We regularly review and draft contracts of employment and Service Agreements for Directors. Doing so enables us to highlight some important areas for you to consider.

Background

The starting point is the interaction of the contract with other documentation, in particular, the offer letter and staff handbook.

Our view is that the offer letter should be limited in what it says about the benefits/terms being provided simply to avoid the risk that the two contradict each other leading to confusion or uncertainty. Ideally, the focus of the offer letter is to sell the role and organisation, rather than detailing all the terms of employment.

In relation to the staff handbook, our view is that this should be ‘non-contractual’. That way you shouldn’t need to seek your staffs’ consent every time there is a change in law and various policies/rules need updating.

Specific terms

Employment Rights Act 1996 (ERA)

The starting point for the contract is section 1 of the ERA (available here http://www.legislation.gov.uk/ukpga/1996/18/section/1) which dictates what information must be included in every contract of employment. There are other sections that need to be considered as referred to in s1 ERA, but the key point to highlight is that these are here to protect the employee, not you.

Our view is that while the contract must comply with s1 ERA, it can (and should) go further to offer your organisation greater protection. The contract is your opportunity to balance some of your employees’ rights and to protect your business.

Express/implied

Provided the contract is in writing the terms specified in it will be ‘express’. In addition to these, the courts can also ‘imply’ terms between you and your employees.  Some of the implied terms place obligations on you (such as to provide a suitable working environment), whereas others are placed on the employee (such as, the duty of fidelity).

For any areas that require the employee’s express consent, you must ensure this is secured, and the contract is the easiest place to do so.  This will be for things like your ability to make lawful deductions and to process personal data (see below).

Confidential Information

While your employees are under obligations not to use or disclose confidential information during their employment, the obligation ceases when their employment ends.

In order to protect your organisation, you should consider and clearly state what information is confidential and that the obligations not to disclose it extend beyond the termination of employment.

This area also highlights how confidential information is used within your organisation. Here IT policies can be key to detail the practical ways in which your confidential information can/cannot be used by employees, especially when it comes to the security.

Restrictions

We usually hear from employers that clauses preventing an employee’s activities after the termination of their employment are unenforceable. We disagree.

Provided the restrictions are carefully drafted, you should be able to protect your legitimate business interests by preventing a former (or existing) employee from:

  • working in competition;
  • poaching clients/customers;
  • poaching your staff; and/or
  • dealing with clients/customers.

We shall shortly be circulating an article on this topic, which will contain further information.

Notice periods

These link heavily to clauses dealing with restrictions especially when considering garden leave provisions.   The general rule is that the longer the notice period, the better protected an employee is (as it will cost you more to dismiss).

We usually advise that clients have different notice periods in place, in particular, to reflect the notice required during and after probationary periods.

Once a probationary period has been passed, notice periods usually increase, but you can have different levels of notice from you and the employee.

Data Protection

You will process ‘personal data’ about your employees and, to do so, you need their express consent (see above). While it is usual to have policies governing how your organisation will process ‘personal data’, the contract can be the easiest place to secure their express consent.

When the new General Data Protection Regulations (GDPR) come into force next year, these rules will become even stricter and the penalties more onerous.

Sick pay

The amount you pay when an employee is on sick leave can impact on the level of absences in your organisation; the more generous you are, the more absence may be an issue. Often organisations pay more than just SSP or will only pay SSP and retain discretion to pay more.  This is common, but it poses a risk.

If you inadvertently treat one (or one group) of employees less favourably than another, this can lead to allegations of discrimination. The most obvious issues lie with those employees who are ‘disabled’ within the meaning of the Equality Act 2010.  A disabled employee is likely to have more time off owing to their illness and such less favourable treatment will probably amount to discrimination on your part.

Unlawful deductions

There are strict rules that apply when it comes to deducting money from an employee’s salary. If an unlawful deduction is made, the employee is entitled to recover the sum deducted and you will be prevented from recovering the amount.

The legislation views wages as sacrosanct (Wages Act 1986), and the only way to be able to deduct money is to have the employee’s express consent that in certain circumstances money can be deducted from their pay. Owing to the need to have this as an express term, the contract is the best place to provide for this.

Summary

We could go on.

There are many other areas to a contract that need careful consideration and drafting. Contracts should also be regularly reviewed and updated, where necessary.

If you would like to speak with us regarding a review of your contracts, or for more information, please contact us.