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Varying or Terminating Employment?

Does a unilateral change in employment terms mean that the employment contract has been varied, or terminated?

In Hogg v Dover College, Mr Hogg was the head of a school’s history department when he became ill with meningitis, which left him physically disabled. Although Mr Hogg only missed two terms of the school year, he received a letter from the school’s headmaster on 31 July 1987, confirming that he could not remain in his role as head of history, and that another teacher would be taking his place, with Mr Hogg’s salary being halved.

Mr Hogg successfully brought a claim for unfair dismissal, with Garland J of the Employment Appeal Tribunal (EAT) stating:

“Up to 31 July, the applicant…was head of history; he was employed to teach full-time at a full salary plus such allowances to which he was entitled. On 31 July, he was told that he was no longer head of history; that he would not be employed full-time and…that the salary he would receive would be exactly half the new scale…

It seems to us, both as a matter of law and common sense, that he was being told that his former contract was from that moment gone. There was no question of any continued performance of it. It is suggested, on behalf of the employers, that there was a variation, but again, it seems to us quite elementary, that you can vary by consent terms of a contract, but you simply cannot hold a pistol to somebody’s head and say: ‘henceforth you are to be employed on wholly different terms which are in fact less than 50 per cent of your previous contract.’ We come unhesitatingly to the conclusion that there was a dismissal on 31 July.”

Clearly then, where a change in contract terms is foisted upon an employee, they may be able to argue that they have been dismissed. This was reinforced in section 95(1)(a) of the Employment Rights Act 1996, which confirms that an employee is dismissed if their contract is terminated by their employer. If the effect of a unilateral imposition of new terms is that the old contract is essentially terminated, as in Hogg, then the employee will have been dismissed under section 95(1)(a).

In the case of Jackson v University Hospitals of North Midlands NHS Trust, Ms Jackson was a band 6 specialist nurse. She was entitled to a contractual redundancy payment, which would be paid unless she left her employment before the expiry of notice. Following a restructuring, the Trust said that Ms Jackson would be appointed to a more generic band 5 role, under a new employment contract. Ms Jackson refused to sign the new contract and raised a grievance on 19 November 2018. On 3 December 2018, the Trust’s electronic records were changed to show that Ms Jackson was now a band 5 nurse, despite her not having signed the contract. On 28 December 2018, Ms Jackson received her payslip, which confirmed that she was now a band 5 nurse – she immediately informed the Trust that she was resigning, although she continued to pursue her grievance to the appeal stage for several weeks afterwards, which was ultimately unsuccessful.

Consequently, Ms Jackson brought claims for unfair dismissal and breach of contract, demanding, among other things, the contractual redundancy payment. The employment tribunal upheld Ms Jackson’s claim for unfair dismissal and awarded her the statutory redundancy payment. However, the tribunal refused to award Ms Jackson the contractual redundancy payment, on the basis that there had not been a Hogg dismissal on 3 December 2018. The tribunal took the view that the imposition of the new band 5 contract on Ms Jackson was not a radical change in her terms of her employment, and she therefore could not treat herself as constructively dismissed. As such, although Ms Jackson’s old band 6 contract was replaced on 3 December 2018, she then continued to be employed under the new band 5 contract. She affirmed this continuing employment by seeing through her grievance to the appeal stage, until her resignation was confirmed. As she had left before the expiry of her notice period, she was not entitled to the contractual redundancy payment. Ms Jackson appealed to the EAT.

The EAT confirmed that, where a contract has been terminated, the employee cannot affirm it by working under a new contract. And, as set out in section 95(1)(a) if a contract is terminated by an employer, then the employee is treated as dismissed. Therefore, if Ms Jackson’s contract was terminated on 3 December 2018, she was also dismissed on that date. As established in Hogg, a unilateral variation of contract will amount to a termination of that contract where the effect in reality is that the employee’s contract is replaced with another. The EAT were clear that whether a variation amounts to termination will depend on the facts of each case, but that such change does not necessarily need to be “radical” as the tribunal had indicated.

The tribunal had also wrongly conflated issues regarding constructive dismissal with a Hogg dismissal and section 95(1)(a). They had also been incorrect in considering that Ms Jackson’s continuing grievance was inconsistent with her contract having been terminated. The question was not whether Ms Jackson’s employment was continuing, but whether her old contract had been terminated. The case has been remitted to a different tribunal, tasked with determining whether the variation in Ms Jackson’s terms was sufficient to amount to a termination of contract under Hogg.

The EAT’s conclusion helps to clarify the decision in Hogg, which has become muddled somewhat by case law from the intervening years. Issues relating to constructive dismissal are not relevant to a Hogg dismissal, under which the employer dismisses the employee by terminating their contract through the imposition of new terms – as opposed to the employee electing to resign in response to a repudiatory breach of contract. In addition, the new terms imposed by the employer do not need to radically or wholly change the employee’s terms of employment for Hogg to apply – whether a variation amounts to a termination in each case will be a matter of fact and degree.

Employers should therefore take care when imposing new terms on their employees, as they run the risk of accidentally dismissing the employees in question and opening themselves up to claims for unfair dismissal.

If you would like on introducing new terms for your employees while mitigating the risk of claims, please get in touch at [email protected]