Chapter 2 - The Employment Contract and its Clauses

Question 1

What is Employment Law based on?

Answer 1

Law of contract - most relationships are governed by a contract and statutory law. The relationship is unequal, therefore statutory law was created to attempt to compensate for the imbalance of power.

General rule that the contract doesn’t need to be in writing to be valid (implied terms)

Question 2

Is there a general requirement for an employment contract to be in writing?

Answer 2

No general requirement for a contract of employment to be in writing - it is formed when the offer of a job is accepted.

To avoid dispute, it is useful for the terms of employment to be drafted into a written contract of employment.

Question 3

What is a s1 Statement?

Answer 3

Despite the lack of formal requirement for an employment contract, the ERA 1996 requires employers to provide their employees with written details of terms of their contract (s1 ERA 1996)

Must be provided to an employee’s if their employment is to continue for more than one month.

Must be given to the employee no later than 2 months after employment begins.

Question 4

What information must be contained within a s1 Statement?

Answer 4

1. Name of employer and employee
2. Date when employment began
3. Rate, method, frequency of pay
4. Hours of work
5. Holiday entitlement
6. Job title/brief description
7. Place of work

Some terms do not need to be included in this statement (e.g pensions/pension schemes, notice periods, disciplinary procedures) but must be referred to another document accessible by the employee.

Question 5

What is the procedure to follow then changing the s1 Statement?

Answer 5

s4 ERA 1996 states the employer must give the employee a written statement containing details of the change at the earliest opportunity, no later than one month after the change.

Agreed changes, not a unilateral right for the employer to make changes to the contract.

Question 6

What terms does a contract of employment consist of? Give examples.

Answer 6

Express Terms - agreed between the employee and employer (probationary period)

Implied Terms - terms that a court assumes were intended to be included in the contract (duty to be willing to work)

Incorporated Terms - incorporated into the contract (staff handbooks/policies)

Question 7

Does a contract need to be signed to be enforceable?

Answer 7

If a contract is in writing, there is no requirement for it to be signed.

Question 8

Explain what an express contractual clause is.

Give examples of an express clause.

Answer 8

Employers may require additional express clauses to the essential terms in an employment contract. In these cases a written contract is required rather than relying on a s1 statement.

Examples:
Probationary
PILON
Confidentiality
Garden Leave
Gross Misconduct

Question 9

What is a probationary period clause? (express term)

Answer 9

Trial period at the start of employment, typically lasts 3-6 months, employee is assessed and notified if their appointment will be made permanent.

It needs to be clear on what has to happen for an employee to be confirmed in post (assessment? confirmation automatic or dependent on further action?)

Question 10

What is a PILON (Pay In Lieu Of Notice) clause? (express term)

Answer 10

The employer has the right to pay an employee a lump sum rather than require him to work his notice period (In the absence of a specific PILON clause, this would be breach of contract.)

Locke v Candy & Candy Limited [2010]

Question 11

What is the effect of a PILON clause?

Answer 11

The effect is to terminate the contract early, but compensate the employee for loss of notice.

Question 12

What is a confidentiality clause? (express term)

Answer 12

A confidentiality clause requires employees to keep the affairs of their employer confidential both during and sometimes after employment.

This is an implied term, but it is not recommended to rely on this, therefore a confidentiality clause should be expressly drafted in a contract.

Question 13

What are the 3 requirements for a confidentiality clause to be enforceable?

Answer 13

1. Legitimate business interest in requiring protection
2. The proposed clause is no wider than reasonably necessary to protect those interest
3. Must not be a restraint on trade

Question 14

What is a garden leave clause? (express term)

Answer 14

A garden leave clause allows an employer to require an employee to stay at home during their notice period, whilst remaining an employee, but removed from their regular duties.

Can be used when an employer doesn’t want to rely on a PILON clause which will allow employees to work elsewhere.

Question 15

What happens if an employee breaches their garden leave clause?

Answer 15

Employer may seek an injunction to prevent them from working elsewhere.

Question 16

When may a court insist on a garden leave clause even if there wasn’t an express contractual clause?

Answer 16

When there is a clear case of wrongdoing e.g. intention to join a competing company

(SG&R Valuation Service Co v Boudrais [2008])

Question 17

Is there an implied contractual right to work, even if there is a contractual garden leave clause?

Answer 17

Have to consider whether skills necessary to perform their role needed to be used regularly or they would deteriorate or become de-skilled by being put on garden leave.

(William Hill Organisation Ltd v Tucker [1998])

Question 18

What 3 points need to be considered when deciding on whether to enforce a garden leave clause?

Answer 18

1. The provisions of the contract were common in the industry
2. The employee would continue to be paid his salary and would not be out of pocket
3. No evidence that the employee’s skills would deteriorate whilst on garden leave

As established in ICAP Management Services Ltd v Berry [2017]

Question 19

What is a gross misconduct clause? (express term)

Answer 19

Conduct so serious it will justify summary dismissal (dismissal without notice)

Brito-Babapulle v Ealing Hospital NHS Trust [2013]

Dismissal without notice is normally a breach of contract, however if an employee is dismissed for gross misconduct, the employer is justified

Question 20

What is deemed gross misconduct by the ACAS?

Answer 20

1. Theft or fraud
2. Breach of confidence
3. Harassment or bullying
4. Cause loss or damage through negligence
5. Bringing the company into disrepute

Question 21

What are Implied contractual clauses?

Answer 21

Areas not covered by an express term in the contract, but can be terms/provisions a court assumes were intended to be included within a contract.

1. Implied by custom and practice
2. Implied as a matter of law

Question 22

What is the difference between express and implied terms of contract? Give an example of each

Answer 22

Express - those which have been agreed between the employer and employee (PILON)

Implied - those which a court assumes were intended to be included within a contract (duty to pay wages)

Question 23

What are the 4 implied duties of an employer?

Answer 23

1. Duty to provide work
2. Duty to pay wages
3. Duty of safety and care
4. Duty of mutual trust and confidence

Question 24

What are the 4 implied duties of an employee?

Answer 24

1. Duty to be ready and willing to work
2. Duty to exercise reasonable care and competence
3. Duty to obey reasonable instructions
4. Duty of loyalty and fidelity

Question 25

What is a restrictive covenant?

Answer 25

Restrictions/prohibitions on employees once they leave employment with a company, although it cannot be a restraint on trade.

1. Non-competition
2. Non-solicitation
3. Non-poaching
4. Non-dealing

Question 26

What makes a valid restrictive covenant?

Answer 26

Must protect a legitimate interest of the employer and go no further than necessary to protect that interest

(Nordenfelt v Maxim Nordenfelt Guns and Ammuntion Co Ltd [1894])

Question 27

What must be taken into consideration when deciding whether restrictive covenant is reasonable?

Answer 27

1. Duration
2. Geographical area
3. Whether the content is limited only to the service or products the employee was concerned with in his employment

Question 28

What is the Blue Pencil Test with regards to a restrictive covenant?

Answer 28

Established in the Nordenfelt case.

If the part of the restrictive covenant which makes it unenforceable can be removed, leaving the rest to make sense, then the remainder of the covenant is enforceable.

Question 29

What is a non-competition restrictive covenant?

Answer 29

Prohibits the employee from working for a competitor within a certain area for a certain period of time.

Fitch v Dewes [1921]

Thomas v Farr plc [2007]

Question 30

What is a non-solicitation restrictive covenant?

Answer 30

Prevents former employees from soliciting clients or customers of the employer they used to work for.

Safetynet Security Ltd v Coppage [2013]

Question 31

What is a non-poaching restrictive covenant?

Answer 31

Variation of a non-solicitation covenant. Prohibits employees from seeking to employ their former colleagues.

Hard to enforce. Only applicable to employees who were colleagues of the ex-employee.

Hanover Insurance Broker v Schapiro [1994]

Question 32

What is a non-dealing restrictive covenant?

Answer 32

Prohibits an employee from soliciting clients from his current employer after that employment has ended, and also prohibits the employee from working for such clients or selling to them.

Only enforceable is they go no further than reasonably necessary to protect a legitimate business.

Towry EJ Ltd v Barry Bennett and Others [2012]

Question 33

What are the remedies for an employer for breach of restrictive covenant?

Answer 33

1. Obtain an interim injunction; or

2. Seek damages for breach of covenant.

Question 34

What are the remedies for an employee for wrongful dismissal (with regards to a restrictive covenant)?

Answer 34

Wrongful dismissal - when an employer terminates the contract and in doing so fundamentally breaches the contract.

1. Seek an injunction; or
2. Seek damages - equivalent to the salary that was lost.

The case of General Billposting Co Ltd v Atkinson [1909] deals with whether a RC is still enforceable post-termination.

Question 35

Garden leave over a restrictive covenant?

Answer 35

Garden leave clause may be easier to enforce post-termination than a restrictive covenant as the employer does not suffer financially.