Geoffrey Caesar, Solicitor

Employment contracts are essential documents that define employers’ and employees’ rights and obligations. They can also help to prevent disputes and protect the interests of both parties. However, drafting and enforcing employment contracts can be challenging, especially considering England and Wales’s complex and evolving employment law.

What is an employment contract?

An employment contract is a legally binding agreement between an employer and an employee that sets out the terms and conditions of employment. It can be written, oral or implied by conduct. However, it is advisable to have a written contract that clearly states the key terms of the employment relationship, such as:

• job title and description
• hours of work and place of work
• salary and benefits
• holiday entitlement and sick pay
• notice period and termination
• disciplinary and grievance procedures
• confidentiality and intellectual property rights
• restrictive covenants

A written contract can provide clarity and certainty for both parties and evidence in case of a dispute. It can also help to comply with the legal requirement to provide a written statement of particulars to employees within two months of starting work.

What are the best practices for drafting an employment contract?

When drafting an employment contract, it is essential to follow some best practices to ensure the contract is clear, accurate and enforceable. Some of these best practices are:

• Use plain and straightforward language that is easy to understand and avoid jargon, ambiguity and inconsistency.
• Tailor the contract to suit the specific needs and expectations of the employer and the employee and the industry and sector in which they operate.
• Include all the essential terms required by law or agreed upon by the parties, such as those mentioned above.
• Specify any discretionary or variable terms, such as bonuses, commissions or performance reviews, and how they will be determined and paid.
• Incorporate any relevant policies or procedures that apply to the employment relationship, such as health and safety, equal opportunities or data protection, by reference or attachment.
• Use clear headings and subheadings to organise the contract into sections and paragraphs, and number them for ease of reference.
• Define any key terms or abbreviations that are used in the contract, such as “the Company”, “the Employee” or “the Services”.
• Use consistent terms and tenses throughout the contract, such as “the Employer shall” or “the Employee agrees”.
• Use appropriate modal verbs to indicate the level of obligation or permission, such as “must”, “may”, or “can”.
• Use bullet points or lists to present multiple items or options concisely.
• Use annexes or schedules to provide additional details or information not essential to the main body of the contract, such as job description, salary breakdown or performance targets.
• Include a date and signature section at the end of the contract, where both parties can sign and date the contract to indicate their acceptance.

What are some common mistakes to avoid when drafting an employment contract?

When drafting an employment contract, it is also essential to avoid common mistakes that could render the contract invalid, unenforceable or unfair. Some of these mistakes are:

• Copying a template or a previous contract without checking its suitability or relevance for the current situation.
• Not updating the contract to reflect any changes in the law, the business or the employment relationship.
• Including terms that are illegal, discriminatory, or contrary to public policy, such as those that violate minimum wage, working time, or health and safety regulations.
• Including unreasonable, oppressive, or disproportionate terms, such as those that impose excessive restrictions on the employee’s freedom or rights.
• Including vague, uncertain or incomplete terms, such as those that do not specify how a term will be measured, applied or enforced.
• Including terms inconsistent or contradictory with each other or with other documents, such as policies, handbooks, or offer letters.
• Failing to obtain the consent or agreement of both parties before making any changes or amendments to the contract.

How do you enforce an employment contract?

An employment contract is enforceable by law if it meets the requirements of a valid contract, such as offer, acceptance, consideration and intention. If either party breaches any term of the agreement, they could face legal consequences, such as:

• Damages: The injured party could claim compensation for any loss or harm caused by the breach.
• Injunction: The injured party could seek a court order to stop or prevent the breach from continuing or recurring.
• Specific performance: The injured party could seek a court order to compel the breaching party to perform their obligations under the contract.
• Rescission: The injured party could seek to cancel or terminate the contract and restore the parties to their original position before the contract was made.
• Variation: The parties could agree to modify or change the contract to resolve the breach or prevent further disputes.

The type and extent of the remedy will depend on the nature and severity of the breach, as well as the terms and conditions of the contract. Therefore, it is advisable to include a dispute resolution clause in the contract that specifies how any disputes or disagreements will be handled, such as through negotiation, mediation, arbitration or litigation.

Conclusion

Employment contracts are vital documents that govern the employment relationship between employers and employees. They can also help to protect the interests and rights of both parties. However, drafting and enforcing employment contracts can be challenging, especially in light of England and Wales’s complex and evolving employment law. Therefore, it is essential to follow some best practices, avoid some common mistakes when drafting an employment contract.

I can provide employment contracts and associated policies tailored to your business for a fixed fee. Please contact me for further information.