Following our seminar last year on contracts of employment, this newsletter provides a timely update on contracts of employment and what all employers need to know whilst highlighting some developments in this important area of the law.
Written Particulars of Contract
Employers are legally required to provide employees with a written statement of particulars of certain contractual terms not later than two months after the start of an employee’s employment. Provided the required information is found within the written contract of employment, the legal requirements will be satisfied. If employment ends within two months, a statement must still be given, unless the employment continued for less than one month.
As our seminar demonstrated, there are many good reasons why all employers should take the time to issue all staff with written contracts of employment. Having a written document ensures that the terms and conditions applicable to the employment relationship are written down, thereby avoiding misunderstandings and disputes.
What particulars must be given?
The written statement must provide details of the following:
- The name of the employer and the employee;
- When employment began and when the employee’s continuous employment began;
- The scale, rate or method of calculation of remuneration and intervals of payment;
- Any terms and conditions relating to hours of work;
- Any terms and conditions relating to holidays and holiday pay, sickness and sick pay and pensions and whether a contracting out certificate is in place;
- Notice to be received and given to terminate relationship;
- Job title or brief description of duties;
- Duration of employment if it is not intended to be permanent or if it is for a fixed term, the date when it is to end;
- Place of work or where the employee is required or permitted to work at various places, an indication of that and of the employer’s address;
- Any disciplinary rules or details of a reasonably accessible document containing these;
- With whom any grievances should be raised (about any disciplinary action or otherwise)
- Any collective agreements; and
- Where the employee is required to work outside the UK for more than a month, details of the currency of remuneration, any additional remuneration benefits and any terms and conditions relating to return.
A contract of employment can (and should) contain other provisions that offer protection for the employer.
Must I let employees know if the terms change?
If any of these terms change, an employee must be informed in writing at the earliest opportunity and in any event not later than one month after the change occurred. As the contract of employment is an agreement between employer and employee, changes can only be made with both parties’ agreement.
What if insufficient details are given?
Where an employer has failed to provide a written statement to an employee with two months’ continuous service, an employee may present a claim to an Employment Tribunal which could in certain cases result in the Tribunal awarding the employee two weeks’ pay. On occasion this can be increased to four weeks’ pay.
Terms of the contract of employment
The terms of contract may be written down (i.e. in a contract of employment) or implied (where the term is not written down but is so obvious to both parties that it would be regarded as a term). Terms can also be implied by custom and practice. This is another reason why it is essential to ensure that written contracts of employment are issued since expressly setting out the position in writing reduces the risk of implied terms arising (which may be contrary to the intention of the parties).
Terms in restraint of trade
Some employers include provisions restricting an employee’s freedom to work after the end of employment. These are commonly referred to as restrictive covenants. Courts start from a presumption that such provisions are unenforceable because they stifle competition and are therefore contrary to public policy. However, they may be upheld if the employer can show that they protect a legitimate business need (which could not be protected in a less onerous way) and they go no further than is absolutely necessary to achieve this.
If any covenant is found to be too wide, too vague or too uncertain, it will not be enforced. Courts rarely rewrite covenants to make them enforceable. Where employers wish to place restrictions on former employees, it is essential therefore to tailor the provisions to the particular individual to maximise the prospects of enforceability. The more senior an employee is (with greater customer contact and greater access to confidential information) the better the prospects of enforcement are if a suitably worded covenant is in place.
In addition, employers, when recruiting staff (especially senior staff), should ensure that new employees are not subject to covenants with their former employers. As a result, the offer of a contract of employment should require all new employees to confirm that there are no obligations or covenants binding upon them that would prevent them from taking up the new position. Advice should be taken at an early stage if covenants or breach of covenants may be involved.
The Court of Appeal in Willow Oak Developments recently confirmed that an employer who dismissed employees because of their refusal to accept potentially unenforceable restraint clauses could rely on the catch-all ‘some other substantial reason’ as a potentially fair reason for dismissal. Thus, employers are entitled to seek to update terms and conditions during the period of employment, provided a fair procedure is followed. On the facts in this case, the employer did not adopt a fair procedure and the dismissals were unfair.
How can I change the terms of my employees’ contracts?
Changes in employees’ contracts should not be made without their consent since the contract is an agreement between the two parties. When employers wish to change terms and conditions, employees’ express agreement should be sought. It is risky to assume that an employee’s silence will be considered to amount to acceptance, especially where the terms in question might not impact immediately on the employee. Any change which an employee does not accept could amount to a breach of contract. If the change is significant, the employee may be entitled to resign and claim constructive unfair dismissal. If the change involves the employee receiving less money than otherwise due, potentially the employee could remain in employment and raise a claim for payment of the sums originally due.
Where an employer wishes to change contractual terms in circumstances where an employee will not consent, the employer must decide whether to remain with the current contractual position or to dismiss the employee under the current contract and offer the new contract thereafter. The latter approach needs to be handled carefully to ensure that the procedure adopted is fair and to minimise the risk of a claim arising.
Where an employer wishes to change the terms and conditions of more than 20 employees at one establishment, the employer should comply with the collective redundancy procedures. This can be labour intensive and complex, requiring the election of representatives and consultation. Employers should take care therefore when changing terms and conditions to ensure that the risk of claims arising is minimised.
(Information posted in September 2006 and may not have been updated at time of reading).