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Ben Jones
Ben Jones, UK Lawyer
Category: Law
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Until recently I was a director of a company and had a contract

Resolved Question:

Until recently I was a director of a company and had a contract of employment to that effect. Due to a change in the composition of the Board I agreed to cease to be a director but my day to day duties remain the same and there has been no new contract issued.

I fear that the new Directors may wish to reduce my salary. What rights to I have to resist such a move?
Submitted: 3 years ago.
Category: Law
Expert:  Ben Jones replied 3 years ago.

Ben Jones :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today. How long have you worked there for?

Customer: 19 months
Ben Jones :

So were you a director at Companies House?

Customer: Yes
Ben Jones :

Did the old contract have a notice period for terminaiton?

Customer: Yes - company to give 12 months notice
Customer: It was a condition of the new directors joining the board that I and one other director resign from the board. The other director was non exec and so has left the company completely. I however have been retained.
Ben Jones :

Did the old contract reference your position as a director of the company? Also did it say you can be dismissed by being paid in lieu of notice?

Customer: The old / current contract did ref my position as director and my duties. There is no Explicit TOIL clause
Ben Jones :

ok thanks let me get my response ready please

Customer: Ok
Ben Jones :

There are a few ways in which an employer may try and make changes to an employee’s contract of employment. These are by:



  • Receiving the employee’s express consent to the changes.

  • Forcefully introducing the changes (called 'unilateral change of contract').

  • Giving the employee notice to terminate their current contract and then offer them immediate re-engagement under a new contract that contains the new terms.


 


If the changes are introduced without the employee's consent, then the following options are available:


 


1. Start working on the new terms but making it clear in writing that you are working ‘under protest’. This means that you do not agree with the changes but feel forced to do so. In the meantime you should try and resolve the issue either by informal discussions or by raising a formal grievance.


 


2. If the changes fundamentally impact the contract, for example changes to pay, duties, place of work, etc., one may generally wish to consider resigning and claiming constructive dismissal. However, this option is not open to employees with less than 2 years’ service because that is the minimum requirement for submitting this type of claim.


 


3. If the employment is terminated and the employer offers re-engagement on the new terms that could potentially amount to unfair dismissal. The issue is that as above to make such a claim you need to have at least 2 years’ service with the company. What they could do instead is try to issue you with notice to terminate your employment by giving you the contractual notice you are due, they may try and do so by paying you in lieu of notice and whilst you can’t claim unfair dismissal, you could claim breach of contract by arguing that you were terminated with a PILON clause when one did not actually exist, however you can’t claim unless you have suffered losses as a result and if they have paid you everything you would have earned for that period had you been allowed to work it, then no losses would have occurred.

Customer: Thanks. So in reality I have no legal means of stopping such unilateral action?
Ben Jones :

Due to the length of your service, assuming it is done before the 24 months have elapsed - no, but you are still entitled to the terms of the contract as they stand now, so that includes the notice period at the current rate of pay

Customer: Ok - so if they decided to change the terms I could give my notice to terminate - 3 months - and insist on that being paid at the current rate. Or ask them to terminate at current rate but why would they.
Ben Jones :

you could leave and you are entitled to expect that they continue paying you as you are now for the notice period

Customer: And presumably if I accept any new terms then I am accepting that the old contract is "dead" and thus lose my right to notice being paid at the current rate?
Customer: So if they propose a change it is better to give notice to quit using the current contract - depending on the numbers involved!
Ben Jones :

yes if you accept any new contract it would automatically overrule the old one so any of the old terms would no longer apply (unless they were mirrored in the new contract). Whether you quit would really depend on what you wish to achieve - also if I understand this correctly they have to give you 12 months notice whereas you have to give them 3 months - therefore if they are the ones terminating they must pay you the current rates for much longer than if you were resigning, hence you may wish to consider allowing them to issue you with notice of termination rather than you resigning

Customer: Indeed, but if they change the contract they can still do so now or does it mean they could only implement a change after a period of 12 months?
Ben Jones :

they cannot just change it without getting your consent or by giving you notice equivalent to the one stated in it for termination. If they do not they would be acting in breach of contract and you can pursue the for damages equivalent to the losses incurred through their actions, these being the notice pay you would have been due

Customer: Ok this is better. But what about the unilateral action you referred to above which they could still do?
Ben Jones :

yes but that would be the breach of contract, so whilst they can just introduce the new terms, it would amount to breach of contract as mentioned just now

Customer: Ok thanks we are done.
Ben Jones :

No problem, you are welcome

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