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In the current economic downturn, employers are keen to find ways to save money and try to stay afloat. Instead of redundancies being the first port of call, many employers have sought to reduce the salaries and benefits of current employees. At least that way, the employees still remain in work. However, difficulties may arise when employees begin refusing pay cuts. If they do refuse to accept pay cuts, can the employer dismiss those employees?

This question was recently considered in the case of Garside and Laycock Ltd v Booth. In this case, the employer sought to impose changes to terms and conditions, including a pay reduction of five per cent.

Termination after refusing pay cuts

Mr Booth refused to accept the changes, so his employer terminated his employment and offered him a new contract encompassing the new terms and conditions. Mr Booth appealed the decision to dismiss him, which was not upheld. He continued to refuse to accept the new contract, despite the offer of reviewing his salary after six months.

The Employment Tribunal in this case focused on the reasonableness of the employee’s refusal to accept a pay reduction. The Employment Appeals Tribunal, however, held that the Tribunal should, in fact, have focused on the reasonableness of the employer’s decision to implement the changes.

It is important for employers to be able to demonstrate that they have considered other options, the procedure they have used to reach their decision and the impact those decisions would have on the workforce.

An individual employee may well struggle to argue that a dismissal was unfair for not accepting a reduction in wages and/or benefits, where their employer has sought to implement a reduction in wages and benefits across the whole of the workforce, and the majority of that workforce has accepted the change.

Employers should approach this subject with caution and seek legal advice from the outset to ensure that they have consulted with the workforce properly before they implement any changes. Lyons Davidson’s employment teams are happy to provide such advice. For more information, please contact us on 0117 904 6000.