Employment Series: Breaking Down the Employment Contract

Employment Series: Breaking Down the Employment Contract

Published:

Author: Jonathan Naylor

Applies to: England, Wales and Scotland

Those who review or deal with employment contracts on a regular basis will note that certain clauses seem to make an appearance in almost every contract.

Sometimes, however, we don't stop to think why such clauses are there and what purpose they serve.

This article focuses on those regular clauses (often described as boilerplate) and explains why these clauses are in the employment contract.

Why disciplinary and grievance procedures should not be contractual

Certain clauses should not be in the employment contract. While it is perfectly acceptable to include contractual provisions stating that the employee must comply with the employer's disciplinary and grievance procedure, it should be made very clear that the procedures themselves are non-contractual. Should an employer fail to make that clear (or worse, set out in the employment contract that such policies are contractual) they will face two key difficulties. Firstly, a failure by the employer to follow the grievance or disciplinary procedure to the letter might generate a breach of contract claim by the employee. Secondly, the employer would need to vary the employee's contract of employment on every occasion that it wished to make even a minor revision to the disciplinary or grievance procedures.

For these reasons, it should always be stated that the disciplinary and grievance processes are non-contractual.

Notices

In a world where communication is instant and seemingly never-ending, it can seem odd to set out precise provisions about how certain information is to be conveyed between the parties. The purpose of these clauses, however, is to remove doubt in circumstances where a party is disputing that communication has been made (or made in the correct way). As a number of employment law rights depend on often tight timescales, it is important to know exactly when a particular act occurred or a particular decision was communicated.

Entire agreement

It is crucial to establish, with certainty, the specific terms and conditions that apply to any employee. Employees may well argue for a particular benefit which is more favourable to them and which (they claim) was set out in an earlier contract concluded between the employee and the employer, or made as a promise in pre-contract negotiations with the employer.

If, for example, a previous benefit has been removed by negotiations between the employer and employee, it is vital that the employer is able to point to an up-to-date employment contract that sets out conclusively the employee's rights and entitlements. The entire agreement clause is necessary to establish that it is this agreement, and this agreement alone, which contains all the relevant terms of employment that apply to the employee.

A further aspect of these clauses is that they frequently confirm that the employee has not been induced to enter into the employment contract by some other warranty or assurance that is given outside of the employment contract itself.

Counterpart

With electronic signatures being a permissible way to demonstrate a binding contract of employment and frequent use of email or other web-based evidence of acceptance, it is now often the case that there may not been one complete, hard copy contract of employment signed by all parties in the traditional manner. Counterpart clauses make it clear that such an approach is permissible and the contract can still be valid and binding even if no one document exists which is signed by both parties.

Third party rights

These clauses permit a third party (someone who is not the employer or the employee) to be able, in some circumstances, to enforce a term of the employment contract against the employer. As the Contracts (Rights of Third Parties) Act confers no right on a third party to enforce terms against the employee themselves, it is normally in the employer's best interests to exclude the operation of the act by a clause in the employment contract.

Governing law

While an employee who is working abroad will have the benefit of certain mandatory rights in that country, in most circumstances it will be helpful to a UK-based employer to have a clause in the employment contract which specifies that the governing law will be that of England and Wales. This helps to provide clarity and certainty in respect of the law to be applied in any dispute between the parties.

Jurisdiction

Certainly for most UK-based employers, a jurisdiction clause specifying that the UK courts will have exclusive jurisdiction over any proceedings to be brought by either party will be desirable. While foreign-based employees may still seek to pursue claims in their home country, the absence of such a clause means a greater risk of a disgruntled employee seeking to pursue claims in an alternative jurisdiction, which may be less convenient for the employer.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.