Common mistakes in employment contracts
When the employment relationship starts, you are obliged to give employees a written statement of particulars. This is often set out in the employment contract, and must include certain information, such as pay and hours of work. When preparing employment contracts, it is very important to get them right.
‘We see several common mistakes in employment contracts. These can end up being very disruptive. Failing to have them prepared by a solicitor at the outset is often a false economy in the long run’ explains Sam Welham, an Associate Solicitor, in the Employment Team at Barker Gotelee. ‘The parties may end up in dispute or locked into inflexible contractual clauses. In addition, when the employee moves on, businesses may discover that their intellectual property and other interests are not protected.’
Sam Welham addresses three common mistakes and how to avoid them.
Missing or unclear information
There are two potential legal risks if information is missing, or unclear.
The first is the employee can ask an Employment Tribunal to determine the terms and conditions of employment. Such a claim can be disruptive, and damage relations in the workforce.
The second is where the employee brings a successful claim, such as for unfair dismissal. If that happens, the Employment Tribunal can award an additional two or four weeks pay if certain information has not been given on time.
As well as avoiding these legal claims, putting in place an employment contract avoids the uncertainty of agreeing terms verbally, or through emails which may not be appropriately stored or retained. 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.
Generic clauses, such as on confidentiality or conditions of employment, may not be suitable. They should to be tailored to reflect the nature of your business and the individual’s role. For example, if it is crucial for the employee to hold a valid driving licence, or remain registered with their professional body, this should be included in the contract. If it is, then it will be easier to dismiss fairly in the event the driver’s licence is lost, or the employee is struck off.
To protect your business, it can be important to include post termination restrictions in the employment contract. These must to be specific to your business and the employee’s role. If they are not, then they are unlikely to be enforceable.
Contracts becoming out of date
If the employee’s job evolves, they get promoted, or their working arrangements change, their contract may need to be updated. This is a legal requirement if the change relates to the key information you must give to employees. The update has to be made within one month of the change.
It is also important to review the contract periodically, to ensure it remains fit for purpose. For example, you may need to introduce more stringent provisions to protect your business if the employee now has access to key clients. Changes must be introduced carefully and we can assist in that process.
How we can help
We are experts in drafting employment contracts and directors’ service agreements. We take the time to really get to know your business, to give you the best level of protection and the flexibility to meet future change and challenges.
We can advise on the interpretation of existing contractual clauses if there is a dispute, and advise you on the best way to resolve matters. If contracts need to be changed, we can advise you on how to do this to minimise the risk of a claim for breach of contract, or constructive unfair dismissal.
For further information, please contact Sam Welham in the Employment Team on 01473 617 348 or email [email protected]
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.
