In addition to basic and essential contracts for any business such as trading terms and conditions, as your business grows and takes on staff, it is essential that you have the right employment contracts in place.
Regardless of whether you are a fantastic employer to work for, it is inevitable that at some point, and perhaps with regularity, you will need to rely on your contracts of employment, policies and procedures to either ensure your staff know your rules and adhere to them or perhaps to deal with disciplinary or absence issues or staff complaints or grievances.
Different contracts for different employees
It is also almost certain that your business will have different types of employees, not only in terms of their roles, as some may be admin staff and others sales or management, but also in terms of seniority. You may have part-time staff, staff on so-called zero hours contracts, temporary staff, staff who work outside of the office, perhaps at home or very senior employees. A single contract template is unlikely to meet your business needs.
At Darlingtons, one of the clear benefits we offer is that we don’t just prepare contracts for clients, we ensure that clients understand why a contract is drafted the way it is, the underlying risks and we offer support going forwards.
Not just Employment contract but also employment policies
Employment policies are often a good way for employers to obtain flexibility, outside of the contract relationship. Policies such as holidays, health & safety, data protection or social media and internet use may need to be updated regularly and may be stated specifically not to be part of the contract. However, employers should also be aware that, by conduct or for other reasons, aspects of policies may become contractual. Advice should be sought in this tricky area.
Draft discretionary bonuses and incentives
We work with employers in drafting employee benefits and deal with matters such as share and option awards, performance measures, use of discretion, payment terms and the position if the employee leaves. We draft good leaver and bad leaver clauses in employment contracts.
What are the legal risks and pitfalls with employment contracts ?
With employment contracts, there are always certain terms implied by law and what is included in the contract may well be varied by conduct of the parties – a job role may change and evolve. Clauses in the contract may not be enforceable such as restrictive covenants, if they are drafted too widely or favourably to the employer, without clear thought.
Consult with staff
Failure to review contracts and/or consult with staff – with employment contracts it is often very important to review them regularly to make sure they reflect the ever changing workplace reality and to minimise the risks of implied terms muddying the waters – a good example of this is the fast changing way in which more and more staff are working form home or are mobile. In such an evolving situation, as an employer you need to have clear rules and policies in place.
Confidentiality and restrictive covenants
In today’s world your business data, whether it’s know how, products, clients or suppliers, is likely to be among your most important assets. You certainly won’t want your staff to breach data protection or discuss your business, it’s clients or suppliers in a damaging or even defamatory way and you certainly won’t want your staff to poach your best customers or staff. It’s vital to protect those interests but also to do so in a proportionate way. Blanket clauses which are excessive may well be varied or even found totally unenforceable if they are not carefully drafted by experienced lawyers, taking into consideration all the factors and case precedents for what may be safe for you.
Flexible work and working from home
The way in which many of us now work, and the ability, due to technology, to work just as effectively in many ways remotely, has led to a rapid increase in working from home. Staff also have a number of statutory rights to request flexible work, and so employers must tread very carefully in this area. A clear policy and a consistent approach are required to avoid problems, which can easily include potential claims for discrimination. A well thought out and communicated set of clauses in employment contracts and/or separate policies on the issue are essential. Employees working remotely also necessitates consideration of security risks for equipment and data and potential health and safety considerations.
Bonus payments, commission and other employee incentives
Another area where employment patters have changed, it is common now for employment contracts to incorporate incentives. Many employers believe that, with bonuses, a standard clause stating that any bonus is entirely at the employers discretion, will fully protect them. unfortunately, this is rarely the case. The contract clauses need to be very carefully considered and employers need to recognise that custom and practice are equally important and that any doubt is generally construed by the Employment Tribunal or court in favour of the employee. As regards any commission, issues can include what happens if the employee commits an act of gross misconduct – is he or she still entitled to commission ? What if a sale is part completed when an employee leaves or a sales contract is ongoing ? How will commission be calculated in that circumstance ?
Changing employment contract terms and conditions
One of the most common issues for employers relates to legal rights and business considerations relating to changing employees terms and conditions.
Many employers legitimately have reasons for wanting to change employees terms, but the area is fraught with potential difficulty and risk.
Can an employer change an employment contract?
An employment contract is no different to any other form of contract. Once agreed, the general rule is that neither party can alter the terms without the other’s consent. Consequently, an attempt to unilaterally alter a contract would be a breach of contract. Depending upon what type of breach of contract will depend on the options available to the other party.
Fundamental breach of contract?
If you are an employee and your employer changes your contractual terms, you may well face a difficult decision. Do you reluctantly accept the change or not ? If not, should you resign and claim that you have been unfairly constructively dismissed (assuming you have the necessary length of service to qualify)?
What about contractual clauses that contain discretion?
Bonuses are a classic area of dispute where an employee may argue that the employer has sought to change the contract. Employers often believe that having a clear clause in a contract of employment stating that a bonus is not a contractual entitlement but discretionary means that they can literally adopt that approach. It is understandable that employers will think this but with employment contracts the matter is not that simple.
This is because with employment contracts, the Tribunal or court will often imply terms into the contract based on past conduct of the parties and regardless of what’s actually stipulated.
Example re bonus clauses
For example, if an employee has received a bonus for 5 years in a row and the employer then simply advises that no bonus will be paid in this year, without clear justification, notwithstanding the contract clause might appear to support total discretion for the employer, in practice, the employer may be considered to have sought to unilaterally vary the contract.
Employment contract altered by conduct
Employers are well advised also to be wary of the employment contract being altered by conduct. Take the example of an employee who is allowed to work from home every so often. Gradually, this becomes more and more common. In that situation, over a period of time the employee may be in a position to argue that he or she now has the contractual right to partly work at home. The same sort of issue can apply to an informal change of job role.
In the same way, if as employee, your employer alters your employment terms and you accept those changes, especially without reserving your position or making it clear it is under protest, over a period of time, you may be considered to have accepted the change and to have potentially waived the employer’s technical breach of contract. If your employer alters your contract, you should consider your options and not simply do nothing.
Changing employment contract based on necessity
If an employer is in financial difficulty, one option is to seek to alter employee’s contract by paying them less money, perhaps as an alternative to redundancy. In such a genuine predicament, a Tribunal or court may well be sympathetic to the employer who tries to retain staff, the situation must still be handled very carefully and cannot be imposed on employees. Consultation is key and if redundancy may be the alternative if the employee or sufficient employees are not prepared to work on less favourable terms, employees should be put on notice and proper process followed.
Specific flexibility clauses
Employers will often include clauses in contracts seeking to reserve the specific right to alter certain aspects of employment without further consent. Examples of these types of clauses include mobility clauses and hours of work. Employers should be aware that such clauses may not be effective and will be given a restrictive interpretation by courts and tribunals and the implied terms of an employment contract may curtail the operation of an express flexibility clause.