1.2 Advanced contractual terms


 Along with the standard contractual terms about pay, holidays, hours of work, sick pay and pension, employers may wish to consider including some more sophisticated, advanced contractual terms in their contracts.

Confidentiality

All employees are bound by an implied term of confidentiality. This includes the duty:

  • not to compete with the employer (for example, by working for a rival business) during working hours
  • Not to disclose the employer’s trade secrets to third parties or to use them for their own purposes
  • Not to entice current employees away from the employer to work with the ex-employee (“poaching”)

It is advisable to still have an explicit confidentiality clause in the contract, partly to draw employees’ attention to their obligations and partly to extend their obligations beyond the implied term. For example, although trade secrets are protected by law even after the employment has finished, other confidential information is not and so an explicit contractual term would be needed to protect this.

Restrictive Covenants

A restrictive covenant seeks to control the employee’s behaviour after the employment has been terminated. It usually aims to prevent the employee from working for a competitor within a certain geographical radius of his former employer or from taking clients’ details and conducting business with them.

Although it may be tempting to draft the clause in a way which is very restrictive on the employee, this is not a good idea. Restrictive covenants are only enforceable if they are no more restrictive than necessary to protect legitimate business interests, otherwise they are void on the grounds that they are a restraint of trade.

It can be difficult to strike a balance between sufficiently protecting a business and not drafting a clause so wide that it becomes unenforceable. Factors to be considered are how confidential the information is, how specialist the business is, how senior the employee is, and what is standard within the industry. It is best to seek specialist advice on this topic.

If an employee breaches a restrictive covenant, an employer would usually write to them and their new employer (if relevant) pointing out that they are in breach of their contract. If this does not work, an employer may apply to court for an injunction (to force the employee to hand over all confidential information) and damages (money to compensate them for any financial loss incurred by the employee’s actions). However, such actions can be expensive and difficult to enforce so having a well-drafted clause can save a lot of time and hassle.

Garden leave

An employee who is taking garden leave is excluded from the workplace during a notice period but still receives all of her usual salary and benefits. She is still technically employed so is unable to work for anyone else during this time. This is advantageous to employers because it greatly reduces the risk of employees who have been dismissed or resigned taking confidential information or maliciously causing damage to the company’s reputation.

There is no implied right to put an employee on garden leave and so it will only be possible if an express term is included in the contract. The length of the period of garden leave must be reasonable or it will be unenforceable.

Intellectual property

Employers may wish to make sure that if an employee invents something or makes a scientific or technical discovery during the course of their employment, the rights belong to the employer. Although there is a legal presumption in the UK that this would be the case, without an express clause, the employee would have more rights; for example to be named as the inventor and to object to changes being made to the design.

Clawback

It is common to see a clause in a contract which states that if an employee leaves employment having taken more holiday than he has accrued, a deduction will be made from his final salary to cover the cost of these holidays. Employers may wish to go one step further and build in a provision for the repayment of training costs. In order to be fair, the amount which the employee is required to pay back should decrease as the amount of time since the training happened increases. For example, an employee may be required to pay back 100% of the training costs if he leaves employment before completing the training course, 50% if he leaves 6 months later and 0% if he leaves after a year.

Suspension

During disciplinary proceedings, employers may sometimes wish to suspend employees (who must be on full pay during suspension) either because their misconduct has been so serious that the employer feels that they should no longer be in the workplace, or because their presence there may prejudice the investigation being carried out. There is no implied right to suspend employees, so employers should write this into their contracts.

Lay off and short-time working

If a lay off and short time working clause is included in a contract, for times when work is temporarily scarce, employers can require employees to not work at all on some days or work shorter hours than usual. The employer will only have to pay them statutory payments when laid off (currently £26.00 a day for 5 days in any 3-month period) or for the hours they actually work when on short-time working. This situation can not go on indefinitely but it can save employers money at times of financial difficulty and avoid redundancies.

Requirement to hold a certain qualification

If a driving licence, professional qualification (such as a solicitor’s practising certificate) or a clean criminal record is essential for a job, it is advisable to state in the contract that the employee may be dismissed if this lapses.

For more help on creating a contract of employment which is tailor-made to your specific needs, please contact info@p4b-law.co.uk

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