Employment Contracts – FAQs

Andrew Lester is an Employment Law specialist talking about Employment Contracts in this blog postWhen it comes to Employment Law, our Specialist Andrew Lester is usually asked these 11 questions by Employers to ensure they’re covering all the bases in Employment Contracts. Here are his responses:

1. Do I have to give all employees a contract?

Employers are only legally required to give every employee a Section 1 written statement of terms covering specified terms and conditions within 2 months of the employment beginning.

The absence of a full written contract does not mean that no employment contract exists, a verbal contract will be equally binding on an employer although it will be difficult to establish the precise terms of the contract.

Failure to provide a Section 1 statement of terms entitles an employee to refer the matter to the employment tribunal to decide the terms and conditions of employment.

The penalty for non compliance with the provision of a Section 1 statement is two to four weeks pay (capped at the maximum of £489) but this is not a stand alone claim and will only be awarded alongside another tribunal claim such as unfair dismissal.

It is advisable to give all employees written contracts at the commencement of their employment as this clearly sets out the terms and conditions of their employment and does not leave these matters to chance, which could cost an employer significantly in the long run.

2. What does the written statement of terms and conditions cover?

  • Employer’s and employee’s name
  • Date on which the employment began
  • Date on which the period of ‘continuous employment’ began
  • Pay (or how it is calculated) and when it will be paid
  • Working hours
  • Entitlement to holidays and holiday pay
  • Employee’s job title or a brief description of their work
  • Employee’s place of work
  • Details of disciplinary, dismissal and grievance rules and procedures

Employers must also include in the written statement, or make available in readily accessible documents:

  • Terms and conditions relating to sickness and injury, and sick pay (other than statutory sick pay)
  • Terms and conditions relating to pensions, including whether a contracting out certificate is in force
  • The notice period the employee is obliged to give and entitled to receive for termination of the employment contract (and if you reserve the right to give payment in lieu, it would be sensible to say so)
  • How long the employment is intended to last (unless permanent)
  • Any collective agreement which directly affects the employment

3. Is there a qualifying period to bring a claim for Unfair Dismissal?​

Since 6 April 2012, employees must have at least two years continuous service in order to be able to bring a claim of unfair dismissal. Employees who commence employment before 6 April 2012 only require one year’s continuous service to bring a claim for unfair dismissal.

4. Can I include a probationary period in the Contract?

Most contracts include a 3-6 month probationary period and the right to terminate on short notice during probationary period, this should be long enough for you to judge whether the employee is able to do the job.

5. What else aside from the written statement can form part of an employment contract?

All contracts include implied terms whether written or not:

  • Mutual obligation of trust and confidence between employee and employer
  • Obligation not to undermine the employer business
  • Employer’s must provide a secure safe and healthy working environment
  • Employees must serve employers honestly, faithfully and work with due skill and care in the performance of their duties.

As well as implied terms, employees have statutory rights which cannot generally be overridden by the contract agreed between employee and employer such as minimum periods of notice, minimum wage, working time rights, protection against discrimination and the right to be a member of a trade union.

Terms of an employment contract can also arise by custom and practice in the operation of the employment contract, for example if employees have been provided with a benefit throughout the duration of their employment which is not contractual, the courts are likely to interpret the provision of such benefit as an entitlement under the contract of employment.

6. Can I change the terms of the employment contract?

If there is a reserved right to make changes in the contract, then provided that you, as the employer are not acting in an arbitrary or unreasonable manner then you are permitted to make some changes to the contract.

If there is no such term in the employment contract, then changes can only be made with the employee’s agreement or consent. The attitude of your employee to any changes will largely depend on the proposed change if there is an offer of increased salary employees are far less likely to object to the change as opposed to a reduction in salary.

If a change is made that an employee is unhappy about and provided they have the necessary length of service they have the right to resign and claim constructive unfair dismissal in response to any changes to the employment contract. If a change to the contract is introduced and the employees do not object or resign in response the changes within a reasonable period they will be taken to have accepted the change to their contract of employment.​

When considering making changes to employment contract terms the best approach is to discuss this with the employees and to seek their agreement to the changes explaining the reasons behind the changes and offering incentives for accepting them.

7. What are my options if employees will not agree to changes to employment contract?

One option would be to terminate the employee’s contract on full notice and offer to re-engage the employee on the new terms and conditions that commences upon the expiry of their notice period.

This would not result in a breach of contract but there is a risk of employees claiming unfair dismissal, provided they have sufficient length of service, unless you are able to show the changes are necessary for the needs of the business and these reasons outweigh any disadvantage to the employees and warn and consult before making such changes. Before taking such steps employers should take legal advice on their specific circumstances.

8. When might an employee claim constructive unfair dismissal?

An employee may treat themselves as constructively dismissed where the employer has committed a fundamental breach of contract. For a constructive dismissal there must be a breach of contract by the employer; the breach must be sufficiently serious to justify the employee resigning and the employee must leave in response to the breach without undue delay.

9. What amounts to a fundamental or serious breach of contract?

A unilateral decision to reduce an employees pay without consent will almost certainly be held to be a fundamental breach as will a breach of the implied term of mutual trust and confidence which could include a failure to investigate a grievance/harassment, undermining an employee in public and/or singling the employee out for unfair treatment, which have all been held to be fundamental breach of contract by the Tribunal.

10. What can we do if we find an employee offering to work for a client personally?

Implied into all contracts of employment is the implied duty of faith to their employer and not to use their employer confidential information for their own gain and not to compete with their employer.

If an employee agrees to perform work personally for a client of yours, this would be a breach of the duty of good faith and the employer would be entitled to dismiss the employee for breach of contract and sue the employee for damages.

11. What can we put in contracts to protect the company against ex-employees?​

The two main clauses in contracts that will enable an employer to be protected against employees post-termination are confidentiality clause and restrictive covenants.

  • A confidentiality clause prevents an ex-employee from using commercially sensitive and confidential information relating to the employer after their employment ends.
  • Restrictive covenants can prevent ex employees from setting up in competition with you, prevent them from dealing with and soliciting clients or employees as well as your suppliers. The requirements for restrictive covenants to be enforceable are quite tight and the employer must establish that there is a legitimate business interest to protect and the restrictions must be reasonable in the circumstances in respect of length of time and the area of the restrictive covenants that is necessary to protect the employer’s business. In order to have the protections of restrictive covenants these must be set out in the employees contract and cannot be implied into the contract at a later date, advice should be taken on the drafting of restrictive covenants to ensure employers avail themselves of the maximum protection available and ensure the covenants are enforceable as if not the employer will have no protection for ex employees competing with their business.

If you need assistance on matters set out in these FAQ’s or would wish to discuss any Employment Law issues further please call Andrew Lester on 01785 272 015 or email Andrew.Lester@orj.co.uk