The contract of employment: the cornerstone of everything we do Anna Denton-Jones February 2015

Discussion

• What areas do you have practical difficulties with find or find most challenging when dealing with employees and their contract of employment?

navigating employment law

What is the contract of employment?

• How would you describe it?

• Does the contract need to be in writing?

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Does the contract need to be signed?

Vote navigating employment law

Is there anything you can

’

t have in the contract?

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Magic Formula – general contract law

• Intention to create legal relations + offer + acceptance + consideration = contract navigating employment law

S1 ERA 1996

• • • When must the “ statement ” be issued?

What must it contain?

Is it the contract? •

System Floors (UK) Limited v Daniel 1982

How is this enforced? Application to the ET – declaration of the terms and 2-4 weeks pay award under Employment Act 2002 navigating employment law

Contra proferentem rule

• Where there is doubt about the meaning of the contract, the words will be construed against the person who put them forward (known as the contra proferentem rule) navigating employment law

• • •

If you want to protect yourself beyond the implied duties you will need an express term

Confidentiality Restrictive covenants and PILON Protection for networks navigating employment law

PILON

• • • • Does the employer have contractual authority?

If not – the payment is viewed as damages for failure to provide proper notice

Cerberus v Rowley

Employee cannot insist on working out notice (no duty to provide work) Termination Date = date notice expires or date PILON made navigating employment law

Policies and other documents: contractual or not contractual?

• An employer has much more scope to modify non-contractual provisions or arrangements at any time without securing the agreement of the employee.

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Policies/Procedures

• • What is their legal status? For the tribunal to decide if dispute All policies subject to requirement that you operate consistently with the implied term of trust and confidence navigating employment law ]

• • • • • • •

Factors which will dictate status of policy

Is it the product of consultation or collective bargaining?

When it was introduced: is there any evidence of an intention for it not to be contractual?

Is the subject matter apt for being a contractual term? Is it alongside other contractual matters?

Are the terms clear enough?

Is it expressed in terms of rights and obligations or aspirations?

What has been the custom and practice?

Is it published for all staff or reserved only for management as a guide?

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What about other documents?

• •

Peries v Wirefast Limited 2006

fact states non-contractual does not preclude it from having contractual effect in certain circumstances Use of word “ entitlement ” in handbook likely to make it contractual

– Keeley v Fosroc International 2006

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• • • •

We are all too cautious about

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Custom & Practice

’ Behaviour of the parties – is the term “ reasonable, notorious and certain ”

Devonald v Rosser & Sons

Not just a question of time obligation – got to show parties complied with the term because of a sense of legal

France v Westminster Solectron Scotland Ltd v Roper

need to be able to infer from the regular application of the practice that the parties must be taken to have accepted that the practice has crystallised into contractual rights. Suggested difficult to prove employer regards it as legal obligation and practice needs to be very long established before it could be said to have varied an express contractual term Fact employee ignorant is not relevant

Sagar v H Ridehalgh & Son Ltd

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•

Implying redundancy and bonus payments

Albion Automotive v Walker 2002

o Has the entitlement been communicated to staff/published in some form of writing?

o Has the policy been followed without exception for a substantial period?Are payments routinely made in all cases?

o o o How often has it been followed?

Has the policy been adopted by agreement eg:- with TU Do the employees have a reasonable expectation that a payment will be made?

•

Noble Enterprises Ltd v Lieberum 1998

to staff term implied where pot of money allocated for bonuses each year between 1992 and 1996, memo communicated in 1994 navigating employment law

Can expressly exclude custom and practice

• Entire agreement clauses navigating employment law

Ending the contract

• How does a contract come to an end?

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If you don

’

t like the job you can **** off!

• Is this a dismissal?

• Can you calm down and change your mind?

Martin v Yeoman Aggregates

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• •

Fundamental breach justifying resignation of employee

Employer ’ s breach of contract must be sufficiently important to justify the employee resigning or be the last in a series of small breaches – “ straw that broke the camel ’ s back ”

Pepper v Webb Western Excavating (ECC) Ltd v Sharp –

employer ’ s conduct must amount to a fundamental breach of contract, employee must leave in response to the breach and not for some other reason and act promptly in resigning in response to the breach (1-2 months) (risk that deemed to have waived breach and agreed to vary the contract – affirming the contract) navigating employment law

• • • •

Damages for wrongful dismissal

Compensation for loss arising from the breach and losses which it is reasonably foreseeable are likely to arise from it Loss of salary and benefits from the date of the wrongful dismissal to the date when the contract could have been lawfully terminated

Marsh v National Autistic Society

Can include period would have taken to comply with a contractual procedure

Janciuk v Winterite Ltd Gogay v Hertfordshire 2000

damages re psychological damage for unlawful suspension navigating employment law

Damages continued

• • • • • • • No damages for hurt feelings or manner of dismissal even though it might be hard to get another job

Addis v Gramophone, Johnson v Unisys HL Malik v BCCI

exception where employer conducted dishonest business “ stigma ” damages Duty to mitigate Accelerated receipt Net salary and benefits

BTC v Gourley

Deduct state benefits so no double counting First £30k tax free c.f PILON clauses navigating employment law

Specific performance

• • Generally, a court will not order specific performance of an employment contract once it has been breached (

Ridge v Baldwin [1964])

. This goes both ways: the courts will not force an employee to work for an employer, nor will they force an employer to take back an employee.

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Declaration and injunction

• Declarations will declare that something is null and void or what the employee's rights are. Eg:- after 2 yrs special leave, HC declared that a consultant's contract with a hospital had not been frustrated. (

Gryf-Lowczowski v Hinchingbrooke Healthcare NHS Trust [2006]

) navigating employment law

Claims in the ET

• • • • • Within 3 months of the effective date of termination Tribunal fees apply Employer can counterclaim within 6 weeks of receipt of Response form Chairman sits alone £25k limit in amount can award navigating employment law

Claims in the Courts

• • • 6 years from the breach of contract No financial limit Fees apply: o £80 to claim £1000-£1500 o £115 to claim £1500-£3000 o £205 to claim £3,000-£5000 navigating employment law

CHANGING TERMS AND CONDITIONS

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• • • • • • •

Changing contracts - risks for employers

Claim for breach of contract (notice pay and benefits) Claim for (constructive) unfair dismissal (if LOS) Declaration of entitlement and damages for breach of contract Declaration and injunction Industrial action Actions under Employment Rights Act for unlawful deductions Discrimination navigating employment law

• • •

Questions to ask yourself....

What am I trying to change? Have I got authority to do it?

Is it a term of the contract?

o Express o Implied o Incorporated from agreement with TU Would the proposed change be a breach?

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• Risk assessment: accept change vs resignation? How likely is the employee to take action?

• How many people are affected? Is it more or less than 20?

• Are the affected staff protected as a result of a TUPE transfer?

• Is it a pension change?

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Option 1

• Impose the change, hope for the best and that the change is implied over time as no one objects • Can be risky navigating employment law

Option 2

• Try and agree change o Express voluntary agreement o Sign an amended contract or a letter about the change o Consideration eg:- pay rise, promotion navigating employment law

‘

Nuclear

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option 3

• • • If you can ’ t reach agreement you will need to give proper notice to terminate the contract and offer a new contract on revised terms o Effectively a redundancy situation which needs careful handling You have to make it clear what you are doing – courts are harsh on this Risk – redundancy claims/arguments that role not suitable alternative employment navigating employment law

Getting consent to changes -

•

practicalities

Re-issue handbook and ask employees to sign confirmation that they have received and accepted it • Do it at pay-rise/promotion time as condition of receipt • Consult with eg:- staff forum before introduction?

• s4 ERA 1996 requires you to write to employee with any changes navigating employment law

Special offer

• Order a contract review following today ’ s course • £500 + VAT - normal price £750 + VAT navigating employment law

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