Contracts of Employment – time to review

An employment contract is a legal relationship between an employer and employee and that contract of employment exists even if it is not committed to in writing. Whilst it is in the interests of both parties that the terms of the contract are written down and signed, to evidence agreement and avoid potential misunderstandings, it remains surprisingly common in employment disputes to come across situations where an employee has not received or signed a written contract of employment.

A written contract of employment will usually contain the key terms and particulars of employment and employers in Northern Ireland are under a statutory obligation to provide an employee with a written statement of particulars of employment not later than two months after the beginning of the employment.  Those particulars include key information such as the legal name of the employer, the date the employment began, the rate and timing of remuneration, place of work, hours of work, entitlements to holiday and sick pay, pension provisions, disciplinary rules and procedures as well as the length of notice which the employee is obliged to give and entitled to received in the event of termination of the contract of employment. In certain circumstances, a Tribunal can award an employee up to 4 week’s pay where the employer has failed to provide a written statement of particulars of employment.

Beyond the statutory minimum obligations, a contract of employment with related policies and procedures is essential not only in ensuring everyone understands their entitlements and obligations but also in avoiding disputes and ensuring the employer is in a position to withstand Tribunal claims, when they arise.  Reviewing existing contracts provides employers with an opportunity to best protect the interests of the organisation. Some issues to consider as part of a review:

1. Holiday Pay – the calculation of holiday pay remains in a state of flux in Northern Ireland with the potential for back pay claims stretching back to 1998. What is clear from evolving case law is that employees should be receiving holiday pay equivalent to their ‘normal remuneration’ for at least 4 weeks of their leave entitlement each year. Reviewing and clarifying the calculation of holiday pay is a must.
2. Notice Periods – consider whether the organisation may benefit from notice periods that are longer than the statutory minimum, whether the employer wishes to reserve the right to place someone on gardening leave or to require the employee to avail of any accrued but unused holidays during their notice period (to reduce or potentially avoid further holiday pay entitlements upon termination of employment).
3. Bonus Provisions – ensure that any bonus arrangements, whether stated to be discretionary or contractual, make clear that entitlement to a bonus is conditional upon the employee remaining in employment (and not under notice of termination) at the date the bonus becomes payable. Without this, employees who have left the organisation may still be entitled to a bonus, based on performance up to the date of termination – an issue that continues to take some employers by surprise.
4. Restrictive Covenants – carefully drafted post termination restrictions are critical in protecting the employer’s confidential information and business interests. To ensure enforceability, restrictions in relation to contact with clients, working for a competitor or poaching members of staff must be drafted in a proportionate way, lasting only as long as necessary to protect the legitimate interests of the organisation.
5. Disciplinary and Grievance Policies and Procedures – these are the procedures that employers are most likely to require in the event of a work-related dispute. Examples of misconduct should reflect the standards expected by the employer.  Consider the inclusion of ‘covert audio or visual recordings in the workplace’ in the cited examples of gross misconduct if the employer considers such behaviour to constitute a serious disciplinary offence. Consider whether a separate Dignity and Respect at Work policy and procedure will be used for dealing with concerns regarding bullying and harassment.
6. Equal Opportunities Policy  – a policy clearly setting out the employer’s approach to equal opportunities and the avoidance of discrimination at work is essential to the elimination of unlawful discrimination. Failure to have or properly implement such a policy may harm the employer’s chances of defending a discrimination Tribunal claim and may attract judicial criticism in a Tribunal decision, risking reputational damage to the organisation.   
7. Other key policies – other key policies include Data Protection, Whistleblowing, IT, Health and Safety as well as a Social Media Policy. They should be reviewed annually to ensure they are up to date and reflective of best practice standards.

The employment team at Worthingtons regularly provide advice and assistance to employers across Northern Ireland in the drafting and reviewing of contracts of employment and related policies and procedures.

Louise McAloon is a Partner and the Head of the Employment Department in Worthingtons Solicitors, Belfast and can be contacted on [email protected] or 028 9043 4015.