Almost 500 British Gas engineers face losing their jobs after they refused to sign new contracts of employment. Centrica, which owns British Gas, had given staff until midday on Wednesday 14th April to agree to the new terms under which they will work more hours and face a cut in their average pay. According to Centrica, around 2% of British Gas staff had chosen not to sign these new contracts. The engineers were granted a grace period of two weeks before the deadline in which to change their minds and sign up to these new contracts or face dismissal.
Although it provoked fury among employees and the GMB trade union, dismissal and re-engagement is a lawful course of action open to employers, provided they follow the correct processes. If a contract of employment does not allow an employer to make their desired changes unilaterally, they must then consult with the affected employees to get their agreement to the variation of their contracts.
If the employees still do not agree, the employer can terminate the employees’ existing contracts with notice and offer immediate re-engagement on the new terms and conditions. Because this process involves dismissal, the employer must be mindful of possible unfair dismissal claims. Generally speaking, an employer would need to have a sound good business reason for the changes; have followed a fair procedure; and acted reasonably in all the circumstances.
The employer must provide evidence to demonstrate the business reasons for the changes and must show that they were not trivial, but this is not an onerous requirement and is usually looked at from the employer’s perspective. In Kerry Foods Ltd v Lynch  IRLR 680 EAT, the Employment Appeal Tribunal said that it was not necessary for the employer to show the “quantum of improvement achieved” as the Employment Tribunal in that case had made findings of fact plainly showing the advantages to the employers of the proposed changes to the terms and conditions of all its area sales managers so that they would work six days a week instead of five and reducing their holiday entitlement by six days a year. Centrica has said that British Gas lost more than three-quarters of its market value in the last five years and lost over three million customers, with profits halved over the last 10 years. As a result, Centrica says it had no option but to take the action it did with the contracts of the affected British Gas engineers.
Employers facing a similar situation to British Gas should contact LAW for the correct advice regarding dismissal and re-engagement to make sure an Employment Tribunal does not leave them out in the cold.