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Category: Contracts

New case – holiday pay on termination

If an employee hasn’t taken all of their holiday at the point they leave you, they’re entitled to be paid in lieu of that untaken holiday. But what if there’s a clause in their contract that says they lose it all?

A recent Employment Appeal Tribunal decision (EAT) has confirmed that employees must receive at least their statutory minimum holiday entitlement up to the point they leave, or payment in lieu of that leave. 

Background 

In this case, the employee brought a successful claim for unlawful deduction from wages. The employee’s contract allowed the employer to calculate payment in lieu of holiday on termination at a lower rate than had they taken the holiday whilst they were working.

Despite this, the EAT said this practice was unlawful as it allowed the employer to pay less than the statutory minimum holiday (5.6 weeks per year) to which the employee was entitled.

Practical takeaway 

The Working Time Regulations allow a ‘relevant agreement’ between employee and employer (such as an employment contract) to set out how payment for any accrued untaken holiday will be calculated on termination. However, this case makes clear that any such contractual provision must ensure that the employee is entitled to at least statutory minimum holiday in the holiday year they depart (whether taken or paid in lieu).

The key takeaway from this case is to ensure that your employment contracts don’t go further than this. You’re entitled to say that employees don’t receive payment in lieu of any enhanced holiday on termination, but employees must still receive that all-important statutory minimum holiday.

Contact me here if you need our support to review your contracts or any ‘relevant agreements’. We’ll ensure they’re in line with this decision in order to help you avoid similar claims for unlawful deductions from wages. 

This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Posted On: July 3rd, 2023By |

Limiting non-compete clauses to three months

The government has announced their intention to introduce legislation that will limit the duration of non-compete clauses in employment contracts to just three months.

What does this mean for your existing non-compete clauses and post-termination restrictions (PTRs)? Here’s what you need to know:

Only non-compete clauses – the proposals will not affect your ability to use other PTRs (such as non-solicitation or non-poaching clauses), garden leave periods, or confidentiality provisions. It’s only going to be non-competes that are time-limited to three months.

Existing clauses – we don’t know if the three-month limit will apply retrospectively to non-competes in existing contracts (effectively cutting short any longer clauses by default), or whether the limit will only apply to contracts entered into after the legislation comes into force.

Restrictions in other documents – the announcement only refers to non-competes in “employment contracts”. We’ll need to wait for further detail on the legislation to know whether you’ll be able to use longer non-competes in other documents such as shareholder or settlement agreements.

Test for enforceability – irrespective of the proposed time limit, non-competes will still only be enforceable if they go no further than necessary to protect your legitimate business interests. They’ll still need careful drafting!

Timescales – legislation will be introduced “when parliamentary time allows”. We’ll update you when we know more and when the legislation will be introduced.

I always advise clients to review their PTRs annually. Your business and individuals’ roles change frequently so your PTRs need to keep pace. Get in touch to discuss how we can support you to ensure your PTRs keep up with business interests and remain enforceable. 

This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Posted On: June 15th, 2023By |

Employment contracts and the ‘3Cs’ – pt.4 | Contemporary

Did you know, fewer than 20% of employees actually read their employment contract before signing? That’s staggeringly low for such an important document, and why our last ‘C’, contemporary, is key to boosting engagement. 

Here are my top tips for creating contracts that are engaging, practical…and actually read:

Stop writing in the third person swapping ‘the Company’ for ‘we/us’ immediately creates a connection with your audience and creates a more personal, interesting and engaging read.

Cut out the jargon – if your reader is having to wade through little understood terminology you’re losing their attention, fast! Employment contracts should be user-friendly and easy to understand throughout.

Intuitive layout – create a ‘start, middle and end’ that corresponds with the employment journey to make it easier to navigate and find relevant detail.

Keep it simple – don’t worry about catering for every eventuality. From a legal perspective that can be unhelpful and means the length of the document will in itself switch off the reader.

Contact me here if you’d like to discuss how we can help you create more contemporary contracts. You can also use our free, self-service health check tool to see whether your employment contracts are fighting fit!

This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Posted On: May 25th, 2023By |

Employment contracts and the ‘3Cs’ – pt.3 | Commerciality – avoiding unnecessary costs

This is the second part of what ‘commerciality’ means for your employment contracts. You don’t need to include these provisions, but in doing so you’re giving yourself the potential opportunity to avoid unnecessary costs for your business.

Here are my top three ‘quick wins’ to help save some cash within your contracts:

Holidays departing employees often lose their ‘mojo’ during their notice period – it’s human nature. By requiring them to take accrued unused holiday during their notice period, you save on paying them a lump sum in lieu of untaken holiday when they leave.

PILON – payment in lieu of notice clauses are important, but costly. You’re paying a lump sum for someone to avoid working for you! How can you minimise the cost of PILONs? You can stagger payments and require departing employees to start their job search immediately, and then to tell you when they’ve found a new job. If you add in that they must start their new job as soon as an offer is received, you can potentially end notice pay at that point (provided you’ve paid at least the statutory minimum).

Probationary periods – save unnecessary admin and cost by commencing pension contributions once the employee has successfully completed the first three months of employment. You can also limit notice periods during probation – that way, if you feel that the individual doesn’t have the skills for the role, or simply just doesn’t ‘get it’, you can limit notice costs during this period.

Contact me here if you’d like to discuss how we can help you to ensure your contracts are avoiding unnecessary costs for your business. You can also use our free, self-service health check tool to see whether your employment contracts are fighting fit!

This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Posted On: May 25th, 2023By |

Employment contracts and the ‘3Cs’ – pt.2 | Protecting business interests

What do we mean when talking about ‘commerciality’ in employment contracts? Well, it’s all the stuff that you don’t need to include but can choose to add in order to protect your business interests and what matters most to you. 

There’s loads I could go into but my top tips would be:

Reflect reality – what’s important to your business will change over time. If you don’t think about updating your employment contracts as your business evolves, their value and effectiveness will dilute over time.

Protecting know-how – think about what makes your business unique. Your proposals, pitches, products, pricing…I could go on! They’re all capable of being protected, but you need to call them out in your contracts! Otherwise, they’re often fair game to departing employees.

Post-termination restrictions – “they’re not enforceable!”…if I had a pound for every time I’ve heard that! They’re definitely easy to get wrong, but are enforceable when drafted appropriately. Restrictions that aren’t specific or drafted tightly enough are highly unlikely to be upheld. You need to make sure the terms of the restrictions don’t go further than necessary to protect your legitimate business interests – stating an employee can’t ever work for a key competitor isn’t going to work unfortunately!

Contact me here if you’d like to discuss how we can help you to ensure you’re protecting what matters most to your business. You can also use our free, self-service health check tool to see whether your employment contracts are fighting fit!

This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Posted On: May 24th, 2023By |