Dismissed For Refusing A Pay Cut

In difficult trading conditions employers may be forced to consider adjustments to pay or bonuses as a means of ensuring the company's survival. But employers cannot change their employees' contracts unilaterally (for example by reducing pay) without a risk of constructive dismissal claims. Even where an employer has a variation clause in the contract it must still act reasonably and consult its employees over significant changes, aiming to obtain their consent. If consent cannot be obtained, employers may have to force through change by dismissing recalcitrant employees and offering to re-hire them on new terms. Plainly this is a risky process.

Two recent cases illustrate how the Tribunals might approach an unfair dismissal claim where a pay cut has been imposed against an employee's will.