Employment Contracts

General

To a large extent, employers and employees are free to agree on the details of their relationship. Certain mandatory terms and conditions are implied by law. These conditions and rights cannot be varied by the terms of the employment contract. Terms may also be implied by custom and practice in the absence of an agreement to the contrary.

The Employment Contract is simply the terms of employment. A well-drafted Employment Contract should secure the desired objectives from the employer’s perspective. Employment Contracts may be verbal, written or implied or a mixture. Many employees have verbal or unwritten contracts but certain important terms and conditions may be incorporated with reference to statutory law, custom, practice or more commonly in recent times by reference to an Employee Handbook etc.

The terms of a contract of employment may be found in the original job advert, letters of offer or formal agreements. An oral agreement is as binding as a written agreement but its terms are more difficult to prove. Written agreements reduce later dispute over the terms of the agreement.

There is no legal requirement that an employment contract is in writing. There is an obligation on an employer to give a statement of certain terms of employment to his employees. The written statement is not necessarily the full employment contract. If there is a dispute at a later date, it can be proof of the terms and conditions of employment.

Statement of Certain Terms Required

As with any contract, the terms and conditions of an employment contract can be changed. The consent of both parties will be required. When there is a variation, the old employment contract is deemed to be terminated by notice and the new substituted contract takes effect in its place. If changes are made to the terms of employment, then a new statement of terms in writing must be given.

The written statement of the terms of employment can be a single document or can be set out in separate parts. The following must be specified:-

• The legal name of the employer company;
• the legal name of the employee;
• date of commencement of employment;
• any earlier continuous employment;
• how pay is calculated and the intervals in which it is paid;
• hours of work;
• holiday entitlements including public holidays and holiday pay;
• job title and a brief description;
• address of the employee’s place of work.

The following information must also be given within 2 months. It can be contained in other documents such as a company handbook which must either be given to the employee or be readily accessible. Where there are no details applicable under a heading, this must be specified in the statement to the employee.

• terms and conditions relating to sickness, injury and sick pay, if any;
• period of employment, i.e. whether it is a temporary or fixed contract, and if so the date on which it is to end;
• notice period required for termination. Alternatively, the relevant legislation can be referred to;
• details of any employment abroad for a period of more than one month;
• the details of collective agreements with trade unions which directly affect the terms and conditions;
• any terms in relation to pensions or access to pensions schemes;
• dismissal and disciplinary agreements procedures which must meet the statutory minimum standards. These must state the name or job title of the person whom the employee should contact in order to resolve a grievance with details as to how this application should be made. It should also state the name or title of the person whom the employee should contact if they are dissatisfied with the disciplinary decision.

Changing terms of employment

An employment contract will contain terms and conditions which were either verbally agreed or are in writing or which are incorporated by some other document such as a handbook. Certain terms may be implied by law. In some cases, terms and conditions may be set out in a collective agreement negotiated with a trade union.

A change in terms of employment effectively involves termination of the old contract and substitution of a new contract. Where a trade union is involved in negotiating a collective agreement, it is likely to require that it is party to the changes.

Regulations apply in the case of companies with more than 50 employees which entitle them to request to be informed and consulted with regard to any significant developments in the workplace. If more than 10% of employees make a valid request, a business is required to negotiate a procedure for informing and consulting with employees. Consultation can take place on a one to one basis or in the form of group meetings.

If a change of contract terms cannot be agreed, then a change imposed by the employer could involve a breach of contract. Even if the change is in accordance with a contract i.e. the terms of the contract are terminated and a new one is offered, this could amount to a constructive unfair dismissal. An Employment Tribunal claim could be made for unfair dismissal or breach of contract.

If a new contract is offered in terms such that it is not an unfair dismissal, then effectively the new contract can substitute the old contract. If a number of contracts are being terminated simultaneously the collective redundancy consultation procedures will have to be followed even if no reduction in workforces in fact planned.