Unilateral changes to an employee’s contract are not legally binding. In the event that an employee would dispute such a change, there is a good change the employee will be successful. As an employer, however, there may be instances where an important business goal or objective depends on alterations to employees’ existing employment contracts. There may, for instance, be a desire to alter compensation schemes so that incentives match projected business goals. Whatever the case may be, there is only one way to change an employment contract legally.
In order for an employer to change an employee’s employment contract, the employer must give the employee ‘consideration’. This legal term simply means an exchange of a mutual benefit. The simplest way to offer consideration would be to give the employee a sum of money for agreeing to the new terms of the contract. There are other things an employer can offer other than money. As long as it is a benefit to the employee, the exchange should meet the requirement of consideration. Some examples may include enhanced benefits, a promotion, or an increase in vacation time.
In addition to consideration, timing is also key. Employers must offer the consideration at the time the contract is signed and allow the employee a reasonable time to consider the offer. Employers must also clearly communicate the end the existing contract and the start of the new contract. It is important that these legal requirements are met so that employers are not faced with unenforceable contracts. Always seek the assistance of an employment law expert when seeking to change existing employment contracts.