Employment contracts: some common mistakes
9 October 2024
Under the Employment Rights Act 1996, employers are required to give employees certain key information at the start of a job, in what is called a “written statement of particulars”. The required information includes the name of the employer; the date of commencement; the employee’s remuneration, hours, place of work, and notice period; and various other key details. These are usually set out in the contract of employment. However, meeting this statutory requirement is not the only reason to get staff contracts right.
Contracts of employment are the backbone of the workplace relationship, setting out the rights and obligations of the employer and employee. There are several commonly made mistakes which often arise from attempts to save money on bespoke drafting. Ironically, this can end up being very disruptive and costly for employers in the long run, as they have to deal with disputes or find themselves locked into inflexible clauses. Employers may also belatedly discover that their intellectual property and other business interests are not well enough protected when employees leave the business, taking commercially sensitive knowledge and contacts with them.
In this article, we address four common mistakes and make suggestions for how to avoid them.
Missing or unclear information
If there is no written statement or if required elements are missing, the employee can ask an Employment Tribunal to determine the information that should have been given to the employee. The Tribunal cannot simply create terms where none have been agreed, but there may have been communications between the parties (e.g. in emails or telephone calls) which amount to contractual terms. Terms may also be implied, meaning they have not been agreed expressly, but they are deemed to exist due to, for example, the deemed intentions of the parties, the custom and practice of a particular industry/sector, or because of legal requirements (such as paying the national minimum wage). A Tribunal can award the employee two to four weeks’ pay (subject to a statutory maximum amount of pay) if they are not given a written statement, but only if this claim is brought alongside another specific successful claim, such as for unfair dismissal.
Besides this legal obligation, having a written contract avoids the uncertainty of agreeing terms verbally or through emails that may get lost. A well-written contract makes expectations clear from the outset. Clear wording minimises the risk of contractual disputes in the future.
Off-the-shelf contracts
It is important that any employment contract is bespoke to the needs of your business. For example, a service business employing casual seasonal workers will have a different set of concerns to a software company in which employees have access to confidential data and intellectual property.
Generic clauses, such as those relating to confidentiality, will sometimes need to be tailored to reflect the nature of your business and the individual’s role. To give another example: if it is crucial to the employee’s performance of their role that they hold a valid driving licence or that they are registered with a professional body, making the fulfilment of this requirement a condition of their employment can make it easier to fairly dismiss them if they lose their licence or get struck off.
Adapting the contract both to your business and to the individual’s role is particularly important in the case of provisions that aim to restrict a departing employee’s actions after they leave. These need careful drafting to be binding and must specifically address the potential damage that the holder of the role could do after their employment, if, for example, they joined a competitor.
Inflexibility
Using an off-the-shelf contract may also mean that the employer loses a desirable degree of flexibility. Flexibility can be built in to a contract by, for example, allowing the employer to change certain terms, such as job location, without the employee’s agreement. It should be noted, however, that regardless of the wording, employers will need to exercise any such discretion reasonably.
Contracts sometimes unnecessarily lock the employer into a job description given at the start of employment. Generally, a contract can allow for the job description to be changed, as long as the employer acts reasonably in doing so.
Outdated provisions
If the law changes or the employee’s job evolves – for example, through promotion or a change in their working arrangements – the contract may need updating. This is a legal requirement if the change affects the key information that employers must give to employees in the written statement of particulars. The update has to be made within one month of the change.
It is also important to review the contract periodically to check it is still fit for purpose. Do you need to introduce more stringent provisions to protect your business if the employee gains access to key clients? Have you updated casual worker contracts to reflect changes in the law relating to holiday entitlement and pay? We can advise you on how to introduce any changes.
How we can help
We are experts in drafting employment contracts and directors’ service agreements. We can tailor a contract to the needs of your business and the nature of specific roles to provide suitable protection and flexibility to meet future change and challenges. A new contract can also form a template for future contracts for similar roles, to allow for consistency throughout the business.
We can also advise on the interpretation of existing contractual clauses and advise you on the best way to resolve any disputes with your employees. If contracts need to be changed, we can advise you on how to go about this to minimise the risk of breach of contract or claims for constructive unfair dismissal.
For further information, please contact the team at Synchrony Law.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.