Are Your Employee Contracts Relevant?

Employers are obliged to provide employees whose employment is to continue for more than a month with a written statement of terms of their employment, often referred to as a "section 1 statement". It must be given no later than 2 months after employment begins. The required information relates to terms that the employee will want to know, such as pay, hours, holiday entitlement, place of work, to name but a few.

It makes perfect sense for an employer to provide a written contract of employment, which includes the section 1 terms of employment, and so complies with the employer's statutory obligation, but which also contains additional provisions which are to protect the employer's business.

Such additional clauses can include (but is not limited to):

  • Post termination restrictions. These are particularly important for employees who are senior or who develop close relationships with customers. They can seek to prohibit such things as working for a competitor or soliciting customers and co-workers. However, they must be carefully drafted such that they do not go any further than is necessary to protect the employer. Open ended or excessively onerous restrictions are unlikely to be enforceable.
  • A confidentiality clause protecting the employer's confidential information and trade secrets
  • An intellectual property clause, dealing with ownership of intellectual property created by the employee.
  • Clauses dealing with obligations on termination, including garden leave, return of company property, and perhaps the right to make a payment in lieu of notice
  • A clause dealing with the obligation to repay training costs in the event of departure soon after training concludes, or the repayment of other monies owed to the employer.
  • A mobility clause in the event that the employer needs to change the usual place of work.

Employers should bear in mind that contracts of employment are also subject to various implied terms. Most notably, there is an implied obligation of mutual trust and confidence. Any contractual discretion on the part of the employer will be subject to an implied obligation to exercise that discretion honestly and in good faith, and in a way that is not arbitrary, capricious or irrational.

An employer should ensure that it has in place appropriate policies and procedures. However, often these are stated to be non-contractual.

Well drafted contracts of employment, which are kept under regular review, particularly at times of promotion, can help protect an employer's business, and significantly reduce the risk of future costly disputes.