Contracts of employment
A Contract of Employment is an agreement between an employer and employee which outlines the employee’s duties, responsibilities and employment rights.
- The contract actually comes into existence when the employee accepts a job offer from an employer.
- The employee and the employer are bound to the employment contract until it ends (for example, by giving notice) or until the terms are changed by agreement.
Written and VERBAL contracts
A contract of employment can either be written or oral.
- A written contract should set out all the terms and should be signed by both parties. There can be written variations to an original contract.
- A verbal contract will comprise of the terms offered by the employer before an employee accepted the job. There must be certainty as to the verbal terms of the contract. Vague statements may not be included as part of the contract so it is far better to try to get either a written contract or a written statement of particulars which clarifies all the terms.
A written statement of particulars
If no contract is issued when an employee first starts then an employee is at the very least legally entitled to a written statement of particulars of their main employment terms within two months of starting work.
- These particulars must be contained within a single document and include the names of the parties, the dates when employment began, job title or description, hours and holidays, the particulars of remuneration and place of work.
- An employer’s failure to include a term does not stop an employee from enforcing such a term.
The terms of the contract (whether written or verbal)
The actual terms of a contract of employment may be express or implied.
- Express terms of the contract include those found in the contract of employment, offer letter or can be verbal statements made between the parties. Express terms may also be incorporated by reference to other documents, such as a staff handbook.
- Implied terms are those which have not been expressly stated but which would be taken by the parties to form part of the contract. They are terms which:
- are so obvious that they are assumed to be included; or
- are necessary as a matter of business sense; or
- are those incorporated via custom and practice of the industry.
Common terms which are implied into a contract for an employee include:
- Confidentiality and non disclosure of trade secrets
Common terms which are implied into a contract for an employer include:
- Providing a safe working environment
- To provide work
- Provide redress for grievances
WHAT Terms SHOULD AN EMPLOYEE look out for IN A CONTRACT OF EMPLOYMENT?
- Terms which attempt to contract out of statutory provisions
An employer cannot contract out of the following legislation and any attempt to do so will be ineffective.
- Disability Discrimination Act 1996
- Employment Rights Act 1996
- Employment Equality (Religion or Belief) Regulations 2003
- Employment Equality (Sexual Orientation) Regulations 2003
- Equal Pay Act 1970
- Race Relations Act 1976
- Sex Discrimination Act 1975
- Trade Union and Labour Relations (Consolidation) Act 1992
- Discriminatory terms
- Any term which has the effect of discriminating against a person on the grounds of disability, sex, sexual orientation or religion or belief would be void.
- Restriction on industrial action
- Terms in collective agreements which try to restrict the right to take industrial action cannot form part of the individual contract of employment unless certain conditions for collective agreements are fulfilled, for example, with your union.
- Terms which are unlawful or contrary to public policy
- Any contract or term which requires the employee to do an unlawful act or one that is contrary to public policy is unenforceable.
- Restraint of trade clauses / restrictive covenants
- These are terms which restrict an employee’s freedom to work for a period of time after they leave their employment. The purpose of these clauses is to protect an employer’s legitimate interest such as confidential information, trade secrets, goodwill and client base. Such clauses, if properly drawn, can take an employee out of the market place for a period of time after he or she has left employment, so you need to look out for these.
- Examples include:
- Non-competition clause: this seeks to prevent an employee from setting up in competition with the employer or joining a rival business within a specified time period and/or geographical area.
- Non-solicitation clause: this seeks to prevent an employee from soliciting contracts from customers or employees.
- Non-dealing clause: this seeks to prevent the former employee from entering into contracts with customers or former customers or employees of the employer which he has left.
- Non-poaching of other employees: this would prohibit an employee in offering previous colleagues jobs in the new company after that employee has left.
- Restraint of trade clauses must be reasonable and proportionate in order to be enforceable. The area and the duration must not be greater than is reasonable for the protection of the legitimate interest in question. A usual time period for these restrictions is 3, 6 or 12 months after termination of your employment.
- Length of notice period
- It is important to check the amount of notice period that an employee is required to give to the employer and vice versa. A long period of notice is not always a good thing as it can stop an employee moving on quickly to a new job. On the other hand, some employees may want the stability of a longer notice period in case they think they will have difficulties in securing a new position after they have been given notice.
- The statutory minimum periods of notice is 1 week for every year worked, up to a maximum of 12 weeks. This will override the period of notice specified in your contract of employment.
- An employee may want to check that the notice periods are of equal length. Often an employee may get stuck with having to give a longer period of notice than an employer and it is entirely lawful for an employer to get away with this.
- Flexibility clauses
- A flexibility clause allows the employer to expressly reserve the right to alter the employee’s duties, or other aspects of the employment relationship. You should try and ensure that such clauses (if they are there at all) are drawn as narrowly as possible so that the employer does not have too much flexibility.
- It is worth noting that if there is no such clause in the contract then changes to a contract of employment must be agreed by both parties or through a collective agreement such as with a union.
- Bonuses & Commission
- An employee needs to be careful about discretionary bonus terms that are drafted too widely.The clearest position for an employee is where the bonus is expressed to be contractual and based on a specific formula, such as being linked to individual performances and targets. An absolute discretion by the employer virtually gives the employer a free reign.
- An employee needs to make sure that commission clauses properly reflect what has been agreed, and that they are not prevented from claiming commission simply because they are under notice or because they have left. Many employers will try to avoid paying commission in this way and they can do so more easily if the contractual terms of employment allow for them to do so.
- Mobility clauses
Some contracts of employment will provide that the employee can be moved to work within a geographical region, such as within a certain minimum radius from the existing base. Be careful here, because if you are not (or cannot) move your place of work, you may lose any redundancy pay that you could otherwise have been entitled to. You may also be in breach of contract by refusing to move. It is far better to negotiate on such a clause to start with rather than storing up potential trouble later on.