When should we document variations to Employment Terms and Conditions?
When should we document variations to Employment Terms and Conditions?
Employment relationships are dynamic and it is common for an employee’s role, responsibilities, hours of work, remuneration, reporting lines, or workplace arrangements to evolve over time. However, when any aspect of an employee’s employment differs from the terms recorded in their original signed employment agreement, the employer should ensure that the change is properly documented and agreed to in writing. Failure to do so can expose an employer to significant legal and financial risk.
Employment agreements are contractual documents, and neither party can generally alter the terms of the agreement unilaterally. Where an employer wishes to change a fundamental term of employment, such as duties, remuneration, hours, location of work, or employment status, consultation and agreement are required before the change can take effect. The agreed variation should then be formally documented.
1. What are the risks of failing to document any changes to an employee’s terms and conditions?
The importance of written documentation extends beyond good administrative practice. Written records provide clarity regarding the rights and obligations of both parties and help prevent disputes about what was agreed. Where changes are implemented informally, employers often encounter difficulties later when attempting to rely on the revised arrangements.
The Employment Relations Authority (ERA) has consistently reinforced that employment agreements cannot be varied without mutual agreement. The ERA has emphasised that employment agreements remain contractual in nature and that the ordinary principles of contract law apply unless modified by employment legislation. One consequence of this principle is that contractual terms cannot generally be changed by one party acting alone.
The Employment Court has confirmed that employers must act in good faith when proposing changes to employment arrangements and must provide employees with a genuine opportunity to consider and respond to proposed changes. A failure to do so may amount to an unjustifiable disadvantage and may render any alleged variation as being unenforceable.
2. When should we document a variation to an employee’s terms and conditions of employment?
Documenting changes is particularly important where an employee’s role changes substantially. For example, an employee may initially be employed as a coordinator but over time assume managerial responsibilities. If the employment agreement is not updated, disputes can arise regarding remuneration, authority levels, performance expectations, notice periods, bonus entitlements, and accountability. Written variation agreements ensure the contractual documentation accurately reflects the evolving reality of the employment relationship.
The Employment Relations Authority and Employment Court have also recognised that employers may be prevented from relying on original contractual provisions where the parties have operated under different unwritten arrangements for an extended period. Therefore, relying on implied agreement or custom and practice is inherently risky, as disputes often arise regarding the scope and nature of the alleged variation. A clear written record of any agreed variation therefore removes uncertainty and mitigates the risk of potential dispute.
3. Are employers contractually obligated to document a variation to an employee’s terms and conditions?
Many modern employment agreements expressly require variations to be in writing and will contain provisions stating that any variation to the agreement must be made by agreement between the parties and recorded in writing. Employee Handbooks will often also contain provisions requiring term and condition variations to be documented in writing.
Ultimately, documenting agreed changes protects both the employer and employee. It promotes certainty, demonstrates compliance with the duty of good faith, provides a clear evidential record, and significantly reduces the risk of personal grievances or contractual disputes. In the New Zealand employment law context, if the actual employment relationship differs from what is recorded in the original agreement, employers will be in a safer position in the event of a dispute if a formal written variation was completed at the time the change came into effect. Doing so is therefore not only prudent; it is often critical to preserving the enforceability of the employment relationship and avoiding costly litigation.
4. How can Russell Drake Consulting assist us in ensuring any required variations are well documented?
Documenting a variation is the second step in this process, confirming with the employee the nature of the variation is the essential first step. RDC consultants are highly skilled and experienced in assisting employers through the consultation and documentation phases of creating a binding and enforceable variation to an employee’s terms and conditions of employment.
Please feel free to give us a call to discuss how we can assist you within this process.
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