Publish date

31 October 2019

Five common contract of employment mistakes

This Halloween, don’t be caught with dusty old skeletons of contracts of employment in your personnel files.  Instead, make sure that they are at the heart of your employment relationship and update it regularly so they don’t suck the blood, and your will to live, out of you in the event of a dispute.

1. The ghostly, non-existent contracts

A contract of employment is considered to be the most important document in an employment relationship and yet, it is surprising how many employees have not been provided with a written document of some sort which states the terms that they are employed under.

Section 1 of the Employment Rights Act 1996 (ERA 1996) requires employers to provide a statement of certain terms within two months of starting employment. These terms include but are not limited to the individual’s job title, hours of work and their salary. As of April 2020, this will become a day one right with additional terms to be included.

2. Updating contracts

Employment case law is constantly developing and legislative changes are often introduced in order to reflect changes in the government and the employment market. Much of the time employment contracts are filed away and forgotten, and consequently, are not kept in line with current legislation.

It is best practice to review them frequently and update them where necessary in order to reflect the changes in the law and prevent the contents of the contract from becoming out-of-date.

3. Making policies contractual

Many disadvantages arise from stating that policies are contractual. If a policy is contractual then companies have to ensure that policies are abided by and if they don’t then there is a potential risk of a breach of contract claim. Also, if there is an amendment to any policies then employees’ will have to be consulted beforehand, creating more work for employers.

Policies should be referred to in the contract of employment and it should be made clear that employees are expected to comply with them. However, it is important to state that they are non-contractual and are subject to be amended or withdrawn at any time.

4. Re-using restrictive covenants

Like Frankenstein’s monster, employers regularly re-use and carve up old, previously used restrictive covenants in contracts of employment.  However, it is important to tailor restrictive covenants to each individual employee and ensure that their role and duration in the business is taken into account when drafting them.

Restrictive covenants are only enforceable if they go no further than is necessary to protect a company’s legitimate business interests, at the time they were entered into. Therefore by carrying the ‘one size fits all’ approach with restrictive covenants may prevent them from being enforceable. As case law concerning restrictive covenants is constantly developing, it is advisable to seek legal advice to assist the drafting and to ensure compliance.

5. Using contracts of employment as consent to processing employees’ personal data

Since the General Data Protection Regulation (GDPR) was introduced in May 2018, contracts of employment should not include and be used to extract consent for the processing of personal data. Alternatively, it is advisable to include a privacy notice in the contract that is issued to an employee, which provides more detail on how you intend to process their data, how long it is stored and their rights in relation to the data.

Our thoughts

Contracts of employment are often overlooked and once signed by both parties, are forgotten about. It is important that employment contracts are maintained and reviewed on a regular basis so that they reflect current legislation which is constantly changing.

From 6 April 2020, employment law concerning contracts of employment is changing and the ERA 1996 will require the majority of particulars to be given on or before the date employment commences in the section 1 statement. This obligation to provide a written statement of particulars will also be extended to workers, and not just employees. There will also be a requirement that additional information is included in this section 1 statement which includes:

  • The days of the week the worker is required to work, whether the working hours or days that may be variable and how they may vary
  • Any paid leave entitlement which is additional to annual leave and holiday pay, such as maternity or paternity leave
  • Any probationary period, including conditions and its duration.

It is vital that employers are mindful of this change and that it becomes common practice during the recruitment of new employees to issue these extended particulars of employment before the first day of employment.

If you require any assistance with drafting the new section 1 statements and ensuring they are compliant with the law, then please do not hesitate to get in contact with a member of our employment team.

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