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What is an amending agreement and an annex to an employment contract and how does an amending notice differ from them?
An annex to the contract of employment
The tools available to the employer include, for example, presenting the employee with a proposal to conclude a contract
an amending agreement or an annex to the employment contract (these are the same concepts!). It is simply a proposal from the employer to change the conditions agreed by the parties in the employment contract. The employee does not have to accept such an offer and there is no legal rigor in this respect. Whether or not he signs such a document depends on the individual assessment of the Employee, who alone (or with a lawyer) should assess what is beneficial for him.
The advantage (but also a disadvantage for the employer) of submitting a proposal to conclude an annex or amending agreement is the fact that its acceptance requires the employee's voluntary consent. An agreement - as the name suggests - is an expression of the unanimous will of the two parties who concluded the contract. As a result, the employee may not agree to the new working and pay conditions specified by the employer. It should also be remembered that, of course, the employee has such a right, but it is up to the employee to assess in advance what the consequences will be of his refusal to accept the terms proposed (amicably) by the employer.
Amending notice
The situation is different with the second tool that can be used by the employer to change the employee's employment conditions - which is
amending noticeWhile the aforementioned amending agreement requires the employee's consent, the lack of employee consent to the conditions proposed in the amending notice results in the complete termination of the employment contract within the notice period and in the manner stipulated therein. The institution of the amending notice has been directly regulated in the labour code.
As is known, every employment contract contains certain obligatory elements, which (apart from obvious elements such as: the parties to the contract, the type of contract or the date of its conclusion), broadly speaking, relate to the determination of working and pay conditions, i.e.:
- type of work;
- place of work;
- remuneration for work corresponding to the type of work, with an indication of the remuneration components;
- working hours;
- start date of work.
At the same time, in terms of details regarding the type of work performed (especially in larger companies), the provisions of the contract often refer to the internal regulations of a given workplace (such as company work regulations). However, the amount of remuneration and work hours should result directly from its content. The contract is therefore the basic document on the basis of which we perform work. Its provisions should clearly indicate:
- the nature of the work we will be obliged to provide - taking into account its size (e.g. full-time, ½-time, etc.) and
- the remuneration we are entitled to expect after properly performing our professional duties.
As is well known, unexpected and sudden situations have been occurring exceptionally frequently lately, which can change the situation of mutual relations in a short time, regardless of the quality of mutual cooperation. These include, of course, the situation (which many businesses are currently struggling with) of a company's poorer financial condition caused by the spread of the epidemic, fear, and both legal and factual restrictions.
One of the rights available to an employer in connection with an employment contract concluded with an employee, which can be particularly useful in the era of the pandemic, is the possibility of changing the terms set out in this contract using a "tool" called
amending noticeThis consists of (in the simplest terms) changing the terms of employment and pay, the rejection of which by the employee results in the termination of their employment contract.
The rules for using the institution of a changing notice have been regulated in the Labour Code, so it is necessary to refer to the current provisions. According to them, in the event of the employee refusing to accept the proposed terms of employment or pay, the employment contract is terminated at the end of the notice period. At the same time, if the employee does not declare their refusal to accept the proposed terms before the expiry of half of the notice period, it is considered that they have consented to these terms. The employer's letter terminating the terms of employment or pay should include instructions on this matter. In the absence of such instructions, the employee may declare their refusal to accept the proposed terms until the end of the notice period.
For example: Jan Kowalski runs a business in which he sells women's shoes in 3 locations in 3 neighboring towns (these are 3 small boutiques in local small shopping malls). In each of the boutiques he employed 2 people dealing with customer service. Due to the current pandemic and the forced closure of shopping malls, he decided to start an online business and opened an online store. He was satisfied with his staff and (hoping to improve the entire situation) did not want to completely break off cooperation with them, but leaving the matter unchanged would have a negative impact on his (already not the best) financial situation. So he decided to change the terms of the contract, reducing his employees' working hours by half (everyone was employed full-time, so they would work half-time) and thus their remuneration was also to be halved. At the same time, the nature of the work was to change, because it included the above-mentioned employees would provide service and support in running the online store. The difficult situation meant that Jan Kowalski did not have time or opportunity for negotiations, so he handed his employees notices of change in which he specified changes in working and remuneration conditions on the terms presented above. Each employee was legally entitled to one month's notice. The amending notice was prepared in writing and handed to the employees on October 31; at the same time, it did not contain the instruction that if the employee does not submit a declaration of refusal to accept the proposed conditions before the expiry of half the notice period, he is deemed to have agreed to these conditions.
In view of the above, the notice period for each of the aforementioned employees ends on 30 November, and they have the right to submit a statement refusing the conditions proposed by the employer until that date (if the aforementioned notice contained the warning mentioned in the regulations, the employees could submit such a statement until 15 November; after that date, the employer would have the right to consider that they consent to the proposed conditions). At the same time, submitting the aforementioned statement of refusal to accept the new conditions would result in the employment contract being terminated on 30 November.
In accordance with the regulations, notice of termination of existing terms of employment or pay is not required when assigning an employee, in cases justified by the employer's needs, work other than that specified in the employment contract for a period not exceeding 3 months in a calendar year, provided that it does not result in a reduction of remuneration and corresponds to the employee's qualifications.
For example: Online business of the above. Jana Kowalski is doing very well, and as a result, the company's financial situation is in better condition despite the closure of stationary stores. Due to the above, it does not intend to reduce the remuneration of its employees, but only due to the inability to run its business in stationary mode and switch to the "virtual" mode, it plans to temporarily (i.e. for the period of forced closure of shopping malls) change the nature of the services provided by these employees. work. Namely, instead of providing work involving customer service in stationary stores, they will, for this period (though no longer than three months in a calendar year), deal with the operation of the online store (including: operating the company's website, fulfilling orders and shipping them, cooperation with courier companies, complaint handling, etc.).
In the above case, the employer is not obliged to provide employees with an amending notice if:
- the change results from its justified needs (the need to change the way the company operates as a result of external circumstances - e.g. the current pandemic);
- is temporary and does not exceed a period of 3 months in a calendar year;
- does not result in a reduction in remuneration and corresponds to the employee's qualifications.
Until such time as all the aforementioned conditions are met, the employer is not required to use the institution of a notice of termination with altered terms or to conclude an addendum to the employment contract.
Such a circumstance as a change in the terms of work and pay for a longer period can be "formalised" by proposing to conclude an addendum to the employment contract or (as mentioned above) a amending agreement. Of course, in each case, the employee may refuse to consent to the proposed changes. However, in such a situation, the employer may (forced by the circumstances) issue him
termination of the employment contract or if he still sees hope for an agreement and further harmonious cooperation - an amending notice, which in the event of refusal to accept its terms - has the effects typical of a typical notice of termination, i.e. ends with the termination of the employment contract.
Salary reduction
For example: ABC, a company providing coach transport services throughout Poland, is beginning to suffer large financial losses due to the epidemic situation in the country. The company notes a significant reduction in public interest in using the services it provides - both for interregional travel (due to the closure of e.g. the hotel industry) and for travel to and from work (a significant portion of existing passengers work remotely from home or choose transport by their own car from security reasons). Therefore, in order to generate savings, ABC plans to reduce the number of trips and, consequently, reduce the workload of drivers. So he decides to propose to his employees a change in working conditions and pay by:
- reducing the amount of work they have performed so far by ¼ and (consequently)
- reduction by ¼ of the current remuneration.
In the above example, individuals who were employed full-time would be employed on a three-quarters' basis, and those employed on a half-time basis would be employed on a quarter-time basis.
Naturally, the above situation is an example of an offer based on the employer's goodwill and, looking logically, a fair approach – a reduction in the scope of work performed, and consequently, a proportional reduction in remuneration.
However, in other cases, there may be situations where the assumption will simply be a desire to reduce remuneration, without a corresponding reduction in the scope of work. Employees will therefore be offered the chance to work as before, but for a lower salary. The nature of an amending agreement can vary and does not have to take the aforementioned aspects into account. It may concern:
- the amount of remuneration the employee will receive;
- working time or part-time;
- the type of position the employee is employed in;
- place of work or official position;
- Other changes are also possible, such as a longer severance pay period or a greater number of vacation days, but, as a rule, they should be more beneficial to the employee than stipulated in the provisions of the Labor Code.
Amending notice (or its milder form in the form of a proposal for an appendix or amending agreement) is a tool that, due to current realities, has become increasingly popular among employers. It does not necessarily indicate bad faith towards a specific employee or employees. Indeed, an amending termination notice, for instance, involving a reduction in an employee's salary, can be crucial for the survival of a given employer.
As we know, we do not live in an ideal world, and thus this tool can also be misused or applied intentionally without a valid reason. In the current era, assessing intentions can be difficult, as regardless of how well a company is doing, a crisis is inevitable in many sectors. And companies, looking ahead, may wish to take certain steps (aimed at minimising expenses) before a genuine threat to their condition arises.
Therefore, if a proposal for changes received from an employer raises any doubts, it is worth seeking assistance from a law firm. Experienced in employment law matters
Legal Counsel can fully analyze the employee's situation and recommend appropriate actions.
So what is more beneficial for the employee - an amending notice or an amending agreement or an annex to the employment contract?
This, of course, depends on their content, and not merely on the form in which the change to the terms of employment is presented. In most cases, an amendment or addendum will be a far better solution for both parties – in such a case, the employee may try to negotiate its terms, and, incidentally, making such a proposal means that the employer is not, for the time being, considering terminating the employee’s employment contract and is not putting the matter on a knife-edge.
Both solutions constitute an offer from the employer to the employee, a proposal to amend the terms of the employment contract. One of them (the one containing the word ‘notice’) implies that the employment contract will be terminated if the employee does not accept the offer. The other (the proposal to conclude an annex or an amending agreement) is a proposal which the employee may accept or reject, without any pre-determined negative consequences should they choose not to accept it.
However, setting aside intentions and returning to the institution of notice of amendment itself, it is worth bearing in mind that the employer (particularly in the face of financial difficulties) may enter into negotiations with employees regarding proposed changes to the terms and conditions of employment and pay as set out in the employment contract. In this regard, firstly, whilst still at the stage of considering whether or not to accept the employer’s proposal, it is worth bearing in mind that the employer may have been forced to take such a step. It may therefore sometimes be a better solution to agree to slightly less favourable terms, whilst ensuring the employer remains in business and your current job is retained, rather than leading to the employer’s collapse or your own redundancy. Unless, of course, you have a better job offer and are keen to make the move.
We would, however, caution employers that the use of a ‘notice of amendment’ to worsen pay and working conditions— whilst it does bring tangible economic benefits and is often the only solution — usually leads to increased staff turnover and the associated additional costs.
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