4 reasons you need an employment contract review

Reason 1: To Recognise Legal Changes

If new legislation is introduced by parliament or judges make decisions which change the way in which the law is applied, there could be an impact on employment contracts. If you are using a precedent contract that you have used for many employees to date, it is a good idea to conduct an occasional review of the contract to check that it is current.

One of the most significant legislative changes in recent times has been the GDPR which has altered the way in which organisations manage their data. The Good Work Plan will require further particulars to be included in employment contracts. In case law, the decision of Harper Trust v Lesley Brazel and Unison [2017] EWCA Civ. 1402 provided guidance on how holiday pay should be calculated. Any employment contracts that specified the 12.07% method of calculation is no longer correct.

Reason 2: To Recognise Business Changes

Businesses are often growing and increasing in complexity and as they do and job titles and job descriptions may change. It is important to conduct a review to confirm that the written document actually reflects the arrangement the parties are intending to be bound by. For example, if an employee’s role initially included limited work-related travel but expanded to include frequent travel it would be wise to review any travel clauses contained within the contract. Similarly, a number of contracts include a clause that says that employees will not be expected to undertake lengthy assignments outside of the UK which may need to be reviewed.

Reason 3: To Ensure Restrictive Covenants are Enforceable

A junior employee may have a limited restrictive covenant (or no restrictive covenant at all) in their contract of employment when they start working for a business. They may have little or limited interaction with clients and suppliers of that organisation meaning a detailed clause is not necessary. However, if an employee remains with the same employer over time and is promoted to a more senior position, the restrictive covenants (or lack thereof) may no longer be appropriate.

The need to review restrictive covenants is confirmed by the case of PatSystems Holdings Ltd v Neilly. The restrictive covenant clause Neilly had entered into as a junior employee was void but would have been appropriate for a more senior role. When Neilly left the business, he had been promoted several times but had not entered into any other restrictive covenants. Despite the senior role he held when he left the business, it was held that the initial covenant remained void and unenforceable.

Reason 4: For Clarification

The contract needs to be detailed enough to provide the parties with sufficient guidance on the nature of the employment relationship. Ensuring a contract is up to date will be useful where there are situations of redundancy, restructure, and performance management which rely on the contract and job description.

(Jointly written by Aleksandra Golat, Solicitor and Claire Merritt, Partner)