It is critical that employers get the fundamentals right when it comes to employment law. Being fully aware of what employment documentation is needed and how to draft these documents to best suit a business can be of huge benefit to an employer. Below are some of the main points relating to employment contracts that it is helpful for employers to know.
- Is it a legal requirement to give an employee an employment contract?
- Is a written statement a contract?
- What is the difference between a written statement of particulars and a contract of employment?
- What needs to be in a written statement?
- What are the 6 April 2020 changes to written statements?
- What other terms can be useful in an employment contract?
- What happens if either the employer or the employee loses the employment contract?
- Is an employment contract legally binding?
- Can an employment contract be broken or breached?
Is it a legal requirement to give an employee an employment contract?
There is no requirement for a written employment contract to be issued, an employment contract will be in existence if the working relationship is in reality one of employer and employee, whether there are terms agreed in writing or orally, express or implied. However, there is a legal obligation on an employer to provide a written statement (or ‘section 1 statement), as section 1 of the Employment Rights Act 1996 requires this. The current position is that the written statement must be provided to an employee within two months of starting employment with an employer, but for all new employees (and workers) starting from 6 April 2020 the majority of particulars must be provided in a written document on or before the employment start date. From 6 April 2020 there will also no longer be a one-month service requirement before an employee qualifies for a written statement: they will qualify from day one.
Is a written statement a contract?
A written statement of employment is not necessarily a contract of employment. Written statements are generally quite brief and could just be a statement of what has already been agreed orally or in writing. If there is no separate written contract, the written statement will usually be the best evidence available of what the agreed terms between the employer and employee are and so what the employment contract looks like but is not always the full picture of the employment contract. If there is a separate written contract, this will take priority over the terms in the written statement.
What is the difference between a written statement of particulars and a contract of employment?
The written statement tends to be a short document provided by the employer, just outlining the basic terms of the employment relationship, as required by law. Whereas, an employment contract is generally more detailed and provides more information about what has been agreed between the employer and employee and is usually signed by both parties to signify that both parties have read, understood and agreed the terms contained in the contract. Since a contract is more detailed than a written statement, and it is agreed between both parties, this takes precedence over the terms of the written statement.
Unlike a contract of employment, the contents of a written statement are prescribed by law and so an employer must include the prescribed particulars to the employee as a written statement. Alternatively, the employer can include all the required terms, amongst other things in the employment contract, and dispense with the written statement.
What needs to be in a written statement?
The written statement can be made up of more than one document but at the very least one of the documents (the ‘principal statement’) must include:
- the employer’s name and address
- the employee’s name, job title or job description
- the employee’s place or places of work and any relocation provisions
- employee’s start date and if a previous job counts towards continuous employment, the original start date, as well
- how much and how often an employee will get paid
- hours of work (and if employees will have to work out of usual office hours or overtime
- holiday entitlement and whether that is inclusive of public holidays.
A written statement, once altogether, must also contain information about:
- how long a temporary job is expected to last
- the end date of a fixed-term contract
- notice periods
- collective agreements
- non-mandatory training
- who to go to with a grievance, how to complain about the handling of a grievance and how to complain about a disciplinary or dismissal decision.
What are the 6 April 2020 changes to written statements?
From 6 April 2020 there will be some changes made to written statements, which will become clearer closer to the time, but are likely to include that workers and employees must be provided with a written statement before they start work which states:
- whether there is a probation period for the employee together with the conditions of this including the length of the probation period
- days of the week workers are required to work and whether the hours and days might vary and how
- any paid maternity or other leave which is in addition to holiday pay
- any payments and benefits not previously specifically stated, but which are agreed and paid to the employee
- any training required, whether it is mandatory and detail about who has to pay for this.
Some terms will still not need to be provided from day one and can be provided in supplementary documents within two months, such as pensions or pension scheme information, information about collective agreements, non-mandatory training and certain information about disciplinary and grievance procedures.
Some information will not need to be contained in the written statement, but the employer should tell the employee where the information can be found, and this must be a ‘reasonably accessible’ place. Under the new rules, these are terms relating to:
- incapacity and sick pay
- any paid leave entitlement which is additional to annual leave and holiday pay, such as maternity and paternity leave
- pension scheme documents and further details of the terms of pensions
- full disciplinary and grievance procedure documents, which might be requested from HR or accessible on the intranet separately or as part of a staff handbook, for example.
It is important that employers check that all of the additional information which is required by the new rules to be in one document is included in the written statement they will be providing to employees and workers before they start work, from 6 April 2020. Employers should also check that all the information required either in a reasonably accessible document, or in a supplementary statement provided, and that supplementary statements are provided within two months of an employee or worker starting work. Our specialist employment solicitors can help review and draft your new written statement.
What other terms can be useful in an employment contract?
It can be helpful to include more detail in a full employment contract. It will depend on the nature of the employer, the role to be performed by the employee and the employee’s seniority as to the terms which would be of particular relevance. If you would like assistance with this our specialist employment solicitors can fully appraise your specific businesses needs and assist in reviewing and drafting a bespoke contract of employment for your business. Generally speaking though, it can be helpful to include the following additional clauses in an employment contract:
- Further detail on sick pay and procedures, or at least where these can be found
- Further detail on disciplinary and dismissal procedures and grievance procedures, or at least where they can be found
- How confidentiality will be dealt with and what is included in confidential information
- How intellectual property will be dealt with
- Detail on notice periods and how notice will be dealt with, for example will garden leave and/or payment in lieu of notice be an option at the employer’s discretion?
- Obligations for the employee on termination of employment, such as return of company property and continued confidentiality and intellectual property provisions
- Post-termination restrictions that the employer would like the employee to remain bound by for a reasonable and limited period and scope after termination of employment, such as non-solicitation of particular clients in a particular geographical areas for a limited and reasonable period of time
- Governing law and jurisdiction of the contract
- Specific clauses relating to the types of employment benefits that employees might receive, for example, bonuses, commission, company car or healthcare.
It is also helpful to go further and have a non-contractual staff handbook containing more detail as to company policies and procedures so that both employers and employees are clear on standards expected and the correct and consistent processes to be followed in specific situations in the workplace. If you would like to discuss drafting a bespoke staff handbook for your business, please contact us.
What happens if either the employer or the employee loses the employment contract?
If the employer or the employee has a copy of the employment contract then there is still a record of what was agreed between the parties and so there should not be an issue, as this will continue to bind as long as neither party terminates the contract.
If both parties have lost the employment contract then whilst both parties are in agreement with the terms there is no issue, as the same terms as have always applied under the employment contract will continue to apply. It is only if there is a situation where the employer and employer have both lost the employment contract and there is a dispute over what one or more of the terms of the contract was or meant. If there is evidence of discussions about particular terms before the contract was entered into, this might assist and if an employer has a standard contract that they tend to use for employees or has another employee which started around the same time as the employee in question, this could help shed light on the term(s) in dispute. Alternatively, the parties could agree on a new contract and record those terms in writing being signed by both parties, maintaining the employee’s continuity of service, so the start date of employment will be when the employment originally started.
Is an employment contract legally binding?
Like with other commercial contracts, provided that there is an offer, acceptance, consideration, certainty of terms agreed and intention to create legal relations then an employment contract will be legally binding, provided that the terms are reasonable. If the terms are not lawful they cannot bind on either party, but otherwise, regardless of whether they are in writing or signed, if agreed by both parties explicitly in writing, verbally or by way of conduct of the parties, the terms of an employment contract are binding.
There are differences to commercial contracts in terms of how the contract is enforced. For example, the employment tribunal will not generally order specific performance, it will allow for an employer to terminate a contract of employment, but the employee will be given the opportunity to sue if this was unfair, discriminatory, wrongful or otherwise a breach of contract. Also, if there is a repudiatory breach of contract by one of the parties to an employment contract, that does not automatically terminate the contract, as the innocent party can choose to waive the breach and affirm the contract.
Can an employment contract be broken or breached?
An employment contract can be broken or breached, but there are consequences to this, depending on the circumstances. Either the employer or the employee can bring an employment contract to an end under the notice provisions of the contract, by the doctrine of frustration (illness, death, imprisonment of employee) or by fundamentally breaching the contract, allowing the other party to treat the contract as coming to an end.
If the employer has fundamentally breached the contract by breaching a term that goes to the root of the employment contract, for example by not paying the employee, then the employer has the right to treat the contract as if the employer has terminated the contract and to resign and claim constructive unfair dismissal (if they have 2 or more years of continuous service) or to claim a breach of contract in the civil courts (generally if the employee does not have the relevant service requirement) for any losses incurred as a result of the employer’s breach.
If an employee fundamentally breaches the employment contract, for example by committing gross misconduct (such as theft from the employer) if the employer is sufficiently certain of this and has thoroughly investigated the matter, the employer can dismiss the employee with immediate effect with no requirement to pay notice pay, as the employee has broken the contract with their course of conduct. Further, the employer could sue the employee or, if there is a clause in the employee’s contract allowing this, withhold payments due to the employee, to compensate the employer for any loss flowing from the employee’s breach of contract.