‘Contracts of employment are the backbone of the workplace relationship, setting out the rights and obligations of the employer and employee,’ says Jonathan Lewis, Solicitor in the employment team with QualitySolicitors Parkinson Wright. ‘We see several common mistakes, often made in an attempt to save money. But these 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 contractual clauses. Alternatively, businesses may discover that their intellectual property and other business interests are not as well protected as they thought when employees move on with commercially sensitive knowledge and contacts.’
Jonathan addresses four common mistakes and 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, although the tribunal cannot create terms where none have been agreed. 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.
Using an off-the-shelf contract
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 where employees have access to confidential data and intellectual property.
Generic clauses, such as on confidentiality or conditions of employment may not be suitable and need to be tailored to reflect the nature of your business and the individual’s role. For example, if it is crucial for the employee’s performance of their job that they hold a valid driving licence or they are registered with their professional body, making this a condition of their employment, can make it easier to end the contract and fairly dismiss them if they lose their licence or get struck off.
Including clauses that are specific to your business and the individual’s role is particularly important for any provisions that aim to restrict a departing employee’s actions after they leave. These need careful drafting to be binding and must be targeted to address the potential damage that the specific individual in that role could do after their employment, if for example, they joined a competitor.
Inflexible contracts
Using off-the-shelf contracts may also mean that you miss out on including flexibility in contracts. Flexibility can be built in to the contract allowing you to make changes to the contract or specific clauses, such as job location, without having to get the employee to agree the change. A word of warning though, employers still need to exercise this flexibility in a reasonable way.
Contracts sometimes lock the employer into the job description given at the start of employment, when this is not necessary and the contract can allow for this to be changed.
Contracts getting out of date
If the employee’s job evolves, they get promoted, their working arrangements change or relevant law changes, the contract may need updating. This is a legal requirement if the change relates to 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 now has 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 changes.
How we can help
We are experts in drafting employment contracts and directors’ service agreements. We will ensure that we understand your business and the roles within the business to provide you with the best level of protection and flexibility to meet future change and challenges. The contract can form a template for future contracts in similar roles, to allow consistency throughout the business.
We can advise on the interpretation of existing contractual clauses if you and your employee have differing views and advise you on the best way to resolve the dispute. 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 unfair constructive dismissal.
For further information, please contact Jonathan Lewis or a member of the employment team on 01905 721600 or email worcester:parkinsonwright.co.uk
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.