Legal Article - Employment Law

Some Special Contractual Terms

i. Probationary Periods of Employment: If the offer of employment is made “subject to satisfactory completion of a probationary period”, which may be for three months, six months or any other period of time, the contract can be terminated at the end of the probationary period without giving rise to any legal problem providing the employer takes all reasonable steps to give adequate instructions, training and supervision during that period.

ii. Mobility clauses in Employment Contracts : A clear unambiguous written statement such as “the company reserves the right to require any member of their staff to work at any of their establishments in the UK”, or “at the discretion of the company, you may be transferred at any time during the period of your employment from one location to another” will protect the employer from redundancy claims and breach of contract claims.

The actual enforcement of the term must be done in a reasonable manner to avoid losing an unfair dismissal claim. If it is not really necessary to insert such clauses (i.e. it is not essential to the effective operation of the business) a woman may be able to make a claim of indirect sex discrimination.

iii. Moonlighting and Competition: There is an implied obligation on all employees to work loyally and faithfully for their employer during normal working hours. Thus, an employee who works either for themselves or for another during those hours, or soliciting the employer’s customers, will almost certainly be acting in breach of their contract.

There is no need for any written statement banning such work, unless the employer wishes to emphasise the employee’s obligations to themselves. However, simply indicating that they are seeking other work, even for a competitor, or giving notice to work for one, would not be a good reason for dismissal, unless there are grounds for believing that the employee was abusing their confidential position and information.

Taking a job outside working hours, however, is not in itself a breach of this implied term even where that job involves competition, unless significant harm is done to the employer’s business, or the extra work undertaken by the employee affects his/her job performance.

 It is advisable to have a written term in the contract that restrains the employee from undertaking any work for a competitor, or competing directly against the employer, for the duration of employment. The contract clause should not be unenforceable as being in unreasonable restraint of trade and therefore contrary to public policy.
Even where there is clear breach of a term of the contract of employment, before dismissal occurs the employer must act fairly (i.e. carried out a proper investigation, have reasonable grounds for believing there was a breach of contract and given the employee a chance to explain).

iv. Employee Confidentiality Agreement : There is no need for a written contract clause as there is an implied duty on all employees not to disclose to third parties their employer’s confidential information and trade secrets obtained in the course of their employment.

 A written contract clause may, however, have a strong deterrent effect and is useful if it specifies as precisely as possible what information the employer considers confidential (e.g. price to be charged for a new model of car). Information would not be confidential where it is already public knowledge, or easily obtainable from another source, or which forms part of an employee’s general “know-how” or “stock-in-trade”.

v. Restrictive Covenants in Employment Contracts: Generally, all contractual restraints on a former employee’s freedom to work where or for whom they please, are void as being in restraint of trade. If it can be shown the restraint clause is necessary to protect a legitimate interest of the employer, however, and is reasonable both in relation to the interests of both parties concerned and the interests of the public, it may be enforceable.

Forms of restraints commonly found in employment contracts are clauses relating to confidentiality, non-competition and non-solicitation of the employer’s customers. Clauses prohibiting the poaching of other employees may also be included.
Restrictive covenants should be kept as narrow and specific as is necessary to protect the company’s interests in terms of the following...

• Subject matter (e.g. a salesman specialising in selling Mercedes cars may be restricted from selling those of another company, but not from selling new cheaper cars of other makes)

• Duration (e.g. restricted for no more than one year maximum from selling Mercedes cars)

• Geographical area (e.g. if the franchise only operates in Yorkshire, a prohibition extending beyond Yorkshire would be invalid).

If the employer breaches the contract of employment of the employee concerned (i.e. wrongful dismissal by dismissing without notice or insufficient notice, or in breach of the contractual disciplinary procedure, they cannot enforce a restrictive covenant. Summary dismissal for gross misconduct would not be wrongful dismissal.

Published: 24 Mar 2011

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