Contracts of Employment / Directors' Service Agreements

It is fundamental to the success and protection of your business, to have the appropriate documentation in place and for it to be structured in a way that best suits your commercial needs.

There should be a distinction between what needs to be inserted into your Contract of Employment/Directors’ Service Agreement and what can be included in the Staff Handbook.

Basic terms are required by law, but the Employment Rights Act is there to offer protection to employees.  Therefore, the Contract of Employment is your opportunity to extend the terms to include clauses that protect your business, rather than your employee.

Some examples of this include:

Confidential Information

Often there is highly sensitive and commercially valuable information relating to your business to which the employee may have access while employed by you.  You ought to ensure that during the employment, and afterwards, that such information is protected and cannot be used to your detriment by, for example, falling into the hands of a competitor.

Post –Termination Restrictions

While many regard these as unenforceable, properly drafted restrictive covenant clauses should be enforceable and can therefore prevent an outgoing employee from:

  • working in competition
  • soliciting business and/or dealing with your clients/customers
  • attempting to take other staff with them to a competitor
  • interfering with supplier relationships
  • holding themselves out as still connected with your business.

However, for such clauses to be enforceable they need to be carefully drafted. Clauses that are drafted too widely may be held unenforceable because they are in restraint of trade.  In order to maximise the chances of restrictions being held to be valid they should be specific to your business and provide no more than adequate protection of your legitimate business interests.

Intellectual Property

If there is a possibility that your employees may develop or be involved in developing new inventions, designs, technology or ideas while employed by you, you should ensure that such information belongs to you and is protected.  Particularly for technology businesses and other employers involved in areas where IP rights are being created, it is vitally important to ensure that employees’ contracts contain appropriate provisions. 

Garden Leave

Often misunderstood, garden leave only applies once notice has been served by either party.  Typically, where a departing employee is going to a competitor it may be prudent to keep them away from the business in order to protect confidential business information. If you want the flexibility to not provide work (which may otherwise place you in breach of Contract) then you need to clearly specify what is to happen for garden leave purposes in the Contract.  Without valid garden leave provisions any restrictive covenants in the Contract may be unenforceable.

Social media/internet and email

If employees have access to your information and communication systems then you should ensure that the Contract contains adequate protection to allow such facilities to be monitored to ensure they are not abused. Where the Contract is silent on this you may be in breach by, for example, monitoring email or internet usage.

Deductions

You are only allowed to make deductions from an employee’s salary in very limited situations.  You need the express written permission of an employee to make deductions and the Contract is the ideal place to record the ways in which you can make deductions.

Resignation from Office

If you are engaging a Director, you should ensure that you can require the Director to resign his/her office/Directorship should his/her employment come to an end and, again, the Contract is one way in which this can be achieved.