Contracts

What is an employment contract?

In this short article, Birmingham employment lawyers Hatton James Legal look at what an employment contract actually means. What does it mean when it says “this contract may only be varied in writing“.

Any employment solicitor will tell you that the terms and conditions of an employment relationship consist of:

• Anything agreed between you and a manager at interview or afterwards, orally (verbally) or in emails.
• Practices common in your industry (eg that waiters get to keep or share tips).
• Practices common at your place of work (eg christmas bonuses every year).
• Things a bystander would consider obvious or without which the employment relationship wouldn’t make sense (eg a term that the parties should behave in a manner consistent with an employment relationship, which includes being civil to each other in an office situation).
• Terms implied by parliamentary statute (eg that men and women get paid equally).
• Whatever is recorded on the A4 piece of paper that is the ‘statement of terms and conditions’ or the contract of employment.

Confusion sometimes stems from the fact that “employment contract” can refer either to the A4 piece of paper in the last bullet-point above, or the totality of the terms and conditions in the whole employment relationship – that is, all the bullet-points above.

Sometimes the A4 employment contract says that the parties can’t agree further terms and conditions unless some hoops are jumped through, eg that they be recorded in writing. This is intended to stop employees from relying on oral promises made, eg about bonuses or salary increases.

The counter-argument for the employee is that when a manager made such a promise, that promise was able to override the A4 contract about salary and the part about not being able to change the terms of the contact except in writing.

Does this argument work? It is unclear because caselaw goes both ways. The latest from the court of appeal is that such a clause doesn’t stop later oral agreements, but because of a technicality in the way that precedent works (this was an off-the cuff comment that didn’t impact on the court of appeal case itself), it is not binding at the employment tribunal level, so technically such a clause is binding and an employee with such a clause in their contract can’t rely on anything later agreed unless it is writing.

The message is that if the terms and conditions change, get that confirmed in writing. Not only will this be evidence on what was agreed (in a he-said, she-said scenario), but it will also defeat an employer’s argument that the agreement was invalid because it wasn’t in writing.

It will also defeat an employer’s argument that the manager’s promise wasn’t meant to be contractual since it wasn’t written down after they had previously agreed to make changes in this way (though there may be good reasons why parties agree an oral variation, such as where the employment became long-standing and informal over time or in an urgent situation.

No pay and no unlawful deductions claim for working 29 February

Do you know that salaried employees technically don’t get paid for working today? And there is no unlawful deductions claim available!

Courtesy of Dan Moyle (flickr.com/photos/danmoyle)

Just like the extra hour when the clocks get back (see our other post) salaried workers lose out by being paid a set annual amount per year, whether it is a leap year or not. This means a twelfth of your salary, whether in short months or long ones.

Employers would argue that staff pay already takes into account the vagaries of the leap year system.

Hourly and daily rate workers of course are unaffected by the length of the month – in fact, they have the opportunity to be paid for working extra!

An unlawful deductions claim is a cheap and simple procedure available to employees who are underpaid, but sadly not employees who have to turn up to work on a leap day.

Mobile workers decision is binding on employment tribunals

An employment tribunals case involving the meaning of the Working Time Directive at the European Court of Justice (ECJ) has held that mobile workers’ travel between their homes and the premises of their first and last customers constitutes ‘working time’.

Image courtesy of AJM Studios

The rationale of the decision is that as the workers are acting ‘at the employer’s disposal’ for the time of the journeys and they can’t use that time to pursue their own interests, such journeys should count as ‘working time’. Although this case was referred by the Spanish Court, it is binding on UK employment tribunals.

Therefore, this ruling will have an impact on British employers who employ mobile workers. If the first and last journeys take an employee over the 48 hour a week limit, there will be a breach of the Working Time Directive. This could be a costly mistake for them if claims are brought in the employment tribunals.

The effect of this ruling could be a sharp rise in employers requesting mobile workers to opt out of the 48 hour Working Time Directive working week. Employers will want to ensure that mobile workers’ last assignments are closer to home or reduce their working hours.

Particular sectors that are likely effected include delivery drivers, aviation workers, sales reps and care workers.

This ruling leaves open questions for the employment tribunals. The term ‘home’ has not been defined for these purposes. For example, if the worker has more than one home, which one will count as his ‘home’ for these purposes? What if they are not going home but visiting family or friends at the end of their shift and this is further from or nearer to home? This will provide scope for negotiation for the employer until further clarification is made.

If the employer pays near to the minimum wage, this extra time could lead to breaches of the National Minimum Wage Act. Also, holiday time/pay is calculated based on working hours and employers who give the minimum holiday allowance could find themselves in breach of the Working Time Regulations and in front of the employment tribunal.

Case report: Tyco Integrated Security SL

New guidance on zero hours contracts

Acas has published some new guidance on zero hours contracts.

This is the term for casual employment agreements where an employer needs work done on an ‘ad-hoc’ basis, perhaps from a bank of people prepared to do it. Employers contact someone from the bank of workers as and when the need arises. In the contract, the number of working hours is undefined.

These contracts have attracted the reputation of helping employers to escape from their employment responsibilities as they are an alternative that is more flexible to the employer than offering overtime, annualised hours, recruiting on a fixed term basis and using agency staff.

Yet they are sensibly used when an employer has an unpredictable level of work, including:

• The initial phase of a new business
• Seasonal work (eg the Christmas rush)
• Unexpected sickness
• Special events

The guidance reminds us that employees on zero hours contract are entitled to statutory rights that include national minimum wage, paid annual leave, rest breaks and protection from discrimination.

It reminds employers that they should provide employment particulars. Job ads should convey that the number of working hours is not guaranteed and the work may cease if the demand falls.

It discourages against cancelling work arbitrarily or with insufficient notice. The contract should state under what circumstances work could be cancelled and when the employee should be told and, in the case of a cancellation, whether there would be any compensation.

Finally, the guidance reminds employers that clauses prohibiting individuals from taking up any other jobs are banned. These are called exclusivity clauses and they hit the news recently, which may have prompted this guidance.

Do you lose out on working hours when the clocks go back?

This weekend, the clocks go back an hour, giving most of us an extra hour in bed. But workers on late shifts such as bar staff and factory workers may find that this 2am change happens mid-shift. Do they have to work this extra hour under UK employment law? Time for your favourite Solihull employment solicitors to ‘chime in’.

The clock change works by winding the clock back from 2am to 1am. Your employment contract may say that you work x hours a week or that you work from y o’clock to z o’clock. Logically, if it says the latter, you’d expect that you have to work between those times and that means working the extra hour.

Here are the principles that apply in UK employment law:

• Unless your contract gives paid overtime you don’t have a right to be paid for extra time that you work, which many employees find surprising to learn.
• This doesn’t apply if you are on or near the minimum wage because you must be paid for actual time that you work, measured by a stopwatch, not by the clock.
• And there may be implications under the Working Time Regulations, which contain obligations to do with maximum night shift lengths, break entitlements and weekly hours, again measured by the stopwatch.
• Subject to that, there is no caselaw on whether you can be required to clock off at the adjusted time (working your extra hour) , so it’s up to the employer and employee to work it out.

An employer should have rules that apply fairly. We have heard of some employers that steal time by clocking staff in by one clock and clocking them out by another (that runs slower). They may try the same trick (applying inconsistent rules) for daylight saving changes. If they failed to fix this after complaints, it could possibly be a breach of the employment contract that allows employees to resign and claim unfair constructive dismissal.

But, if there is no right to paid overtime in the contract, a win is unlikely for the employee, as it could be seen as requiring unpaid overtime, which is legal. It may be unfair, but employees are not entitled to be treated fairly at work. They are entitled not to have the ‘trust and confidence’ in the employment relationship breached; underhand behaviour would do this, but an unfair policy, if overt, wouldn’t.

That assumes that the employer ‘steals’ time by having employer-friendly rules at both times of the year (spring and autumn). If it applies the same rule (stopwatch or clock-face) at both times of the year, then it’s not even unfair.

Applying the same rule is obviously best for employee relations because things will even out with time, though there will be some employees who feel hard done by if they are caught on the wrong side of the rule in successive seasons because of the way the rosters work out.

If an employee makes an issue of it by leaving after their eight hour shift (an hour early by the clock), they are likely to be disciplined with a warning or (following repeated warnings, dismissal) and this is likely to be fair.

So, the answer to the question is “yes”, employees can lose out on working hours at this time of year, but a sensible employer will apply a fair and consistent rule around clock changes and not fall foul of the regulations on working time and minimum pay.

Long-term sick employee didn’t TUPE transfer

An employment tribunal has found that an employee absent on long-term sick did not transfer under TUPE when his employer lost a contract to another company.

TUPE (Transfer of Undertakings (Protection of Employees) Regulations) is the set of rules by which employees go with the assets of a company from a seller to a buyer when a company is bought or sold, preventing unscrupulous employers from cherry-picking the best employees and leaving the rest.

Mr Edwards was employed by BT Managed Services Limited as a Field Operations Engineer. His team’s work was outsourced to Ericsson, with his team being an organised grouping of employees under TUPE.

The EAT decided that E did not form part of that organised grouping and so he stayed with his employer. He had been absent on long-term sick leave for five years and was regarded as permanently incapacitated. When his PHI scheme payments ran out BT continued to make payments to him, meaning that he stayed “on the books” as an employee.

But because there was no prospect of him returning to work and he did not contribute to the economic activity of the organised grouping, he was not “assigned” to the grouping and did not transfer under TUPE, according to the ET. The EAT has now agreed with that decision.

This is a rare, but interesting situation for employers who deal with TUPE situations, such as care homes and the security and cleaning industries.

Employment Tribunal solicitors braced for working time claims

You may have read in the news today of an EU ruling on working time that affects workers who are not office-based. Time spent travelling to and from first and last appointments by such workers should now be paid. Many employers do this already, but many do not.

This particularly affects you if you are a care worker, plumber, sales rep, or similar. If you are more akin to a professional, who occasionally go to client meetings it affects you too, although if so you are likely to be unaffected because you will be deemed to be able to choose your own working arrangements. Neither will it probably affect those who have signed a 48 hour a week opt-out of the working time regulations.

There is no impact on the national minimum wage, which calculates working time by a different set of rules.

The working time directive protects workers by setting rules on how long employees work, how many breaks they have, and how much holiday they are entitled to. It puts a ban on a working week longer than 48 hours, although UK employment law currently allows it if the employee opts out in writing.

Employers can mitigate the effects by organising work schedules to put first and last appointments close to home.

The judgment is retrospective, posing a worry about employment tribunal claims for past breaches and back-pay for some employers.

Finding for a group of security installer claimants, the European court said that if workers begin or finish the journeys far from home, it is because the employer got rid of the regional offices. The employee should not pay the price, as it is detrimental to their health.

This will have some impact for certain employers and it is another example of the trend at the EU employment law level towards improving employment law rights for employees.

Terms and conditions

We just advised an employee who was unhappy that his employer wanted to withdraw his entitlement to a company car, although he was entitled by his terms and conditions.

We advised he could resign and put in an employment tribunal claim form for air dismissal – but only because his employer had made two technical HR mistakes. Could you learn from them?

Changing terms and conditions – the right way

It is possible to change your employees’ terms and conditions, if you do it in the right way.

You could have a provision in your contract that allows you to do so. If you don’t, you could do it anyway but avoid unfair dismissal claims by having a ‘sound business reason’ (eg need to reduce costs), by consulting with staff, seeking their agreement by offering something in return. If most employees say yes to the deal, that should show it’s fair and you should win a claim for unfair dismissal when you dismiss and offer the new terms to any refuseniks, whose only option is to lodge an employment tribunal claim form at their local tribunal.

The employer in this case did have a contractual term letting it make the change but it forgot to follow the procedure in its own handbook when bringing in the change, so it couldn’t rely on that.

The other mistake it made was not to say “we’d like to reduce your salary package and if you say no, we will dismiss you and offer the new terms and conditions” but instead “we’d like to reduce your salary package and if you say no, we’ll do it anyway”.

The difference may surprise you.

The first phrase is perfectly safe to say. The second one turns out to be threatening a breach of contract which allows an employee to resign and claim constructive dismissal.

Zero-hours contracts

According to the Working Families association many on zero-hours contracts are unwilling to access existing employment rights because they often feel they do not have any right to complain of any unfair treatment they might be getting and fear that if they do assert their rights they will no longer be given the chance to work.

Also most callers to the Working Families helpline are stressed due to pay being unpredictable i.e. people are unable to predict how much they will earn in any week. Families then struggle to set a budget and suffer difficulties with planning for maternity. In some cases this may lead the worker to become stressed due to financial reasons and suffer other related side effects.

According to The Guardian, the Office for National Statistics said the number of estimated people to be employed on zero-hour contracts for their main job was 697,000.

This represents the 2.3% of all people in employment. In the same period in 2013, the figure was 1.9% of all people in employment, or 586,000.

In 2013 Vince Cable (the minister in charge of employment rights) said that zero hour contracts was actually not the problem, it was the employers who abuse them, many problems arise when companies use zero-hours contracts for most of their staff which in turn will cut their own costs and while limiting the rights that their workers are entitled to.