Employment contracts – watertight or full of holes?
At Merston Peters we’re often asked for advice, by both employers and candidates, on the validity of employment contracts. The simple truth is: it depends. It depends on circumstances, on forward thinking, on legalities and on good old fashioned understanding. In agricultural recruitment, as in any other area of industry, an employment contract should always be written in order to create a level playing field for both parties. This article attempts to wade through what may seem like treacle in order to answer the most common questions.
Let’s first ask the employers amongst our readers: do you really want to tie your staff in so tightly so that, every time an employee leaves, the rest of your personnel sees them struggling like Houdini in a suitcase!? Once a member of staff has received an attractive offer or believes that the grass is greener elsewhere, it is difficult to convince them otherwise. Our advice is always to let them leave amicably and accommodate their wishes as far as possible, limiting any possible damage in terms of finances or security. A departure is always unnerving for other employees and so, if the transition is smooth, you will gain respect. For employers, we urge you to read on, noting especially our advice on creating contracts with short, legitimate restrictive covenants that help to alleviate any misunderstandings at the beginning, middle and end of a term of employment.
To clarify what we mean by an employment contract in terms of legalities, according to gov.uk, as soon as someone accepts a position, they are bound by a contract; a contract does not have to be written. However, within two months of starting a job an employer must provide a written statement of employment particulars. This must include:
- the business name, the employee’s name, job title or description of work and start date
- how much and how often an employee will be paid
- hours of work and any weekend or overtime requirements
- holiday entitlement
- location of employment and, if an employee works in different places, where these will be and what the employer’s address is
It must also include information about:
- the length of the contract or the end date of a fixed-term contract
- notice periods
- collective agreements
- pensions
- grievance procedure and who to report to
- how to complain about a grievance procedure
- how to complain about a disciplinary or dismissal decision
The statement does not have to include the following information but must state where this information can be found:
- sick pay and procedures
- disciplinary and dismissal procedures
- grievance procedures
In order make any changes to an employment contract, an employer must gain an employee’s agreement and should consult or negotiate with employees (or their representatives), explain the reasons for change and listen to alternative ideas from employees. For employees wishing to change the terms of their contract, talking to your employer is the first step. Employees can insist on a change if it’s covered by a statutory right such as ‘not working on a Sunday’.
Now, let’s look at employees and employment contracts. Here are some of typical scenarios – we’ll use these to examine how employment contracts can affect you should you wish to leave a post (and let’s face it, that’s one of the only times that most of us actually read our employment contract!):
Scenario 1 – leaving before your notice period
Merston Peters have found you your ideal job; your new employer knows what a good catch you are and, naturally, wants you to join their business pronto (in this scenario, your new employer is not a competitor of your existing one). The contract of employment issued when you began your current role states that you are obliged to give three months’ notice.
The first thing to do is to study your original contract and any restrictions that it contains. With a three-month notice clause, in the first instance, it’s best to talk to your new employer; people of your calibre would usually have to give a good notice period and it may be that your new employer has taken this into account when offering you the position. In the event that your new position rests upon your immediate availability, you will need to decide whether to break your existing contract, and understand the consequences of this.
It is always sensible to seek legal advice if you are thinking of breaking the conditions of your
original employment contract although probably the first, most obvious, thing to do would be to chat to your existing employer – you may be able to reach an agreement whereby you forego any salary and benefits that would have been payable for your notice period in order that you can leave in a shorter timeframe. Our first piece of advice in all instances is ‘chat’ – lots of things can be solved with a good, honest conversation.
From the moment you decide to leave a business, your current employer will understand that you will be of less value to that business. Should your employer insist on the original notice period (they may be ‘doing a Houdini’ – see our introduction), your only option is to break your contract without their agreement. According to Claire Dawson of employment lawyer Slater & Gordon, “an employer is entitled to stop your pay and benefits but they cannot force you to stay and carry out your work”. She advises that, although it’s relatively rare for an employer to take legal action, it does depend on the circumstances: “they could seek compensation for breach of contract against you, claiming any financial loss they say arises as a result of your early departure, or apply for a court order to stop you working somewhere else”. However she adds that this is only likely to happen if they consider you have caused them a financial loss, or if you are leaving to go to a competitor.
In summary, our advice here would be:
- Review your contract of employment
- Talk to your new employer
- Talk to your current employer
- Seek legal advice if necessary
- Decide whether to jump ship or ride the contract out
Scenario 2 – leaving to join a competitor
In this second scenario, your new job is for a competitor of your current employer. Although they’re prepared for you to wait out your contractual leave period, your new employer has suggested that you may be able to divulge useful information and bring existing clients with you.
Once again, the first thing you need to do is to examine your current contract of employment.
However, the key thing to remember is that, whilst you are still employed (including your notice period even if on garden leave), you would be breaching your employment contract if you divulged any information to a new employer – and this can have serious, and possibly legal consequences.
When reviewing your contract, you need to pay particular attention to any restrictive covenants. A shrewd employer will have included restrictive covenants in your employment contract and will have ensured that these are short and relevant. According to Paul Whitfield, Principal Solicitor at Fox Whitfield for employers “it is generally better to have a narrowly-written, short restriction that can be relied upon, than to have a wide restriction that lasts for a long time and may not be worth the paper it is written on.”
The most common types of restrictive covenants aim to prevent employees from:
- Using confidential information obtained during their employment
- Soliciting business from the company’s customers
- Dealing with the company’s customers
- Poaching colleagues to join them in their new company
The key to determining whether a restrictive covenant is enforceable is whether the High Court considers it to be reasonable and relevant to the business’s interests; it is also highly unlikely that the court would consider restrictions of longer than six to twelve months enforceable. Restrictions could include client connections / confidential information / stability of the existing workforce – if your departure is considered relevant in any of these key areas, a restrictive covenant could affect your decision to break the contract. The matter of ‘reasonable and relevant’ depends upon factors that include:
- Your seniority
- The amount of confidential information you have and how relevant it is
- The value of your client relationships and how long it would take your replacement to
rebuild client relationships
- The geographical location of your current employer’s legitimate business interests
In summary, our advice here would be:
- Do not divulge any confidential information to your prospective employer whilst still employed in your current role and do not promise any confidential information until you have been through points 2-5
- Review your contract of employment paying particular attention to any restrictive covenants
- Talk to your new employer
- Talk to your current employer
- Seek legal advice if necessary
- Once you’ve left, review information you can legally take with you to your new role
Scenario 3 – leaving en masse
You successfully interview for a new job role and your new employer is interested in talking to your colleagues; they’d like to employ your entire, successful and harmonious team.
This scenario can be quite complex to resolve. Think about your current employer – they’re in danger of losing a successful team; generally a situation considered as damaging their business in terms of finances, security and the stability of the rest of their workforce. This is certainly a case where a restrictive covenant should have been written in to your contract to prevent such a scenario.
The key difference between your own departure and the departure of an entire team is that a team is more likely to have breached, or be seen to have breached intrinsic elements of their contracts as well as any restrictive covenants in place. Your employer may look for evidence of planning the move – covenants relating to confidentiality, trust, good faith and fidelity, the duty not to compete with their employer during their employment and so on. Your employer would be more likely to take legal action in this scenario.
If there is a group of you thinking about leaving together be very careful as this is hard to do and stay within the law. Get early legal advice about what you can and can’t do and the best way to structure a planned team move.
In summary, our advice here would be:
- Review your contract of employment paying particular attention to any restrictive covenants
- Seek legal advice even before planning your departure
- Follow all legal advice before, during and after the team move.
To look at the issue of employment contracts as a whole, the team at Merston Peters would advise employers against too much red tape but would certainly recommend obtaining shrewd advice on important restrictive covenants in order to protect your business. As candidates, we would always encourage you to carve out a career that fulfils you and, remember, communication can almost always ease a successful appointment or a departure.
To end this article, we’d like to leave you with one thought: communication is key – respect is earned, experience is invaluable – always look back with great memories of lessons learned, relationships built and opportunities gained.