Asda’s ‘contract 6’: how to manage employment contract changes

Managing employment contract changes

Supermarket giant Asda is facing backlash from a number of its employees this week due to changes in employment contracts. Protests are being held to raise awareness of the disputes surrounding the so-called ‘contract 6.’

The new contract increases employees’ hourly pay rate and introduces annual bonuses, discounts and a range of other benefits – which sounds like good news. However, the changes also see a reduction in paid breaks and how much notice must be given for changes in shifts, a shortening of the time period defined as a ‘night shift’ and introduces the requirement for employees to work some bank holidays. For some employees, the negatives outweigh the positives – thus the protests. The majority of Asda’s staff have signed the new contract, but those that refuse are being put into a  consultation process and face the prospect of their existing contracts being terminated.

Asda’s bosses state the new contract will increase flexibility and efficiency and, in an increasingly competitive retail landscape, it’s been said these changes are critical to allow the business to best serve its customers. Clearly this is a difficult situation for an employer to be in. So, what does the law say when an employer wishes to introduce employment contract changes?

Firstly, employers should identify whether there is a sound business reason for changing employees’ contracts.  An employer then has three options:

  1. Get explicit agreement to the new terms from employees

This is the preferred course of action.  An employer may have to consider offering an incentive to the employees to agree to the employment contract changes.  Ideally, written agreement should be obtained so there is a clear record that an employee has read and agreed to the terms. Whilst verbal agreement might suffice it is harder to prove at a later date.  Furthermore, some contracts state that changes are only effective if agreed in writing.

  1. Impose the changes and, if employees adhere to the changes without formal complaint, establish implied agreement

This approach is by far the most likely to lead to problems.  Employees may continue to work under the new terms, but silence does not equal acceptance and the complaints can arise at any time. The negative impact of these changes, without explicit consent, may also lead employees to resign (or refuse to work which leads to dismissal) which could be seen as constructive dismissal – leaving the employer vulnerable to claims of unfair or wrongful dismissal.

  1. Terminate the current contract and offer continued employment on the new terms

Provided an employer can establish a sound business reason for the changes, properly consults with its employees and acts reasonably in implementing the changes, they stand a good chance of getting the changes through.  However, employees can still bring claims of unfair dismissal – even if the employee agrees to the new terms.  Often a deciding factor on whether such claims are successful is whether a majority of the workforce agreed to the new terms.

When undergoing employment contract changes, it is essential that employers communicate the need for the changes clearly to their employees. This not only helps to get staff on board, but also mitigates the risks of legal challenges from an employee. As such, it is also essential that employers get sound legal advice before beginning these changes to ensure they are acting in an ethical and legal manner.

For Asda, the public scrutiny they are facing as a result of these contractual changes will inevitably be damaging to their reputation.

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