely to result in grievances or legal claims.
Where multiple employees are affected, additional consultation obligations may arise, particularly if dismissal and re-engagement is being considered.
Taking legal advice before implementing significant contractual changes can help businesses avoid costly disputes and maintain positive working relationships.
Conclusion
Changing employment contracts is rarely as simple as issuing a new document for employees to sign.
While businesses may need to update contractual terms from time to time, employers should remember that employment contracts are legally binding agreements and changes should generally be made with employee agreement following meaningful consultation.
Where an employee refuses to sign a new contract, employers should avoid making assumptions or taking unilateral action without understanding the legal implications.
By following a fair process and seeking legal advice where appropriate, businesses can introduce necessary changes while reducing the risk of employment disputes.
Need Employment Law Advice?
If your business is considering changing employment contracts or dealing with an employee who has refused to accept new terms, Penerley’s experienced employment solicitors are here to help. We provide practical, commercially focused advice to employers across England and Wales. Contact Penerley today to discuss your situation and protect your business.
