Obviously every business tries to ensure that all employees sign their contract of employment. However, there have certainly been times in my career when I’ve faced a challenge with a particular employee, gone to their file to check their contract only to find that there is no signed copy held. Where does this leave a business? Can you still enforce the contract if you have no way of proving that the employee signed it?
Promoted but no signed contract
A case reported this week, FW Farnsworth Ltd v Lacy, tackled this exact issue. In this case the employee had originally joined the company in 2000 and signed the contract he was given at this time. He was then promoted in 2003 and given another contract that he did not sign.
The original contract that Lacy signed did not include any restrictive covenants. The second contract which he did not sign did include restrictive covenants.
When Lacy left employment the company looked to enforce the restrictive covenants but Lacy argued that they could not do so as he had never actually signed the contract.
Accepted the terms of the new contract
The High Court found that Lacy had taken action on other elements that had been included in the 2003 contract which had not been included in the 2000 contract. For example he had joined the pension scheme and accepted private medical benefits.
The High Court therefore concluded that, even though the contract was unsigned, Lacy had accepted the terms of the new contract and that the restrictive covenants could be enforced.
Proposed Approach to Ensuring Employment Contracts are Up to Date
When you combine this with the case we wrote about a couple of weeks back regarding A Need to Review Contract Restrictions so as to get employees to re-affirm their agreement to key terms when they are promoted we would suggest you adopt the following approach:
- Have a quick check that you do hold signed copies of all employment contracts. Whilst the case shows that it isn’t absolutely vital just think how much easier and less costly it would have been for the company in this case if they’d held the signed contract. Legal representation for a High Court case isn’t inexpensive!
- When you promote employees use this as an opportunity to get them to re-sign a contract even if their terms remain the same. This means that you are not relying on a contract that was signed years ago if you do find yourself in a position where you need to exercise an element of the contract.
- Look at your contract at least once a year. It’s very easy to have a contract that you rely on long past the point when it was actually legally sound. Set yourself a note to take a look at your contract on a annual basis to make sure it still meets the needs of your business and that it reflects any changes to employment law.
If you need any help with your contracts then do give us a call on 0203 319 1649 or you can use our contact form to email us and we’ll be in touch.