Unfair Dismissal - Withdrawal of Incentive to Accept Change in Terms

We recently reported on the decision of the Employment Appeal Tribunal (EAT) in Garside and Laycock Ltd. v Booth - see "Dismissal for Refusing to Accept Pay Cut". In that case, the EAT confirmed that it may be fair to dismiss an employee who refuses to accept a pay cut. We now have another EAT decision which again suggests that tribunals are likely to have some sympathy for employers who find that, due to the current economic climate, they are forced to make changes in employees' terms and conditions in the face of employee opposition.

In Slade and Others v. TNT (UK) Ltd., TNT was facing a severe decline in profits from its distribution business. It decided that was necessary to remove what was known as an End of Sort Bonus (ESB) that was paid to 470 employees, even though this would result in a fairly substantial pay cut for many employees. It attempted to negotiate a deal with the trade union, offering each employee a one-off buy-out payment. However, in a ballot of the employees the deal was rejected by a small majority. TNT then gave all the employees Notice of Dismissal but offered to reemploy them on the same terms as before, minus the ESB. The employees all accepted the new terms under protest and then sued for unfair dismissal. ACAS managed to conciliate a settlement for most of the employees, based on an enhanced buy-out amount. However, 183 refuseniks stuck to their guns and persevered with their claims. These were rejected by the Employment Tribunal, which ruled that the employees had been fairly dismissed for Some Other Substantial Reason (the final miscellaneous category of fair dismissal).

On the employees' appeal to the EAT, one of their arguments was that the requirement of "equity" laid down by the law meant that when imposing the desired terms, TNT should have included the one-off buy-out payment that had been on offer in the negotiations. However, the EAT rejected this argument. TNT had not been obliged to offer re-engagement on terms which included the buy-out sum but had been entitled to offer that sum in order to secure a specific benefit - namely, the employees' agreement to the changes it wished to make.

There seems to be little doubt that the decision in this case strengthens the hand of an employer attempting to negotiate changes to employees' terms and conditions. In effect, it says that employees are not entitled to the benefit of a one-way bet and allows an employer to offer an incentive to accept changes to terms and conditions on a time-limited basis.

If you would like to know more, please contact Nick Crook or Gareth Pobjoy.

Filed: 10/11/2011 14:00:27