02 Dec 2016 | 12.30 pm
Getting Your Employment Contracts Right From The Start
Make sure that they are clear and comprehensive
02 Dec 2016 | 12.30 pm
The contract of employment is the core legal agreement between the employer and employee. So make sure it’s fit for purpose, advises solicitor Dermot Casserly (pictured)
Contracts of employment need to be fit for purpose and tailored – whether the contract is for the CEO or the most junior employee in the organisation. The most typical form is a contract for an indefinite term, but there may be occasion to engage the employee on another form of contract, for example, a fixed-term contract.
At a minimum, there is a legal obligation to provide an employee with a statement of terms of employment. The Terms of Employment Information Acts 1994- 2012 require that certain terms be provided in writing, including:
- the place of work
- job title or nature of the work
- if the contract is temporary, the expected duration of employment
- if the contract is for a fixed term, the date on which the contract expires
- the rate of remuneration or method of calculating remuneration
- terms or conditions relating to hours of work (including overtime), paid leave and incapacity for work due to sickness or injury
- terms or conditions relating to pensions and pension schemes
- periods of notice to give and receive on termination of employment.
The contract should clearly define the job title, duties and reporting structure and reserve the ability to change these within reason. Probation is also a key clause in the contract to give the employer flexibility to terminate the contract at an early stage.
Salary & Benefits
The salary and benefits on offer should also be clearly stated and couched in appropriate terms. For example, if there is a pension scheme or permanent health insurance scheme, the contract should state that the employee may be entitled to participate in such schemes, subject to the rules of same as may be amended from time to time.
As a general rule, employment contracts should not refer to bonuses or share incentive schemes. It is preferable if such schemes are subject to their own scheme rules, terms and conditions, although it should be noted that in any event they do form part of the terms and conditions of employment.
It is also important that the contract refers to key policies such as: discipline, performance, grievance, dignity at work, whistleblowing, social media, email usage, and data protection including CCTV usage. Employers should update their employment policies in line with the ever changing employment environment and communicate such changes to their employees.
Prepare For The Future
The contract should also protect the employer’s goodwill by having appropriate notice and gardening leave periods. For senior executives, contracts should include restrictive covenants to reduce the risk of an executive poaching key employees and customers. Consideration should also be given to whether the senior executive will be appointed to the board of directors. If so, there should be a detailed clause in relation to the appointment and removal from the office of director in specific circumstances. Clauses to protect the intellectual property and confidential information of the employer should also be included.
In relation to retirement, compulsory retirement at a specific age can be challenged as age discrimination under the Employment Equality Acts. Employers need to be able to show an objective basis for seeking to enforce a retirement age.
Apart from taking a claim to the Workplace Relations Commission, an employee could apply to the High Court seeking an injunction where there is a purported dismissal in breach of contract. This could potentially be very costly for an employer to defend – not to mention it could be the source of embarrassing negative publicity. Well-drafted and fit-for-purposes contracts and policies should help protect against this risk.