Contracts of employment: common errors and how to avoid them

by | Oct 8, 2019

Tempting though it might be to dish out the same contract of employment for new starters year after year, putting a little time into preparing your contracts could pay dividends in the longer term. Should you fall out with an employee, a clearly-worded contract that is fit for purpose for that individual and up-to-date can go a long way towards protecting your business.

Issue contracts promptly

You need to ensure that every employee who works for you for at least one month receives a statement of particulars setting out key terms such as pay, hours and place of work. You have to give this to the employee within two months of their start date. If you do not, an employee may be able to claim two to four weeks’ pay (subject to the statutory cap) from you. Even if their employment ends before two months have passed, as the Employment Appeal Tribunal recently confirmed in Stefanko and others v Maritime Hotels Ltd, you are still required to provide the statement of particulars.

From 6 April 2020, you will need to issue the statement of particulars on or before their first day to all workers, as well as employees. The rules will require more information to be included than is currently required.

Ensure new starters return their signed contract

Time-consuming though it might be, always make sure you have a signed copy of the most recent version of the contract on file. In the recent High Court case of Tenon FM v Cawley, the employer tried unsuccessfully to enforce restrictive covenants against its Operations Director to stop her poaching a colleague to come to work with her at a competitor. The employer could not provide the High Court with a signed copy of the contract which included these covenants, and so could not convince the High Court that the Operations Director was bound by these terms.

Make sure the contract terms match the offer letter

Make sure the offer letter and any terms agreed verbally with the prospective employee are reflected in the contract. Ensure that this information is passed on to the person who prepares the contracts. This avoids disputes over which is binding and getting off to a bad start with an employee who is disappointed if the contract is less generous than the offer.

Check contracts carefully

While a court or tribunal is very unlikely to agree with an employee that they should be paid £180,000 instead of £18,000 due to a blatant typo in the contract, generally the rules are strict on when you can correct a mistake. If you spot an error, we can advise on how best to deal with it. Careful checking of each draft contract is really important. 

Make your meaning clear

Some employers shy away from sounding overly formal, but a ‘chatty’ style may not have the same legal clarity. For example, ‘you may be asked to travel to other sites’ is not as clear as ‘you are required to travel to other sites.’

Include some flexibility, carefully 

Changing contractual terms can be difficult. To help your business’s resilience, it is important to include flexibility in the contract to cope with changes in business. Typical flexibility terms allow you to change your employees’ work base, duties or to require them to work extra hours. However, these need to be used with care.

Even though a contract can give you the right to change an employee’s work base or hours, you have to exercise these rights reasonably. This may mean giving the employee reasonable notice of the changes and taking into account their individual circumstances. Bear in mind the risk of discrimination, for example if the changes have a negative impact on a female employee’s childcare responsibilities or a longer commute causes difficulties for a disabled employee.

Be cautious with fixed term contracts

Although we see them being used less frequently, some employers still do not realise that ending an employee’s employment at the end of a fixed term contract is the same as dismissing an employee. Depending on the reason for ending the fixed term contract and their length of service, the employee may be able to bring a claim for unfair dismissal.

We can advise you on when it is safe to use fixed term contracts. If you do use fixed term contracts, make sure you include a notice period allowing you to end the contract early, in case things do not work out as planned. 

Draft restrictive covenants with care

Many businesses understandably try to protect their know-how, confidential information, staff and client relationships by including restrictive covenants in contracts of employment. For instance, these could stop an ex-employee working for a local competitor and contacting your clients. Although it may seem sensible for the scope of these to be as wide as possible, courts will only enforce them if they are strictly necessary to protect your legitimate business interests. Appropriate wording is crucial. We can help you get the wording right and ensure that these are binding.

Give your contracts a employment law health check regularly 

Whatever is written in your contracts, statute will always override the wording in the contract. It is worth checking that your contracts are compliant with the latest laws. Relevant law includes the entitlement to minimum notice periods, restrictions on working time, the right to ‘blow the whistle’ and the rules on holiday entitlement. Contracts should also have been updated since May 2018 following the changes to data protection law.

The government recently consulted on the use of confidentiality clauses (also known as non-disclosure agreements). We will keep an eye out for any new rules introduced following this.

Check also that your contract is still fit for purpose in light of the changing ways of working, such as homeworking and increased use of social media.

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.

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