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What employers should be aware of before changing an employee’s contract



Expert | Featured | Leadership

By Jackie Olling

Throughout the course of employment, circumstances can change and you may find there’s times when you need to alter your employee’s work arrangements. Read about how to do it legally here.

Hiring employees means that you’re responsible for ensuring the terms of your employees’ contracts are being met. Whether this means paying the correct salary, or fulfilling any fringe benefits you offer, you are bound under law to abide by these terms. However, it’s understandable that there may be times when you need to change the terms of employment – but you should tread with caution.

Inform your employee

Changing the terms of a contract without the knowledge or consent of the other party is illegal, and this also applies to Employment Contracts. You should sit down with your employee and explain to them the change and why you need to make it. Make sure your employee understands the effect this change will have on the way that they work, and provide them with any other relevant information.  It’s also important that sufficient notice is provided, so the employee has time to decide whether they want to accept the change – and what you’ll do if they decline.

If your employee consents

If your employee consents to the change, have them authorise it by signing the amendment and make sure you give them a copy of the updated contract. It may also be worth having a new employment contract drafted, depending on the significance of the change. Significant changes which include remuneration and working hours are ‘fundamental changes’ and will likely require a new contract. Non-fundamental changes such as performance reviews or provisions relating to underperformance will likely only need to be amended.

Either way, changing an existing contract or implementing a new one should be done carefully and it’s wise to consult with an employment lawyer before making anything official.

If your employee doesn’t consent

Your employee has the right to choose whether they will accept the new terms of the employment contract or not. If they don’t, they can choose whether to continue under their current employment terms or resign from their position. It’s important to note here that the Fair Work Commission (FWC) has found that it’s illegal to terminate an employee for not agreeing to sign a new contract. Further, employees have a legal right to refuse a proposed contract. Put simply, if you terminate your employee in the event that they don’t agree, you will be breaking the law.

However, you should also bear in mind that this isn’t the end of the road. Depending on the change you want to make, your employee may be willing to negotiate. For example, if the change is an increase in work hours, you should consider negotiating a pay increase for them to account for this.

Similarly, be mindful that it may be the case that if they continue to work, they may be implicitly accepting the terms of the new contract – but they should still be aware that they are doing this.

Finally

Running a business means that you’re constantly adapting to new requirements and implementing new strategies. However, when it comes to your employees, it’s important to remember that while their interests may not entirely align with your own, they still have enforceable legal rights. One such right is their right to refuse changes to their terms of employment. So if there’s a change you have to make, make sure your employee agrees to it first.


Jackie Olling is the Content Manager at Lawpath and manages the content team. She is an admitted solicitor in the Supreme Court of NSW and is interested in how technology can help shape the future legal landscape.

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