Are contractual variation clauses worth having?
Are contractual variation clauses worth having?
A variation clause purportedly gives you the power to unilaterally change one or more terms of an employee’s contract. However, is it really as simple as including them in a contract to then enable you to change that contract as you wish?
General variation clauses
There are two main types of variation (or flexibility) clause: (1) general ones that purportedly give you a blanket power to vary any of the contract’s terms; and (2) specific ones that enable you to amend a particular contractual clause. General variation clauses are usually unenforceable as they seek to evade the general rule that contractual changes must be mutually agreed between the contracting parties. Instead, they will normally be interpreted by courts and tribunals as limited to changes of a minor administrative nature that aren’t detrimental to the employee.
Tip. A general variation clause can still be a useful bargaining tool when you are seeking to persuade an employee to consent to a contractual change. Just be aware of the clause’s significant limitations.
Specific variation clauses
Specific variation clauses relate to particular terms of the contract. Common specific variation clauses relate to (1) place of work, i.e. a mobility/relocation clause; (2) job duties; and (3) hours of work. Even in this case though, your ability to rely on such a clause to unilaterally change an employee’s contract is limited for the following reasons:
• They are given a restrictive interpretation by courts and tribunals, with ambiguities or uncertainties in the wording construed in favour of the employee. The clause must be very clear, explicit and unambiguous about the particular change that it authorises.
• The more detrimental your proposed change is to the employee, the more difficult it will be for you to rely on the clause. If the change is to a fundamental term, such as pay or hours, you should instead seek the employee’s consent to it.
• You are bound by the implied duty of trust and confidence in how you implement the change. This will usually mean consulting with the employee about your proposal, taking account of their views, considering alternative solutions and then, if the change is still to be implemented, providing adequate notice of it. In other words, you always need to act reasonably in the way you seek to rely on a variation clause to implement a change.
Tip. This doesn’t mean you can’t rely on a specific variation clause to enforce a contractual change, even one that may be detrimental to the employee, but it does mean you need to be careful. Failure to use variation clauses reasonably can lead to claims of breach of contract or constructive dismissal.
Tip. Audit existing contracts to see what variation clauses they contain.
Discriminatory?
Even with an enforceable variation clause, you must still consider whether your proposed change might be indirectly discriminatory by reason of a protected characteristic, such as sex, disability, etc. e.g. relying on a relocation clause may constitute indirect sex discrimination on the basis that it’s likely to be more difficult for women than men to relocate because a greater proportion of women, compared with men, are secondary earners. If it is indirectly discriminatory, you’d need to be able to objectively justify the change.
General variation clauses are unlikely to be enforceable save in respect of minor administrative contractual changes. Specific flexibility clauses can be enforceable, but they are subject to the implied duty of trust and confidence and they are also given a restrictive interpretation by courts and tribunals.