Reviewing and Changing Contracts of Employment

1 CREATING THE CONTRACT OF EMPLOYMENT 1ANNELISE TRACY PHILLIPS Introduction...2 Offer ...2 Invitation to treat ...3 Acceptance ...3 Withdrawal of offer ...4 Consideration...5 Intention t

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Annelise Tracy Phillips

Annelise Tracy Phillips is a Partner in the HR Group at Eversheds She practices

in all aspects of employment law, including strategic issues such as managingchange and large-scale restructuring Particular areas of expertise include discrim-ination law and cross border change management/executive terminations.Annelise lectures for the CIPD and is the co-author of published works on topics

as diverse as working time, family friendly working, employment tribunals andrace discrimination

Paula Rome

Paula Rome is a member of the Eversheds HR Training and Development Teamand is involved in providing training for clients on legal and HR issues includingequal opportunities, bullying and performance management as well as writingand presenting lectures on the training and development public programme.Paula has also developed and provided training programmes for clients on equalopportunities, avoiding harassment, performance management and absencemanagement, as well as participating in pan-European training sessions for inter-national clients

Thomas Player

Thomas Player is a Partner in the Human Resources Team at Eversheds He has

a particular interest in industrial relations and collective bargaining He is anexperienced labour and employment lawyer He has experience on complex re-organisational issues and collective redundancies He has drafted collectiveagreements and has experience of industrial action, balloting and trade unionrecognition issues He has a particular interest in the working time regulations

Tracy Luke

Tracy Luke is an HR and Employment law trainer with Eversheds

Tracy initially worked for the Department of Trade and Industry (within the tics Division and the Insolvency Service) for six years before her departure tocommence studies for her Law Degree She qualified in 1995 and practised foreight years as a solicitor

Statis-Tracy currently delivers training to a range of different organisations – fromFTSE 100 companies to police forces and housing associations She has alsodelivered training on a pro bono basis to charitable organisations

1 CREATING THE CONTRACT OF EMPLOYMENT 1

ANNELISE TRACY PHILLIPS

Introduction 2

Offer 2

Invitation to treat 3

Acceptance 3

Withdrawal of offer 4

Consideration 5

Intention to create legal relations 5

Statement of main terms and conditions 5

Contents of the written statement 6

The terms of the contract of employment 8

2 REVIEWING AND CHANGING THE CONTRACT OF EMPLOYMENT 21 PAULA ROME, UPDATED BY TRACY LUKE Handbook of policies and procedures 22

Legal status of the handbook 22

Maintaining flexibility 23

Common content of the handbook 26

HR Policies – Key Policies and Procedures 30

HR Policies – Non-Key Policies 40

Legal enforceability 47

Incorporation of collectively bargained terms into individual contracts .48

Express incorporation 49

Implied incorporation 51

Incorporation by way of agency 51

Provisions restricting rights to take industrial action 52

Trade union recognition 53

Schedule A1 54

Drafting of collective agreements 61

4 PRACTICAL DRAFTING CONSIDERATIONS 68 TOM PLAYER Introduction 69

Hours of work 71

Role and responsibilities 71

Building flexibility into contracts 72

Express flexibility clauses 72

Place of work 73

Deductions – protection of wages 75

Right to search 77

Employee benefits 77

Working time 79

Enforcement of the Regulations 82

Competition whilst still employed 85

Post termination restrictions – restrictive covenants 89

Enforcement 93

The effect of wrongful and constructive dismissal 95

6 CHANGING THE CONTRACT 98 ANNELISE TRACY PHILLIPS Introduction 99

Consent between the parties 99

Union agreement 99

Legal remedies 102

Deductions in wages claims 104

Unfair dismissal 104

Remedies for unfair dismissal 106

Discrimination claims 107

Imposing the change 107

The pressing business need 108

Collective consultation 110

With whom should you consult? 111

Employee representatives 111

Notice 113

Summary 115

What is industrial action? 117

Definition of a ‘trade dispute’ 118

The rules on ballots and notification 119

Information to be contained in notices 119

Sample voting paper 120

Type of ballot 121

Industrial action notices 122

Commencement of industrial action 123

Planning for industrial action 123

Temporary labour 124

Industrial action and the statutory right to claim ‘unfair dismissal’ 124

The strike 126

Picketing 127

SUMMARY 128

Chapter 1

Creating the contract of employment

Annelise Tracy Phillips

Introduction 2

Offer 2

Invitation to treat 3

Acceptance 3

Withdrawal of offer 4

Consideration 5

Intention to create legal relations 5

Statement of main terms and conditions 5

Contents of the written statement 6

The terms of the contract of employment 8

Introduction

Technically, a contract of employment does not need to be a written document

It can be wholly oral (subject to the statutory obligation to provide written ulars discussed below) Given the difficulties of interpreting oral agreementsafter some time has passed it is clearly advisable for the written version of thecontract to be agreed between the parties and retained for future reference

partic-A binding contract of any kind must contain the following elements:

is subject to the receipt of satisfactory references and the employee accepts theoffer, the contract will not be complete and binding until all the conditions arefulfilled

An issue which regularly arises is what constitutes a satisfactory reference

In Wishart -v- National Association of Citizens Advice Bureaus Limited [1990] IRLR

393, Mr Wishart was offered employment subject to satisfactory references His

references disclosed significant sickness absence in his former employment Thejob offer was withdrawn and Mr Wishart sued

The question before the Court of Appeal was what constituted a satisfactoryreference In particular whether the test is objective or subjective That is, doesthe reference have to be satisfactory to a reasonable employer or to that partic-ular employer who may have significantly higher or lower standards?

The Court of Appeal decided the case on a different point but held, obiter (that

is as a matter of guidance rather than by binding precedent), that the use of

‘satisfactory’ in this context meant that an employer is reserving the right tomake up its own mind as to whether the references are satisfactory as opposed

to setting an objective condition

Advertisements do not constitute offers capable of acceptance but merely tions to make applications It is when a formal offer of employment is made that

invita-an acceptinvita-ance becomes possible

The counter offer operates to terminate the original offer If the candidate purports

to accept a varied offer, and this counter offer is rejected by the employer, thenthe candidate can no longer go back and accept the original offer unless it isre-made

Withdrawal of offer

A common problem area arises when an offer made in error is accepted by thecandidate Offers may be withdrawn at any time before they are accepted even

if they have been stated to be valid for a specific period of time and that period

of time has not yet expired Withdrawal of an offer is valid when it is nicated Acceptance is valid when it reaches the offeree with one exception, that

commu-is when it commu-is posted Postal acceptance occurs when it commu-is posted rather than when

it is received

This means that if an offer is withdrawn by letter and the acceptance is postedbefore the withdrawal is received, a binding contract will have been createdbetween the parties

In Sarker -v- South Tees Acute Hospitals NHS Trust [1997] IRLR 328 a binding

contract was created but was terminated before Mr Sarker started work

The Employment Appeal Tribunal held that the fact that the contract was set tostart at a later date did not mean that termination did not require notice in accor-dance with the contract which had created the binding agreement

An individual who claims breach of contract and succeeds is entitled to damages

to compensate him/her for the losses they have suffered The measure of damagesamounts to the sum the individual would have recovered had the contract beenproperly performed

Normally this would amount to compensation for the proportion of the noticeperiod during which the contract would have been live, and salary and benefitswould have been paid

The termination of the contract is a dismissal for the purposes of the

Employ-ment Rights Act 1996 and if the reason for it is one of the automatically unfair

reasons set out, e.g pregnancy, then, because there is no applicable qualifyingperiod of employment for the automatically unfair categories, a claim for unfairdismissal can be made

in terms of the consideration which passes to the employer, this is usually said

to be the benefit of work done

Intention to create legal relations

Without intention to create legal relations, contractual obligations cannot havelegal effect In situations therefore where benefits are stated to be discretionary,the parties are making it clear that there is no intention to create legal relationsand therefore they do not intend to be bound by the obligation to provide thebenefit

In the terms of the exercise of the discretion and the potential breach of trustand confidence see later (Chapter 4)

Statement of main terms and conditions

The law does not require a contract of employment to be in writing and, duringthe first two months of employment, there is no duty on the employer to provideany additional information as to the terms of the candidate’s employment

However, Section 1 of the Employment Rights Act 1996 (‘ERA’) requires that the

employee must be given a statement of the main terms and conditions of hisemployment not later than two months from the beginning of the employment(see below)

If an employer fails to provide written particulars and a claim is tagged on toanother claim, for example for unfair dismissal, an employee’s award can beincreased by between two and four weeks’ pay subject to the statutorymaximum of a week’s pay, currently £270 per week

Technically the statement is not a contract, although it is very strong evidence

of what the terms of the contract are By contrast, a document which is drawn

up as a contract of employment will provide direct evidence of what the terms

of contract are

Contents of the written statement

The statement may be given in instalments during the two month period although

certain particulars must be included in a single document known as the Principal

Statement These are as follows:

• The name of the employer and employee; and

• the date when the employment began; and

• the date on which the employee’s period of continuous employmentbegan (taking into account any employment with a previous employer– for example, where the business has been taken over – which countstowards that period)

The statement must also contain details of the following particulars of ment which are applicable as at a date no more than seven days before the datethat the statement is given to the employee:

employ-• Scale of remuneration, or the method of calculating the remuneration;

• the intervals at which the remuneration is paid (i.e weekly, monthly

• either the place of work or an indication that the employee is required

to work at various places, and the address of the employer

The remaining details which can be provided in instalments are terms and tions relating to:

condi-• Incapacity for work due to sickness or injury, including any provisionfor sick pay;

• terms and conditions relating to pension schemes and confirmation

as to whether or not a contracting out certificate is in force (a certificatemay be issued where an occupational pension scheme exists);

• the length of notice which the employee is obliged to give and is entitled

to receive to terminate the contract of employment There are statutoryminimum notice periods which apply to all employees employed forone month or more; these are as follows:

• where the employment is not permanent, the period for which it isexpected to continue or, for a fixed term, on which it is to end;

• the particulars of any collective agreement which directly affects termsand conditions including the persons by whom they were made wherethe employer is not a party;

• where the person is required to work outside the UK for more thanone month, the period for which he or she is to do so, the currency

in which the salary will be paid, any additional remuneration or benefitsand any terms and conditions relating to his or her return to the UK;

• the statement must include a note specifying any procedure applicable

to the taking of disciplinary decisions relating to the employee or to

a decision to dismiss the employee or refer them to the provisions of

a reasonably accessible document which specifies such rules It is useful

if the note specifically stipulates that the disciplinary procedure is not

1 week (from employer)

2 weeks (from employer)3-12 weeks (from employer onthe basis of one week per year

a term of the employee’s contract This is an important considerationfor employers as a result of recent cases in the Tribunals which haveheld that in certain circumstances, employees would be able to claimdamages for breach of contract when a disciplinary procedurewhich formed part of the employers contract was not followed (seelater).

The terms of the contract of employment

The parties to the contract may agree (subject to some specific exceptions) anyterms they wish The terms of the contract may be written or oral, express orimplied

Express terms

These are the terms which the parties have specifically discussed or agreed eitherorally or in writing They may also be terms which have been agreed by refer-ence to collective documents accepted by the parties (see below) It is thus notnecessary for all express terms of the contract to be contained in a single writtencontract

Incorporated terms

Contract terms may become part of the contract of employment by tion where the contract expressly states that it is subject to the terms andconditions of another relevant source, such as a collective agreement, work rules

incorpora-or the staff handbook Incincorpora-orpincorpora-oration may also be implied by custom incorpora-or pastpractice in the industry Once a term contained in a collective agreement is incor-porated into the contract, then it applies to all employees despite the fact that

a particular employee does not approve of what has been agreed (Tocher

-v-General Motors (Scotland) Ltd 1990 IRLR 478) and whether or not he is a member

of the trade union

Collective agreements

Collective agreements are generally made between employers and trade unionsand are not normally legally binding When the union negotiates on behalf ofits members, it is acting as a principal and not an agent Terms may, however,become incorporated into individual contracts of employment if agreed

A collective agreement is defined in Section 178 of the Trade Union and Labour

Relations (Consolidation) Act 1992 (TULRCA) as ‘an agreement or arrangement

made by or on behalf of one or more trade unions and one or more employers

or employers associations which relates to one or more of the items listed inSection 178 (2)’ These are: terms and conditions of employment and conditions

of work, hiring, firing and suspension, allocation of work or the duties of ment between employees, discipline, union membership, union recognition,facilities agreements, procedures and the other machinery of collectivebargaining

employ-Therefore, even though a collective agreement may not be enforceable betweenthe collective parties (the employer and the union), it may still be enforceablebetween the individual parties (the employer and the employees) This is the caseeven where the collective agreement expressly states that it is binding in honour

only (Marley -v- Forward Trust Group Ltd (1986) IRLR, 1986 ICR 891, CA).

Not all terms will be incorporated into the contract of employment, only thosewhich are appropriate Those which are essentially collective in nature will not

be classed as appropriate Terms relating to pay, hours, holidays etc will be priate as opposed to those relating to conciliation schemes

appro-In National Coal Board -v- National Union of Mineworkers (1986) IRLR 439 (1986)

ICR 736, the judge decided a collective dispute procedure was not contractually

incorporated In cases of ambiguity, the courts look to the intentions of the parties

to the collective agreement (Adams -v- British Airways plc (1995) IRLR 577).

Staff handbooks

In the same way as collective agreements, staff handbooks may be incorporatedexpressly into the contract of employment by reference Furthermore, wherethe court can reasonably infer from the circumstances of the case that the partiesmust have intended works rules to have contractual force, then they will be incor-

porated For example, in Petrie -v- Mac Fisheries Limited 1940 1KB 258, a notice

about sick pay posted on the factory notice board had contractual effect

If the principal contract does not expressly incorporate the collective agreement

or staff handbook, then the court will look to see whether the employee hasacknowledged the binding effect of the documents For example, if they weresigned by the employee then obviously this may be evidence of the parties inten-tion to incorporate the terms as terms of the employee’s contract of employment

If there is no signature, then the Court will determine whether the employeewas put on notice of such terms and then assess how widely known and acceptedthey are If the terms are generally well known to the employee they may well

be incorporated into the individual’s contract of employment

• By conduct

• By custom and practice – which must be reasonable, certain andnotorious

• For the purposes of business efficacy (Scally v Southern Health and

Social Services Board (1991) ICR 771)

• By the officious bystander objective test

by conduct (see Aparau -v- Iceland Frozen Foods Plc (1996) IRLR 119, EAT).

One area of concern for employers is at what point a practice within the businessbecomes a contractual right of the employee

In the case of Quinn -v- Calder Industrial Materials Limited [1996] IRLR 126, this

very point was considered In that case the employers had issued policy documentswith guidelines on enhanced redundancy payments Over the years the terms

of the policy became generally known and it was used on four separate occasions.When the applicant was dismissed by reason of redundancy, he brought a claimfor breach of contract because his employer had not made any payment in respect

of enhanced redundancy entitlements under the policy

The Employment Appeal Tribunal held that the key factors in deciding whether

an enhanced scheme has become a contractual right are:

• whether and how the policy has been drawn to the attention of theemployees

• whether it has been followed without exception for a substantial period

In particular the Employment Appeal Tribunal considered whether theEmployers had communicated the policy to the employees in a manner thatsupported an inference that the employer intended to be contractually bound

by it

IMPLIED BY CUSTOM AND PRACTICE

If it can be shown that a term is regularly adopted in the employer’s particulartrade or business the court may decide that such a term has been implied bycustom Before the court will allow such a term to exist, it must be ‘reasonable,

certain and notorious’ (Bond -v- CAV Ltd (1983) IRLR 360) This has been upheld more recently by the EAT in Henry -v- London General Transport Services Ltd

([2001] IRLR 132 EAT)

The word ‘reasonable’ has been held to mean ‘fair’ (Devonald -v- Rosser & Sons

(1906) 2KB 728) and ‘certain and notorious’ are interpreted as precise and

well-known Once a custom is established, it is not necessary that an employee seeking

to rely on the custom knew of its existence

IMPLIED TO GIVE BUSINESS EFFICACY

In the case of Liverpool City Council -v- Irwin (1997) AC 239 the court held that

a term will be implied into a contract if it is ‘necessary’ to give the contract businessefficacy In other words, the term is necessary to make the contract workable.Examples of such terms quite often relate to mobility For example, an employerwho employs an HGV driver with no express term requiring him to begin hisjourney at any one of the employers sites, may imply a term into the contract

to the effect that the driver must begin his journey from any of the employer’ssites that the employer stipulates depending on the journey the driver is likely

to make

The courts justify interpreting the contract in such a way by claiming that theparties must have intended the contract to work properly, and it can only becapable of working properly by implying such a term In this way, the courtscan take quite an active role in interpreting the contract It is, therefore, best

practice to express the terms which are agreed In Janes Solicitors -v- Lamb

Simpson 26.6.95 (EAT 323/94 unreported) the Employment Appeal Tribunal

implied a term allowing an employee to be paid in lieu of holiday entitlementaccrued, but not taken

IMPLIED BY THE OFFICIOUS BYSTANDER TEST

This is an objective test which was first referred to in the case of Shirlaw

-v-Southern Foundries (1926) Ltd (1936) 2KB 206 Essentially, the court will imply

a term to exist where the term is ‘so obvious that the parties must have intended

it to apply’ The court supposes that if at the time the agreement was reached,

an ‘officious bystander’ were to suggest some express provision in the contract,the parties would both say ‘oh, of course that should be included’

IMPLIED AS A CHARACTERISTIC TERM OF THE RELATIONSHIP

Under the common law, certain rights and obligations are characteristic of therelationship of master and servant On this basis, many terms may be held toexist unless they are modified by expressly agreed arrangements, for example,the employer’s duty to pay wages and take reasonable care of employee’s safetyand the employee’s duties of fidelity and obedience

Employee’s implied duties

of official strike action)

TO SERVE HIS EMPLOYER FAITHFULLY AND NOT ACT AGAINST HIS INTEREST

A term is implied into every contract of employment to the effect that an employeemay not set up a rival business during the period of employment without expresspermission However, preparation to set up a competing business after employ-

ment is not necessarily a breach of contract (Adamson -v- B and L Cleaning Services

(1995) IRLR 193) Nonetheless, the submission of a tender for future business to

a customer is unlawful competition, even if the employee was prepared to givecontractual notice expiring before work was due to start It will also be a breach

of contract to attempt to persuade customers to transfer their business when

the employee leaves (Wessex Dairies Ltd -v- Smith (1935) 2KB80)

A term is implied into every employment agreement that the employee promises

he is reasonably competent to do the job Incompetence is therefore a breach

of contract (Harmer -v- Cornelius (1858) 5CBNS 236)

CARE

The employee impliedly promises to take reasonable care in the performance

of his duties (Lister -v- Romford Ice & Cold Storage Co Ltd [1957] AC555).

Honesty – the employee must be honest in the execution of the service but he

does not have to disclose his own acts of dishonesty (Bell -v- Lever Brothers 1983

ICR 801 AC) Senior employers who are under enhanced fiduciary duties may

have this obligation

NOT TO MAKE SECRET PROFITS

An employee must not make a secret profit or take bribes He may be compelled

to account to his employer for the secret profit or bribe (Boston Deep Sea Fishing

& Ice Co -v- Ansell (1888) 39 Ch D 229)

CONFIDENTIALITY AND TRADE SECRETS

Inventions and discoveries made during the course of employment, belong to

the employer in the absence of any agreement to the contrary.(British Syphon

Company Ltd -v- Homewood (1956) 2 All ER 897)

A breach of confidence is an independent equitable wrong irrespective of the

employment relationship (Faccenda Chicken Ltd -v- Fowler (1984) IRLR 61),

however, the duty of confidence is greater during the duration of the ment contract Current employees are under an implied obligation not to use

employ-or disclose confidential infemploy-ormation Femploy-ormer employees are required only to keeptrade secrets confidential, that is, information so highly confidential it requiresthe same protection as a trade secret

In Faccenda Chicken, the Court of Appeal set out the test for a trade secret.

• What is the nature of the employment? Does the employee regularlyhandle confidential information? If so, the duty of confidentiality isgreater

• What is the nature of the information and is there a need for it to beprotected?

• Did the employer impress upon the employee that the information wasconfidential?

• Can that information be easily identified and separated from informationwhich the employee is free to use?

The duty of confidentiality is, in principle, unlimited, however it ends when theinformation loses its confidential nature, for example, where it becomes publicknowledge or outdated

Employer’s implied duties

DUTY TO PROVIDE WORK

In some cases it may be argued that, as long as the employee is fully ated, he/she can be kept idle However, if an employee is paid by commission

remuner-or is a piece wremuner-orker, remuner-or if his skills would atrophy through lack of use, there is

an implied duty to provide work In Langston -v- Amalgamated Union of

Engineering Workers (1974) ICR 180, the Court of Appeal indicated that a skilled

worker has a right to have the opportunity to exercise his skill

In the case of William Hill Organisation Ltd -v- Tucker (1998) IRLR 313 the Court

of Appeal held that there may be an implied obligation upon the employer toprovide work to an employee during the employee’s notice period, where theemployee’s skills require frequent exercise In this case the Court of Appeal refused

to enforce a garden leave injunction against a senior dealer

DUTY TO INDEMNIFY

To indemnify in respect of costs, claims and expenses which arise through thecarrying out of duties

DUTY OF MUTUAL TRUST AND CONFIDENCE

There is a duty of mutual trust and confidence owed by the employer and the employee to each other

The following are examples of breaches of this term:

• being accused, without reasonable cause, of theft (Robinson

-v-Crompton Parkinson Ltd (1978) IRLR 61);

• exercising an express clause in such a way as to render performance

of the contract impossible (United Bank -v- Akhtar (1989) IRLR 507);

• In Aspden -v- Webbs Poultry & Meat Group (Holdings) Limited [1996]

IRLR 521 the Court held that the employer was under an implied duty

not to terminate the employee’s contract of employment if, in thecircumstances, this would result in the employee ceasing to be entitled

to payment under a permanent health insurance scheme The employercan still dismiss a sick employee in these circumstances if dismissal is

on the grounds of gross misconduct or on grounds of redundancy (Hill

-v- General Accident Fire & Life Assurance Corporation [1998] IRLR 641.

• If dismissal is due to an employee’s fundamental breach of contract,for example failure to comply with the necessary internal policies, then

it will not be a breach of trust and confidence to do so Briscoe -v- Lubrizol

Limited, Court of Appeal 2002 EWCA CIV 508.

References

The employer is under no implied duty to provide a reference to employees but

if he or she does then there is a duty of care to the employee about whom they

write to take reasonable care in the preparation of a reference (Spring -v- Guardian

Assurance plc & Others [1994] IRLR 460).

Honest business

In Malick -v- BCCI [1997] 3 IRLR 1, the House of Lords established that claims

for stigma damages could be brought on the basis that the BCCI’s conduct was

in breach of the implied term not to damage the relationship of trust and dence Therefore if the employees can demonstrate that they had a measurablyincreased risk of unemployment attributable to the stigma of having workedfor a previous employer, and from which an inference of loss could be drawn

confi-on the basis of a lost chance, then they were entitled to recover in breach ofcontract

Not to suspend an employee without reasonable cause

In the case of Gogay -v- Hertfordshire County Council IRLR 2000 the High Court

held that the decision of Hertfordshire County Council to suspend a tial care worker, after one of the children made allegations of abuse, was in breach

residen-of contract The allegations against Miss Gogay were unfounded and she wasreinstated quickly, however she had suffered depression in the meantime andnever returned to work

The Court of Appeal held that the decision to suspend was a knee jerk reactionand other options could have been considered In the circumstances there was

a breach of contract

Equal pay

The Equal Pay Act 1970 applies to men and women and deems an equality clause

to be included into contracts of employment The equality clause then modifiesthe woman’s contract so that whenever she is engaged on like work, (work-related

as equivalent or work of equal value to a man), she is entitled to equal pay withthat man unless the employer can establish that the difference between thewoman’s and the man’s contract is genuinely due to a material factor which isnot the difference of sex

Where the equality clause is implied into a woman’s contract of employmentthen it modifies that contract to include any beneficial term contained in the man’scontract which is not so contained in the woman’s If any term of the woman’scontract becomes less favourable than that contained in the man’s contract thenthe woman’s contract is again modified

The Employment Quality (Religion or Belief Regulations) 2003, the EmploymentEquality (Sexual Orientation) Regulations 2003, the Sex Discrimination Act 1995and the Race Relations Act 1976 prohibit discrimination in terms and condi-tions of employment on the grounds of:

• Religion or belief

• Gender

• Sex or marital status (including pregnancy)

• Race, ethnic, national origins, nationality and colour

• Sexuality

Employers must also be aware of the possibility of indirect discrimination in termsand conditions where a provision, criteria or practice is applied generally but

puts people at a particular disadvantage and that cannot be shown to be aproportionate means of achieving a legitimate aims Examples include therequirement to work on particular days, e.g Friday’s or to work full-time.

The Disability Discrimination Act 1995 prohibits discrimination in relation tothe terms and conditions offered to disabled people unless their less favourabletreatment can be justified by a reason which is material to the circumstances

of the particular case and substantial

Where terms in an employee’s contract of employment are discriminatory thensuch terms are void where:

• Their inclusion renders the contract unlawful;

• they are included in furtherance of an act rendered unlawful by theAct;

• they provide for the doing of an act which would be rendered unlawful

by the Act

If there is a term contained in the contract of employment which results in unlawfuldiscrimination against a party, then that term is not void but is unenforceableagainst that party so that where an employee fails to comply with a discrimi-natory term contained in his or her contract of employment the employer willnot be entitled to sue that individual for breach of contract

Unfair contract terms

The Unfair Contract Terms Act 1977 makes some contract terms unenforceable.Contracts can neither exclude nor restrict liability for death or personal injurycaused by negligence Terms which impose strict liability for breaches of contract

or allow non performance or significantly different performance of contractualobligations are unenforceable unless they are reasonable

Fixed-term contracts

Fixed term contracts are subject to exactly the same rules as normal contracts

of employment, save only that they last for a specified period after which theyexpire without further action by either party No notice needs to be given toterminate at expiry but notice clauses can be included in fixed term contracts

to allow either party to bring the contract to an end at some time before expiry Where employment continues after the date of expiry then the employee isdeemed to be working under the same terms and conditions as before but with

a reasonable notice period (subject to the statutory minima) implied into thecontract.

For the purposes of employment rights under the Employment Rights Act 1996,

expiry and non-renewal of a fixed-term contract amounts to a dismissal (ERASection 95(1)) Provided the employee satisfies the usual conditions for claimingunfair dismissal, i.e employment status, age and continuity of employment, thenclaims for redundancy and unfair dismissal can be made

WAIVER CLAUSES

Since 25th October 1999 it is no longer possible to agree to exclude the unfairdismissal provisions in relation to fixed-term contracts (Section 18(1) Employ-ment Relations Act 1999 which repealed Section 197(1) of ERA)

After 1st October 2002 fixed term employees on contracts of two years or morecan no longer waive their statutory right to receive redundancy payments onthe expiry or non-renewal of their contract This rule applies to contracts signed,extended or renewed after 1st October 2002 Waivers agreed prior to 1st October

2002 will remain in force until the contract is renewed or extended

FIXED-TERM EMPLOYEES (PREVENTION OF LESS FAVOURABLE

TREATMENT) REGULATIONS 2002

These regulations came into force on 1st October 2002 and in summary they:

• prohibit less favourable treatment in relation to fixed-term employeesterms and conditions of employment and other detrimental treatmentwhen compared to permanent employees where there is no objectivejustification;

• establish a framework to prevent the inappropriate use of successivefixed-term contracts;

• convert task or performance contracts into fixed-term contracts so thatunfair dismissal and redundancy rights apply;

• give fixed-term employees the right to request a written statement inrelation to potential breaches of the regulations;

• require employers to provide information to fixed-term employees aboutpermanent vacancies available in the organisation

RESTRICTING THE USE OF SUCCESSIVE FIXED-TERM CONTRACTS

The use of successive fixed-term contracts is limited to a maximum of 4 yearsunless their use for a longer period is justified This requirement can be modified

by collective or workforce agreement which must provide alternative schemesfor preventing abuses and specify a maximum duration, a maximum number

of renewals and/or whatever objective reasons justify renewals

If a fixed-term contract is renewed or extended in breach of the 4 years tion without justification, then that will become a permanent contract andemployees can make a claim in the Employment Tribunals for a declaration ofthat fact The clock began ticking on the 4 year limitation period on 10th July

limita-2002 and any service prior to that date is disregarded

PART-TIME WORKERS

The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations

2002 have as their objective the prevention of less favourable treatment of

part-time employees in respect of their terms and conditions of employment as opposed

to comparable full-time employees Part-time employees are also protected againstany detriment because of their part-time status

This means that their:

• rates of pay;

• contractual and sick pay;

• annual leave, maternity leave, parental leave and career breaks;

Employees have the right to receive a written statement if they feel they havebeen treated less favourably than a comparable full-time employee They areprotected against unfair dismissal and being victimised on the grounds that theyhave:

• brought proceedings;

• requested a written statement of reasons;

• given evidence or information in connection with proceedings;

• sought to assert their rights under the regulations;

• alleged that their employer has infringed the regulations; or

• because the employer believes they intend to do any of the above

National Minimum Wage Act 1998

All workers have the right to be paid at a rate which is not less than the NationalMinimum Wage

Chapter 2

Reviewing and changing the

contract of employment

Paula Rome, updated by Tracy Luke

Handbook of policies and procedures 22Legal status of the handbook 22Maintaining flexibility 23Common content of the handbook 26

HR Policies – Key Policies and Procedures 30

HR Policies – Non-Key Policies 40

contract of employment

Handbook of policies and procedures

As a general rule, details specific to the employee will be set out in their individualcontract of employment Such individual details will include salary/wages, hours

of work, place of work and job description or job title Other more general policiesand procedures, which apply to all employees or large sections of the workforce,are more often contained in an employee handbook These policies and proce-dures can be contractual entitlements of the employees or may be simply astatement of best practice

To comply with changes in legislation many handbooks are now seen as livingdocuments, undergoing constant review and revision An employer must considerhow the handbook is going to be designed Will it be bound or in loose leaf,hard copy or electronic, or both? Is it worth assessing how often the policiesare likely to be amended? A loose leaf document or electronic format handbook

is easier to update at regular intervals

The length of the handbook is also worth considering in light of the size andcomplexity of the organisation For some employers a basic handbook whichcan be expanded as the business grows is ideal, whereas, for larger or opera-tionally diverse organisations the handbook will normally be more comprehensiveand, as a result of this, is likely to need to be reviewed on a more frequent basis

Legal status of the handbook

Terms of a contract can be written into the contract expressly, or incorporated

by reference to another document Commonly, an individual’s written contract

or Statement of Terms and Conditions will include some reference to certainpolicies and procedures in the Handbook or intranet in today’s electronic age.There is the danger that unless this reference is drafted carefully the referencemay incorporate the policy as a contractual entitlement Indeed, if a contract is

handbook as a whole may be deemed to be incorporated by reference and itsterms may become contractual entitlements of the employee.

If the policy or handbook is contractual, any failure to comply, to the letter, withpolicies or procedures is a potential breach of contract This would enable theemployee to pursue a claim against the Employer in either an EmploymentTribunal or through the ordinary courts

As well as being a potential breach of contract there is also the danger that theemployers actions might amount to a constructive dismissal of the employeewhere, by changing a policy or procedure, this change strikes at a fundamentalright of the individual The right to claim constructive dismissal will apply toemployees with over 1 year’s continuation of employment

Employers will therefore see, when drafting their contracts and handbooks andthe policies and procedures such handbooks contain, the need carefully toconsider whether they are willing to accept the implications of being contrac-tually required to comply in full with such policies If not, it is possible to draftcontracts in such a way so as to, expressly, not incorporate the handbook or tolimit incorporation to specific parts Careful wording in order to maintain flexi-bility for the employer is highly recommended

Maintaining flexibility

It is even possible to draft flexibility into contractual policies and procedures

by careful consideration of the wording which is used Many handbooks containphraseology which allows flexibility for the employer, for example:

• ‘the employer may’;

• ‘at the employer’s discretion’;

• ‘this list is not exhaustive’

The use of such words seeks to maintain flexibility for the employer to extend

or on occasion avoid compliance with the policy procedures

Some caution must be exercised in this area as expressing rights as being tionary’ may be overridden if the employer habitually, and without exception,always applies the policy There has been a great deal of recent case law aroundthese points, in particular, regarding the application of bonuses At present, in

‘discre-cases such as Mallone -v- BPB Industries plc (2002) CA, there is guidance that

the courts and tribunals will expect such discretion to be exercised in a able fashion and may even, if a procedure or policy is well known and has been

reason-communicated to the staff and was used without exception, decide that theemployer no longer has the right to rely upon the discretion that they havepurported to protect

The Mallone decision examined the concept of absolute discretion in a ShareOption Scheme When Mallone was dismissed on ‘no fault’ grounds, the Direc-tors of BPB cancelled his share options It was only when Mallone tried to exercisehis options that he discovered this He successfully argued in the High Courtthat the cancellation was unlawful and the court decided that the Directors hadacted irrationally

BPB appealed but the Court of Appeal agreed with the High Court deciding

that, notwithstanding the contract allowing the Directors to exercise absolute

discretion, the options were granted as reward for past performance and future

loyalty The decision to cancel the options when Mallone’s dismissal was on ‘nofault’ grounds and ignore his past good service was an irrational exercise oftheir discretion

This case follows the earlier discussion in 2000 in Clark -v- Nomara [2000 IRLR

766] which examined this need for even discretionary bonus payments to be

excised in a way which is not irrational or perverse

Custom and Practice can also lead to an expectation of payment as can be seen

by the series of cases examining when enhanced redundancy payments should

be made This was recently examined in Albion Automotive Limited -v- Graham

Walkers and others CA2002 The employer in this case had provided enhanced

redundancy terms in six previous redundancy exercises and, as a result, theTribunal examining the redundant workers’ claims in the present redundancyconsidered the enhancement to be incorporated into the contract The Court

of Appeal backed the original Tribunal decision

It is common practice for employers physically to separate contractual policiesfrom non contractual policies in an attempt to prevent confusion Policies that

an employer more commonly may accept as contractual include:

• Hours of Work Policies;

• Holiday Policies;

• Absence from Work Policies;

• Compassionate Leave Policies;

• Maternity and Family Friendly Policies;

• Equal Opportunities, Bullying and Harassment Policies and Procedures

• Health and Safety Policies

• Data Protection

Employers commonly exclude best practice policies which often include plinary and Grievance Procedures Statutory minimum discipline and grievanceprocedures will come into force in October 2004 The Government haswithdrawn it’s original proposal that these procedures would be implied intoall contracts Instead, it intends to wait and see how the initial proposals beddown before deciding whether to make them contractual

Disci-CONTENT OF THE EMPLOYEE HANDBOOK

Included below is a table showing the types of polices that might be included

in an Employee Handbook relating them to the relevant legislation surroundingthe policy There is a brief summary of the effect of the legislation and also ofany proposed changes which relate to the relevant legislation or which may impact

on the policies

COMMUNICATING POLICIES AND PROCEDURES

It is of extreme importance that the employees know of the existence of thehandbook and how they can obtain it It is especially important for policies imple-menting equal opportunities and prevention of harassment (otherwise oftenknown as ‘Dignity at Work’ policies) Unless the employer can show that thepolicies have been effectively communicated to employees they will not be able

to rely upon the policies to provide a defence against claims of harassment made

by employees This is because the defence is based on the argument that theemployer had taken all reasonably practicable steps to prevent the harassmentoccurring and an employer is unable to argue this if an employee has not seenthe relevant policies Similar arguments would apply to the failure to commu-nicate email policies and then attempt to discipline an employee for breachingsuch a policy

Common content of the handbook

Explanation of the scope of the handbook/introduction

This can be used to explain the purpose of the handbook and whether it is awholly contractual document It can also outline those parts which are consid-ered contractual and those which are best practice only If the employee isexpected to update the handbook himself it can explain that the employee will

be sent updates and expected to file them The introduction should also encouragethe employee to familiarise himself with the contents of the handbook and toretain it for future reference It is also very common, if a company or organi-sation has a mission statement, to include this in the introduction to the handbook

Equal Opportunities Policy

It is currently unlawful to discriminate on the grounds of sex, race, disability,sexual orientation and religion or belief

By October 2006 this will further be extended to prevent discrimination on thegrounds of age A policy decision must be made at this stage whether or not

to include this protection in advance of the implementation by law, or to awaitfurther guidance and amend policies as and when changes occur

It is essential to include an equal opportunities policy in a handbook as tribunalswill expect all employers to have taken steps towards tackling discriminationissues in the workplace and the implementation of a policy is seen as a funda-mental first step towards supporting employees and dealing with these issues.The Equal Opportunities Policy should seek to deal with equality of treatmentduring the whole length of the contract from the initial recruitment stage to dealingwith the employee within the workplace, provision of recruitment and training,

up to the end of employment

The policy can include outlined steps for employees taking complaints or cancross refer to the grievance and/or harassment procedures

Sickness Absence Policy

Given the ever rising rates of absence it is crucial to have policies in place whichoutline the employee’s duties when absent from the organisation with regard

to reporting in and providing evidence as to the reasons for their absence

Leave Policy

This will include leave entitlements and holidays, maternity leave, paternity leave,parental leave Details surrounding compassionate leave, time off for medicaland dental appointments and public duties should also be outlined

Disciplinary and Grievance Policy

Normal disciplinary policies will include examples of misconduct; some of thesecan be specific to the requirements of a particular organisation Some businessesmay have particular rules regarding smoking, food handling or, if public author-ities, may limit actions outside the workplace such as political activities

Examples of conduct which can be seen as gross misconduct and which maylead to instant dismissal (after, of course, a fair procedure is followed) will alsousually be given

Policies normally outline the need for fair investigations and the need to allowthe employee and his representative to prepare their case The accompanyingrepresentative will normally be a colleague or trade union representative whomay be chosen by the employee for any hearing which could result in a formalwarning such as:

• Verbal warning – also recorded in writing;

These steps normally include referral of the problem to a more senior manager,sometimes in writing If a meeting is to take place the employees have similarrights to be accompanied as in disciplinary situations In October 2004 new regula-tions came into force which implemented the statutory discipline and grievanceprocedures introduced by the Employment Act 2002 The Regulations requireemployers to follow set procedures for dealing with disciplinary matters oremployee grievances A failure by an employer to follow the disciplinary proce-dure (other than in specific circumstances) will result in a finding of automatic

unfair dismissal if an employee brings a claim (a one year qualifying period isstill required) Failure by the employer or employee to follow either procedurewill mean that any compensation will be increased/decreased by 10%-50%depending on who is at fault.

Harassment Policy

The harassment policy will link into the equal opportunities policies stating thatharassment on the grounds outlined in the equal opportunities policy will beunacceptable Details of what will be considered as harassment should be outlinedand should include as a minimum:

• Verbal conduct and actions;

• Physical conduct and actions; and

• Non verbal conduct and actions

which will cause the recipient to feel embarrassed, humiliated or able in their working environment Specific examples can be given

uncomfort-The employee should be given a suggested method of complaint which willnormally include a choice of formal or informal action The likelihood of disci-plinary action being pursued against any employee who has been found to havebreached the policy should be outlined

Health and Safety Policy

All health and safety policies should outline the responsibilities of:

• the Company; and

• the Employee

The policy should also outline:

• Who has the responsibility for managing health and safety within theorganisation

• Those procedures for reporting any accidents and notifying the healthand safety managers of incidents within the organisation and anyobserved dangers or potential dangers

• What training the organisation has put in place regarding health andsafety issues

• Public Interest Disclosure/Whistleblowing Policy

The employer should encourage employees to raise genuine concerns abouthow the employer operates their business within the Company The employercan use this policy to assure employees that their concerns will be taken seriouslyand acted upon by the employer The policy should outline how the employeecan pursue their complaint or concern within the Company and can outlinethose situations and bodies to whom external complaint can be made and thesituations when this is appropriate The employer might consider it worthwhile

to outline the actions they will take if an employee raises false concerns in amalicious fashion

Other useful policies to be considered

Less common but very useful policies include:

• Flexible Working Policy

• No smoking Policy

• Company Car Policy

• Personal Records Policy

• Email and Internet Policy

• Personal Expenses Claims

• Access to Premises/Security Policies

• Alcohol and Drug Abuse Policy

• Policy on Personal Development

• Personal Conduct Policy

• Diversity Policy

• Dismissal Policies (often incorporated into the disciplinary policy)

HR Policies – Key Policies and Procedures

1 Bullying and Harassment Policy and Procedure

RELEVANT LEGISLATION

Disability Discrimination Act 1995 (DDA), Race Relations Act 1976 (RRA),

Sex Discrimination Act 1975 (SDA), Employment Equality (Sexual

Orientation) Regulations 2003, Employment Equality (Religion or Belief)

Regulations 2003

SUMMARY OF RELEVANT LEGISLATION

Harassment is unlawful where it falls within the scope of

anti-discrim-ination legislation It may also be unlawful under criminal law and

negligence (see below)

The statutory definition of harassment is ‘unwanted conduct with a

purpose or effect of violating dignity and creating an intimidating, hostile,

degrading, humiliating or offensive environment’

There is currently no specific, legal definition of bullying nor is there

an express legal remedy However, employees with complaints of

bullying may pursue claims of unfair constructive dismissal, personal

injury or alternatively the employer may face criminal prosecution under

the health and safety legislation It may be that the bullied or harassed

employee also has a legal remedy under the Criminal Justice and Public

Order Act 1994 and the Protection from Harassment Act 1997

FORTHCOMING LEGISLATION AND EFFECT

The DDA was amended in October 2004 to incorporate the statutory

definition of harassment Changes to the SDA are expected in 2005

Age discrimination legislation is due by October 2006