EMPLOYMENT CONTRACTS AND EMPLOYMENT LAW : THE RELATIONSHIP

Employment law reform prompts a familiar reaction: update the contracts.

Often, that's the wrong instinct.

The reaction stems from a fundamental misunderstanding of the relationship between statutory and contractual rights.

A statutory right exists because Parliament created it. It does not need to be repeated in a contract of employment in order to exist or be enforceable.

Contracts can provide rights that exceed the statutory minimum. Enhanced holiday entitlement is a classic example.

What a contract cannot do is reduce a statutory entitlement.

Yet I still see contractual provisions that attempt exactly that.

Take notice periods. Statutory notice increases with continuous service. An employee with eight years' service is entitled to eight weeks' notice. An employee with 12 years' service is entitled to 12 weeks.

Yet I still come across contracts stating that employees are entitled to a maximum of four weeks' notice regardless of service.

That provision achieves nothing. It does not reduce the employee's entitlement and it does not reduce the employer's legal obligation. It simply creates a misunderstanding which often survives until one party obtains legal advice.

The mistake stems from a belief that the contract takes precedence over the legislation. It does not.

This is why my starting point when drafting employment contracts is not, "What else can we put in?"

It is, "What genuinely needs to be there?"

Every contractual provision added beyond that point should have a clear purpose. If it does not, the better question is not whether it should be in the contract, but why it is there at all.

And the folly of making all your policies and procedures contractual is for another day!