An employment contract will govern the legal duties and responsibilities an employer and employee have agreed to each other. An employment contract will consist of the explicit terms agreed, but also certain implied terms. There are a number of core statutory rights that will be featured in any employment contract.
Contracts do not legally have to be in writing, rather, they can be agreed orally. However, in the employment context, an employee has a statutory right to request a written statement setting out the principal terms of the employment contract. This rule applies regardless of actual length of the employment relationship, including where they are less than two months in duration.
Often an employer will wish to add heightened protections, such as confidentiality agreements and restrictive covenants. Depending on their nature and extent, these can be challenged in court. Human rights and anti-discrimination requirements must also be complied with, and cannot be departed from via contractual agreement.
What are the core statutory rights featured in employment contracts?
All employment contracts must provide as a default minimum certain express statutory rights, including:
- an itemised statement of pay;
- redundancy pay;
- maternity leave; and
- not to be unfairly dismissed.
Employers and employees cannot contract to depart from these minimum protections.
All employment contracts will contain implied duties. For employees, these include duties of trust, for example non-disclosure of trade secrets, and the duty to follow reasonable instructions. For employers, these include a duty of care to protect employees from foreseeable harm, including health and safety, and a duty to provide payment.
A particular employer practice can give rise to implied terms, where, despite no written agreement, the employer is through regular “custom and practice” considered to have adopted them.
What are the standard terms of employment contracts that must be disclosed to an employee?
An employer is subject to a legal duty to disclose upon demand by written statement any terms including but not limited to:
- rates and frequency of pay;
- hours expected to work;
- entitlement to benefits, including holiday, sick pay and any employee pension schemes; and
- procedures relating to discipline and dismissal, including mechanisms for resolving grievances.
Common types of employment contract
Employee contracts may vary between permanent or fixed, consultative and agency based or “zero hours”. Agency workers and independent contractors have less statutory protections than employees.
In any event, the parties cannot contract out of the implied terms mentioned above.
Where the company is a corporate body, it is common that employees also possess a shareholding in the company. An “employee shareholder” relationship can be contractually agreed, and the employee must receive a minimum of £2,000 and maximum of £50,000 in shares in the company in order to qualify.
An employee shareholder status waives rights to challenge unfair dismissal, save for certain dismissals that qualify as automatically unfair and dismissals made with discriminatory intent.
Some employers may insist on heightened obligations upon their employees. These can include non-compete, non-poaching and non-dealing clauses.
- A non-compete clause seeks to prevent a former employee from working for a competitor with their former company. They can also impose limitations on the type of business the former employee may set up themselves. Non-compete clauses will expire upon a set term after the employment end date.
- Non-poaching clauses will prevent a former employee enticing other employees away from their former employer.
- A non-dealing clause prohibits a former employee transacting or interacting with clients of their former employer.
Challenging restrictive covenants
A restrictive covenant is challengeable in a court if found to be unreasonable in light of the employer’s objective of protecting their legitimate interests. A covenant cannot be too broad in application or have an excessive duration. The burden of showing whether an objective is a legitimate business one rests on the employer.
Amending contractual terms
Altering the terms of an employment contract can only be done with the consent of the employee. If an employer materially alters the terms of a contract on renewal and the employee does not protest, they may be considered to have implicitly accepted the terms of the new contract. If an employee does object, they can challenge the alterations on grounds of constructive dismissal.
Human rights and anti-discrimination considerations
Since the Human Rights Act 1998 took effect, employees can enforce rights under the European Convention on Human Rights in domestic courts.
Previous cases have featured challenges to monitoring and surveillance agreements as being in conflict with the right to privacy, and agreements to compel employees to join or refrain to join a trade union as breach of the right to association and freedom of speech.
The UK’s anti-discrimination regime features statutory protections for sex and gender-based discrimination, disability, race, sexual orientation and religious belief. For example:
- Under the Equal Pay Act 1970, an employer cannot contract to give a different salary to a male and female employee in the same role, unless they can show the difference in pay is owed to a material factor other than gender.
- An employer must make reasonable adjustments and employment arrangements for individuals with disabilities, including flexibility in working hours and absences.
Transfer of employment contracts
Where a parent company acquires a target company, or a buying company purchases a selling company’s employment contracts in an asset sale, current employment contracts will be protected by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”). The TUPE Regulations provide barriers against dismissals in the course of a transfer or change in contractual terms unless there are “economic, technical or organisational” reasons justifying them.
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Contact our Employment Contract Solicitors in Mayfair and throughout London
The Employment Lawyers at Lewis Nedas Law hold a broad range of experience in acting on behalf of both employers and employees in litigation and ADR, including assistance in drafting employment contracts and leading negotiations between employers and employees where disputes arise. For expert advice from our Employment Law Solicitors, please call us on 020 7387 2032 or complete our online enquiry form.