Employment law; everyday questions

As an employment solicitor I get asked a range of questions by my clients each week.  Employment law is a practical and personal area of law which impacts and affects most people on a day to day basis.  Rather than write an article on an employment tribunal case or new legislative change/update I thought I would focus on the questions I have recently been posed by my commercial clients and the advice I gave:

Q. My employee has just resigned and given less notice than the contract of employment allows for, what can I do?

A. On receiving a resignation letter giving less notice than contractually required, you can draw the employee’s attention to the notice period clause in the contract and confirm that they are obliged to give XX weeks/months’ notice. A failure to do so is effectively a breach of contract and accordingly you are entitled, should you wish to do so, to pursue a claim for the value of the breach (the loss suffered) which can include the costs incurred by the business for hiring a replacement. This can be especially relevant if you have to engage agency staff to provide cover. My professional view is that a conversation about the remit of the contractual notice period and reaching agreement on the termination date is much more satisfactory than the potential costs of pursuing a claim against a former employee for breach of contract.

Q. I am purchasing a business and the outgoing owner will be retained post sale to provide services. We have agreed that this would be on a self-employed basis but now they want to be employed for tax efficiency purposes. Does it matter?

A. The simple answer is yes, it does matter. Employment status is a hugely complicated and complex area of law which can result in employment tribunal claims and HMRC penalties. Any contractual documentation should reflect the reality of the situation and the way in which the services are to be provided and the relationship between the parties. You have to consider the following:

• Are the services being provided on an ad hoc basis?
• How much control you may want to exercise over the individual
• Can they substitute themselves for another or personal service required?
• Are they going to be fully integrated into the business?
• Are you going to provide their work equipment?

If the answer to the above questions are ‘yes’, you are likely looking at an employment relationship. This brings with it entitlement to holiday pay, statutory sick pay, pension and the accrual of statutory employment rights. Therefore, exercise caution and seek advice when questions of employment status arise.

Q. I am drafting a new contract of employment for a senior employee and am considering inserting post termination restrictive covenants. Are they even enforceable?

A. Well drafted and tailored post termination restrictive covenants are definitely enforceable. The first thing to consider is what is reasonable and do the scope of the restrictions go no further than protecting a legitimate business interest? There is a balance between a business’ ability to protect itself and the right of an individual to work and earn a living. The most effective and enforceable clauses are those that deal with ‘non-solicitation’ preventing an employee from taking clients on exit. My advice is always to limit these clauses to a six-month restricted period and focus on clients with whom the employee had ‘material contact’ in the latter stages of their employment. If drafting a non-competition clause, make sure it is clear and detailed as to what businesses you consider to be direct competitors and even name them for clarity. The more specific, tailored and reasonable the covenant, the more likely it is to be enforceable.