Why You Should Review Contracts of Employment
Author: David Seals
Employees’ contracts of employment are important legal documents which should be periodically reviewed and kept up to date. There are various reasons why you might want to update and change contracts of employment. For example:
- Job changes, e.g. promotions.
- Ensuring the Employer has appropriate legal protection.
- Changes in legislation.
Looking at these in turn:
Job Changes: if an employee is promoted, thought should be given to whether their existing terms and conditions are appropriate to the new role. For example, a promoted employee may have greater influence in the business and over customers and business contacts and, therefore, it may be appropriate to put in place restrictive covenants that prevent the employee, for example, from leaving and trying to take customers or other employees to a competitor. In a recent case, FW Farnsworth Ltd and another v Lacy and others 2012, the question arose as to whether restrictive covenants in an unsigned contract of employment, issued after the employee had been promoted, were enforceable. Fortunately for the employer the High Court held that because the employee had taken advantage of a medical insurance contractual benefit only available under the new contract he was to be taken as having agreed to the new terms and conditions, including the restrictive covenants. The judgment indicated that the position might well have been different had the employee not used that contractual benefit. The case highlights the importance for employers of making sure new contracts are properly agreed and signed by employees.
Ensuring the Employer has appropriate legal protection: the source of and quality of different employment contracts varies considerably from a bespoke document produced by a specialist employment solicitor to something downloaded free from the internet. Employers should ensure they have adequate legal protection in their employment contracts, especially for those of key staff. For example, there should be adequate provisions protecting confidential business information and intellectual property and relating to loyalty and the avoidance of conflicts of interests with the employer.
Changes in legislation: Employment law is a complex area which changes frequently. From time to time, a legislative change may make your contract of employment out of date. For example, many contracts of employment still contain a provision stating that the employee will retire automatically at the age of 65. Since the abolition of the default retirement age in April 2011, it would be unlawful discrimination, in the majority of cases, for the employer to rely on such a contractual provision. Therefore, in most cases, a clause to this effect should be removed.
If you have any queries about this article or any other employment law issues, please contact David Seals on 01306 502218 or d.seals@downslaw.co.uk
