part two: Putting a contract out on your staff

Adam Bernstein examines the measures employers can put in place as a part of employee contracts

By Adam Bernstein | Published:  05 February, 2019

Good contracts go to the heart of good business, and employment contracts are part of the story. In the last issue we noted the importance of having a written contract, how they are constructed and varied. But what other practical considerations should employers take notice of?
    
The first is, according to Philip Richardson, a partner and head of employment at Stephensons Solicitors LLP, to understand what a breach of contract is. “This,” he says, “is where either party breaks an express or implied term of a contract. Examples of an employee’s breach include violence, theft, fraud and gross negligence. If the employer finds this has happened they may be entitled to dismiss the individual immediately.” However, he adds that it is important that the employer has genuine grounds for taking such action otherwise it could face a legal claim from the departing employee for unfair dismissal and breach of contract. He offers examples of an employer’s breach that include demoting an employee or failing to pay them without good reason – “if this happens then it may give the employee the entitlement to bring a claim against the employer in the Employment Tribunal.”
    
At the outset of the employment relationship, disputes aren’t usually envisaged. However, Philip says “a shrewd employer will often put mechanisms in place in the employment contract to protect its position should a dispute arise.” Common clauses that can offer assistance to the employer include the following:

Garden leave
If the employer gives an employee notice of dismissal it may decide to place them on garden leave. Philip says the benefit here is that during this period, the employee is usually prohibited from attending work for the duration of their notice period and prevented from contacting other employees or key clients of the business during the interregnum. “This,” he says, “gives the employer the opportunity to deal with employees whose contract has been terminated in acrimonious circumstances and also allows them to protect confidential information and prevent the employee from using it against the company in the future.”
    
He warns that if an employer wants to utilise this then it is important to include a clause to this effect in the contract of employment otherwise the employer may have difficulty in exercising it. It is also important to note that employees maintain all their contractual and statutory rights and benefits until the end of the garden leave period.

Restrictive covenants
This can be a particularly useful clause to include in the employment contract as it sets down the obligations on the employee after his contract is terminated. Philip says the most common types of restrictive covenant prevents the employee for working for a competitor, usually within six months to one year of leaving the business and “can prove extremely useful to protect confidential information and trade secrets.”
    
Another common form of a restrictive covenant is a non-poaching clause. This prevents the former employee from enticing the employer’s staff away from the business to join him/her in working for a new employer.
    
However, Philip says that it can be difficult to enforce a restrictive covenant against a former employee, “especially if the clause is unreasonable and does not protect a legitimate business interest as the court may declare the clause void.” He explains that this is because the courts are reluctant to place too great of a restriction on employees after termination. But in practice Richardson thinks that the mere existence of the clause may make the employee think twice before acting in breach, meaning “that a restrictive covenant can be a valuable contractual clause for an employer despite the concerns about its enforceability.”

Deductions from salary
A last, but useful, clause for the employer to include, at least from Philip’s perspective, is one that entitles it to make deductions from the employee’s salary in certain circumstances. He says that the most common types of deduction usually contained in the contract of employment include where the employee has caused financial loss to the employer because of their negligence or misconduct, or where the employee leaves shortly after having incurred substantial training costs. However, he cautions employers to “exercise caution in drafting and exercising this clause as any deduction that is not permitted by the clause could be considered unlawful.”



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  • part one: Putting a contract out on your staff  

    There is a common belief amongst employers that if an employee does not have a written contact there is no contract in place, leaving the employee without any rights.
        
    However, from a legal perspective, Philip Richardson, a partner and head of employment at Stephensons Solicitors LLP, says: “a contract of employment will be in place at the point where the prospective employee accepts an unconditional offer of employment.”
        
    This means, quite simply, that a contract and the obligations under it are often in existence prior to the employee’s first day or signature on a written contract; employers should be mindful of how they conduct themselves from the moment the offer is made.
     
    Fundamental terms
    Philip says that while it’s true that there is no legal obligation for the employer to provide a written contract of employment, “the employer is under a duty to give employees a written statement of employment particulars. This sets out the fundamental terms of the employment contract such as the names of the employer and employee, brief job description and hours of work along with other key terms of the employment relationship.”
        
    It’s worth pointing out that an employee’s right to a written statement arises where the contract lasts for at least one month; the written statement must be given within two months of the start of employment. If the employer fails to provide the written statement within the stipulated period Philip says the employee may be able to obtain an award of up to four weeks for compensation from the Employment Tribunal.
        
    “In practice,” says Philip, “it’s beneficial for the employer to draft a full contract of employment as soon as possible so that it can clearly set down its expectations of how the relationship will progress.”

    Express and implied
    There are two types of contractual term – express and implied. Philip says that an express contractual term is one that is explicitly agreed upon by the parties and as such is binding on both – “the terms included in the written statements or terms referred to above would all be considered to be express terms of the contract.”
        
    An implied term is one that has not been expressly stated but is considered to be included in the employment contract. Philip explains that these are often clauses that are implied by law for example the employee’s right to the minimum wage. He says that other terms are implied where they are too obvious to mention, including the duty of care owed by the employer and employee, the duty of mutual trust and confidence, the duty to pay the employee and the employee’s duty to provide the work personally.
        
    This is where Philip sees problems for employers, as some believe that providing the term is not in writing, it isn’t relevant. “However, this isn’t the case and the employer ought to have regard to the terms mentioned.” He adds that implied terms are usually based on the perceived intention of the parties and notions of good practice and reasonable conduct.

    Variation
    Any variation of a contract must be agreed by both parties in order to be valid. However, as Philip notes, this does not mean that the employer’s hands are tied in varying the contract. “One way in which the employer may be permitted to make changes is if the contract includes a carefully drafted flexibility clause. Employment relationships often naturally develop and evolve over time and such a clause gives the employer capacity to make changes to the employment contract without the need to obtain the employee’s consent.” That said, he says a fundamental point to note with a flexibility clause is that there is an underlying duty for the clause to exercise reasonably: “If the clause is drafted too widely or the employer unreasonably exercises the right to vary the contract then the employee may argue this has broken the mutual trust and confidence in the relationship and could resign, taking legal action against the employer.”

    From a practical perspective if the employer is seeking to vary the contract of employment it is also important to discuss the changes with the employee first. Often employees will be in agreement with the changes if they fully understand the reasons behind them.



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  • When the stars align: Robertson Gemini 

    You know you are doing something right when you are doing something that is not the central part of your business, but you are doing it more successfully than those who have made it their main focus.
        
    This is the position that Castle Douglas-based independent garage Robertson Gemini Ltd finds itself in. The garage is a six-ramp repairer with a dedicated MOT bay. It offers all the usual services in terms of alignment, diagnostics and the rest. Meanwhile, it is also has a line in used cars, where it is doing very well.  
        
    Director David Butler explained: "We are trying to grow car sales. We have talked to some of the main dealers in Dumfries and they are having a hard time, being asked to do all their showrooms, but their sales are pretty static at the moment. Meanwhile, our model is actually working well for us. I am looking at a 65 plate Focus going out now, and a 67 plate Toyota. We have quite a few getting up to just one or two years old. That is where we are trying to be. That is the kind of image we are looking at."

    Focus
    While this will keep the business warm on cold nights, the main focus for the business remains servicing and repairs. Being in a largely rural area, the catchment area for customers is quite large: "Goodness me, they come from all over the place," exclaimed David. “They come from Castle Douglas itself, Dalbeattie, almost as far as Stranraer as well. It is quite a rural setting. We are a market town with quite a big hinterland. There is a lot of farming, forestry and that kind of thing. We even get people coming down from Edinburgh, people that are associated with the town here."
        
    The company provides a broad offering, but is looking to concentrate more tightly on the upper end of the market: "We are a  general garage, we take all makes of cars. Jaguar and Land Rover, which is the upper end of the market is where we are heading.  We have invested quite heavily in all the diagnostic equipment for Land Rovers and things like that, so we are getting more and more of that now, which is great. We are trying to move away from old bangers. We are not really interested in that end. We do a lot of Ford, it used to be a Ford service centre until quite recently, but ultimately we decided to sever that relationship."

    Evolution
    The business is now in its 97th year of operation:  "It opened in 1921," said David, "and has always been owned by the Robertson family." Any business that exists for almost a century will go through a great degree of change. For the business now called Robertson Gemini, this included being a franchised dealership for the Rover and MG brands, but it survived the collapse of Rover and went on to evolve into its current independent form.
        
    Names change over time too, with the branding of the business developing a cosmic angle thanks to a brainwave by Stewart Robertson, the late husband of owner Caroline Robertson: "The name Robertson Gemini came about for an interesting reason," revealed David. "Stewart, who unfortunately died in 2010, had another garage in Dalbeattie, so two garages. In addition, in the family, Caroline and Stewart had twins, with Gemini being their starsign. So that is where the Gemini came in; twin garages, twin children, starsign. That is how Robertson Gemini came to be named. That was Stewart's little lightbulb moment."
        
    David came into the business following Stewart's passing: "Caroline lost Stewart and I lost my wife, we both lived in Kippford and we are now business partners. We are both directors in the business. I was not in the automotive sector before. In addition, Caroline was married to Stewart but had very little to do with the business. The garage was thrust upon us – just circumstances. So
    we have had to pick it up and drive it forward."

    Excellence
    From 2015, Caroline and David took on the day-to-day management, and the business has not looked back: "We've had to do a lot of learning, but we are rather fortunate in that we have some excellent staff here, who have guided us. They have been fantastic.   

    "We have got five full time mechanics. We have just taken on an apprentice as well, who is excellent, and we have also taken on an autistic lad called Thomas as our valeter. That was something that Caroline and I wanted to do. We took a gamble but it has been very positive for us. We are quite pleased about that. It came through a programme run by Dumfries and Galloway council called Total Access Point. It is about employability for all. We went to an open day to find out about it and we  thought 'we want to have a go at this.' We are absolutely delighted with what we have achieved, and what Thomas is achieving. That has been a good venture for us."

    Toolbox Sessions
    According to David, the key is enabling the staff to pass their knowledge on: "We have two guys who are experts on Land Rovers. The rest are all very good mechanics too. We have started doing what we call Toolbox Sessions in the workshop. Each of the mechanics is running a topic. We have done one on all the MOT new legislation very recently. Yesterday we had one on electrics.
        
    "What we are trying to do is spread the skills across the workforce, so it is not just one individual that keeps getting the same old jobs all the time. We have got someone lined up for the next one, which will be on vehicle health checks. That's going well and we are all enjoying that. Each mechanic is being left to do their own little session. That is stretching them a little bit, which is good."

    Top Technician
    When you are spreading knowledge around a business, it helps to have staff members who know their stuff. Luckily for Robertson Gemini, one of their team is a regular Top Technician finalist, namely Neil Currie, who was in the final five in 2017 and 2018.
        
    "It was Neil who did the Toolbox Session on electrics," explained David. "That was the first of his sessions. It was good. He enjoyed it as well. He will be doing one on diagnostics before long."
        
    David said he was pleased to have a Top Technician regular on staff: "It is great for us as we can promote it for a start, and it really gives the other boys something to aspire to as well. Neil is good at spreading his knowledge about. From our point of view that's great. If he is on Top Technician, we like to think that the company is benefitting as a whole. This is why we are doing these toolbox sessions. I think we are quite progressive on that side of things and it has certainly motivated the workshop team. I sat in on a couple of sessions and I have been very impressed with what they have done.  I'm delighted with it."
        
    At this point, Neil himself popped his head round the door: "I have been here three years," he explained. "I regularly get training, and they helped me with the cost of going down for Top Technician, paying for the hotel, so they have been very supportive that way. David has looked to us to help him with equipment, and he has certainly invested in what we have asked him to, dealer-level equipment and oscilloscopes, all the kit we need so we can keep up to date with the technology. We specialise in Land Rover, so he bought the equipment for that as well. It allows us to do more things."
        
    Commenting on the Toolbox Sessions, Neil observed: "We started that recently – it saves money on training courses and time, in terms of  having people out of the door. We just put some time in the diary and shut the workshop door. The guys will come in and one of us will talk about a subject, just trying to pass on some knowledge. Instead of going away on a two day training course it is all kept in house."
        
    Taking part in Top Technician was inspirational for Neil: "It has inspired me to try and push the industry higher. You meet guys with the same aims and goals as you and you want to aim for the best. It is about bringing the trade up and trying to improve everyone's skills. I'm all for it. There is definitely a need for more talent, especially up here in Scotland. I just want  to help people and keep it going."

    The future
    Looking forward, David commented on plans for the future at the business: "We have put in so many new procedures – a new management system, which is absolutely brilliant in terms of giving me an on the pulse feeling of what the company is doing on a daily basis. It starts from the customer coming in, all  the details, job cards and invoicing. It is all interlinked, so it is tremendous. We are getting to grips with all of that. We are just about to take on a new fleet of brand new Peugeot 2008s courtesy cars, they are coming next week."
        
    David added: "We are running at 110mph at the moment!" Long may it continue.

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