Contracts of employment and restrictive covenants
Have you received a contract of employment? Do you understand all the terms included? Does your employer wish to change your existing terms?
Most terms of a contract of employment cover the usual provisions of job title, salary, holidays, sick leave, and notice periods. However, your employer may wish to restrict your actions post-termination, by including restrictive covenants within the contract. Should you wish to move to a new employer, it is important that you are aware of any such restrictions and understand their implications.
Your employer may also wish to alter your existing contractual terms and conditions, due to a business reorganisation resulting from the financial impact of the Coronavirus pandemic. Changes an employer may wish to make to the terms and conditions of a contract include pay cuts, changing hours or place of work, job duties and entitlement to certain benefits. However, changing an employment contract is not a simple procedure and has a number of serious legal implications.
Contractual terms in an employment contract cannot be changed without your agreement, unless this is permitted by the contract itself with a variation clause. Even if such a clause exists, employers should still be cautious, as variation clauses are unlikely to be effective unless carefully worded and a fair procedure followed. Any ambiguity will be construed in favour of you the employee and Courts and Employment Tribunals sometimes view such clauses as undermining trust and confidence considerations. It should be noted that claims with Employment Tribunals and Courts are time sensitive, and are generally considered to have begun from the date of the incident — not from when it was reported.
Changing employees’ terms and conditions can be contentious, as often the employer is asking the employee to make changes that they may feel are detrimental to them personally. The employer needs to be clear from the outset why it is seeking to change contractual terms so that its actions are not perceived as being carried out for no good reason but can be justified supporting evidence.
Employers need to prepare carefully for such a process and ensure they have plenty of time to implement the changes in order to minimise legal risks such as claims for constructive dismissal, wrongful dismissal, discrimination on the grounds of sex, age, disability, harassment, unfair deductions from pay, and, depending on the numbers of employees affected, awards for a failure to inform and consult. If the changes affect 20 or more employees and the employer is considering dismissing and re-employing staff on new terms, the collective redundancy regulations apply.
If no agreement can be reached, your employer can terminate the existing contract and offer continued employment on new terms. However, this constitutes a dismissal in law and you will be able to bring unfair dismissal claims if you have 2 years’ service. Whether the dismissal is fair depends on why the changes are needed and if your employers can establish that they had a reasonable substantial reason. However, a tribunal would always expect there to have been consultation and an attempt to reach agreement first.
If you need your employment contract reviewed, or your employer has asked you to accept changes, you should seek legal advice at the earliest opportunity to ensure the proper legal procedure has been followed and the contract is fair and reasonable. We will review the terms of your contract and advise you on the provisions before you agree to them, and provide you with the opportunity to query any element with your employer.
For directors, service contracts are often used with even tighter restrictions and longer notice periods. We can offer support and assistance in negotiating the terms of any service agreement.