As widely reported in the news this week, thousands of Asda supermarket workers have been told to agree to new contractual terms of employment or face dismissal. The supermarket chain has offered staff a wage increase to £9 per hour in return for agreeing to work on bank holidays, unpaid breaks and a reduction in the period of night work for which increased rates are paid.  

In the highly competitive supermarket industry, employers see these changes as necessary in order to adapt to challenging trading conditions. Following a process of “dismissal and re-engagement” is of course a risky business decision to implement. It is not known how many staff will accept the new contracts, or how many may refuse to do so and, with union support, claim unfair dismissal, or even sex discrimination where predominantly female staff with caring responsibilities may be adversely impacted by the requirement to work on bank holidays.  

A dismissal with contractual notice accompanied by an offer to re-engage is a step that should only be taken after there has been full and meaningful consultation process with the affected employees and where the employer has explained the genuine business reasons underpinning the changes and sought to come to a compromise with staff as to the proposed changes, where they do not agree to the variation. The employer should consider the employees’ views on the proposed changes during consultation. 

Where the employer is proposing to change the contractual terms of 20 or more employees, they will be required to collectively consult with the staff, which will mean appointing employee representatives and consulting via them or through any recognised union.

However, whilst terminating employees’ contracts and offering re-engagement on new terms is a risky course of action, employers decide to adopt this approach, often because it is the only commercially viable option and the cost savings achieved by the forced contractual changes may, for example, avoid the need to make staff redundancies at a later stage. Provided that there is a genuine business reason and a full and meaningful consultation process has taken place, the employer may be able to successfully defend any unfair dismissal claims on the basis that the dismissal comes under the category of ‘some other substantial reason’, as a potentially fair reason to dismiss. Legal advice should always be sought in the first instance.    

At Markel Law we regularly comment on SME related matters.

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