Employment law is continually changing and for those starting employment on or after 6 April 2020, businesses are now required to provide employees with a section 1 compliant statement by no later than the beginning of the employment.
Certain information must now also be included in a contract. Whilst most of this is standard, a contract must now set out:
- what training entitlement is required to be undertaken by the employee or otherwise on offer to them.
- details of any paid leave (other than holiday and sick leave) which the employee is entitled to take.
- what benefits will be provided to the employee, other than sick pay, pension, holiday pay.
Failing to do so may entitle the employee to make a compliant to the employment tribunal where an employer has failed to provide a section 1 statement or provides an inaccurate or incomplete statement.
The General Data Protection Regulations and the Data Protection Act 2018 replaced the Data Protection Act 1998 (DPA 1998) on 25 May 2018. As such, it is important to ensure that the employment contract is up to date and complaint with the current law, referring to the relevant data protection provisions.
Why businesses must review their employment contracts or otherwise face the (expensive) consequences
We often see employment contracts which have not been updated for a number of years. As a result, they are:
• often out of date in terms of the law; and
• Do not reflect the status of individuals who may have been promoted from junior to more senior roles over time; and
• do not offer the right protection to the business, which can be vital if there is a contentious exit.
These are just some reasons why it is important for businesses to regularly review and keep their contracts up to date. Please therefore consider the following questions:
• When did you last review your employment contracts and policies? Was it over 6 - 12 months ago?
• Are you confident that your policies and procedures are compliant with recent changes to employment legislation?
• Do your contracts and policies protect your business from falling foul of anti-bribery legislation and discrimination?
• Is your business adequately protected from the risks posed by employees both during and after the end of the employment relationship? Is your confidential and proprietary information protected?
• Do your sick leave provisions allow for effective management of employees on long term sick or taking frequent short-term absences?
• Are your discretionary bonuses really discretionary?
• Did you just take a precedent contract from someone else? Is it right for your business?
There are a number of key areas businesses should always consider when reviewing their contracts:
1. Confidential information
It is important to ensure that the contract covers all types of information which the business considers confidential and to which the employee would have access. Failing to properly define confidential information may mean the information the business considers confidential is not properly protected after the employee’s employment terminates leaving the business exposed.
2. Post-termination restrictions
Depending on the nature of the business and seniority of the employees, it is important that contracts include certain restrictions which the employee must adhere to following their departure. This is because, departing employees are often well-placed to take advantage of confidential information, strategic plans, customer and client details or other information about their employer's business, after the termination of their employment. They may attempt to use this information for the benefit of their new employer, or in order to set up a rival business.
Another common mistake is having restrictions that are either too wide or too long in their length following the employees exit. In such a scenario, a court is unlikely to enforce them if required, meaning they offer no protection to the business.
It may also be that a junior employee with no restrictions is promoted to a more senior position. At this stage it is vital to consider whether such restrictions should be put into place, given the change in circumstances.
3. Notice periods
Having the right notice period is vital to ensure that when employees leave, there is enough time for the employer to protect those relationships with clients and ensure a suitable handover. It may also be that the contract does not comply with the minimum statutory notice period.
Furthermore, it is worth reviewing the length of an employee’s notice period particularly where they are subject to post-termination restrictions. If an employee is subject to a short notice period, then they may be able to argue that longer post-termination restrictions are unenforceable.
Review your contracts now and save costs later!
The Ilaw Employment Team can undertake an audit of your contracts and policies for an agreed fixed fee. We will then report to you and provide recommendations on the areas we think require amendment or improvement.
About iLaw’s employment team
At iLaw, we specialise in providing employment law advice and assistance to both employers and employees. The strong reputation of our employment lawyers is built on providing pragmatic, commercially focused strategies and solutions to clients facing employment issues. Our employment team is formed of expert lawyers and supervised by Nick Hine.
