5 things to know about Employment Law in the UK

In this series, Barry Stanton, Managing Partner, is talking to his European colleagues with whom he has worked on numerous projects about five things we should know about employment law in their country.

In this episode, Barry is speaking to his colleague Claire Taylor-Evans on employment law in the UK. The episode begins by highlighting that employment relationships can exist without written contracts, as verbal and implied agreements hold legal weight. The discussion covers the value of well-structured contracts, including protective clauses like restrictive covenants and extended notice periods.

The episode also addresses unfair dismissal rights, stressing the need for employers to follow proper processes when terminating employment. Changes to redundancy procedures are explored, including increased protections for employees on maternity and parental leave. Finally, the growing shift towards flexible working rights from day one is discussed, requiring businesses to adapt policies to meet employee expectations and legal requirements.

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Chapters

• 6:24 Notice provisions to terminate a contract
• 13:12 Redundancy in the UK
• 22:27 Flexible working rights

Transcript

Barry Stanton: 0:01 

Hello, my name is Barry Stanton. I'm the Managing Partner at Boyes Turner and I've also practiced as an employment lawyer for the past 25 years. In that time, I have seen the growing importance of a knowledge of European and international employment law. In this series, I'm talking to my European colleagues, with whom I have worked on numerous projects, about five things we should know about employment law in their country. 

Today I'm joined by Claire Taylor-Evans, one of my colleagues at Boyes Turner. Hello, Claire. 

Claire Taylor-Evans: 0:29 

Hi Barry, it's great to be here. 

Barry Stanton: 0:31 

So, Claire, I want to start with a proposition that an employment relationship can only exist even if there's nothing in writing. 

Claire Taylor-Evans: 0:39 

Yeah, that's right. I know, having dealt with a number of multinational clients who deal with employees in other jurisdictions, that there are quite complex rules in place in relation to, for example, Germany in relation to the governance of the employment relationship. The agreement has to be in writing, I understand, and even in wet ink, and there's no such requirement in the UK and often that comes as a surprise to employers. So an employment relationship can exist even if there is nothing in writing. The terms of that relationship can be derived from the agreement between the parties, which can be verbal and in fact even their conduct. 

Claire Taylor-Evans: 1:20 

And there are also unwritten terms which are implied by law or modified by statute. So, for example, that can relate to the minimum notice periods that must be given to terminate the employment relationship, the requirements to pay statutory minimum wage, for example, and to abide by limits on working time. Other implied terms include those implied by law, such as the employee's duty of fidelity to act honestly and in good faith and not act against the interest of the employer. And with senior directors and executives there's also a fiduciary duty which applies, which is a higher duty than the duty of fidelity and compels them to act in the best interest of the company. There's also a key term of mutual trust and confidence, so implied into every employment relationship, there has to be mutual trust and confidence between the parties, so it's really important. I think that anyone looking to set up in the UK is aware of these plethora of terms that can come about even if there isn't anything in writing. 

Barry Stanton: 2:25 

And one of the things that employment lawyers talk about is the Section 1 statement, and sometimes you see a statement of terms and conditions. So the Section 1 statement as opposed to an employment contract. What would you recommend that employers do if they're putting things, writing a Section 1 statement or to have a contract of employment? 

Claire Taylor-Evans: 2:44 

Yeah, so the Section 1 statement is important because it is the minimum that must be provided. So, any employee or worker who's going to be employed for more than one month is entitled to a written statement of terms, and this must be provided on or before the first day of them commencing their employment. And that is important because if you don't provide that as an employer, you can be liable to a claim for compensation. But I think the bigger risk in relation to this is if you were only to provide a Section 1 statement, then you miss the opportunity to set out clearly the relationship between the parties and also protect the business. So, for example, we would normally recommend setting out protections in the contract of employment which will go much further than the minimum terms that needs to be set out under the written statement of terms. 

Barry Stanton: 3:39 

And I suppose if it's a statement, it's not actually a written binding contract, so there could be terms which the employee might say well, I know you've written that as a term or as a statement, but it's not actually the term that we've lived to. 

Claire Taylor-Evans: 3:54 

Yeah, absolutely. Absolutely, and I think areas we'd normally see in an employment contract which go further than the written statement of terms would include provisions relating to, perhaps, what might happen after the employment relationship terminates. 

Claire Taylor-Evans: 4:09 

So restrictive covenants we would normally see, which would include covenants that the employee won't solicit clients after their employment terminates, they won't poach senior employees, they won't deal with customers that they currently deal with. It's important to bear in mind, as you know, Barry, that restrictive covenants are only enforceable if they only go as far as is necessary to protect the legitimate interests of the business. So we need to make sure that they're tailored to each role and reviewed regularly. For example, if an employee is promoted, it's always very important to review the restrictions to check that they're still relevant to that role and, if they're not, make sure that the employee enters into new restrictions. So there's lots of things you can put in place as an employer to make sure that your contract works for you, and it's an excellent business protection tool as opposed to what you have to provide as a minimum under the section one statement. 

Barry Stanton: 5:12 

I think one of the points that I'd make and I think it's really important here with the restrictive covenants is that if somebody is promoted, then it's an ideal time to review and impose new restrictive covenants, even if they're the same as the ones that went before, because you have new consideration. So what might not be enforceable when they're in a more junior role become enforceable when they're in the new role. But if they don't have a new contract with a new term, then they may still be unenforceable. 

Claire Taylor-Evans: 5:39 

And I think the other point to make in relation to express terms is that they can also be governed by these implied unwritten terms. So I touched briefly earlier on the term of mutual trust and confidence. But you, for example, might have something in your employment contract saying that you may change the employee's workplace location commonly known as a mobility clause or a power to award discretionary bonuses but these implied terms that I talked about earlier, these unwritten terms, still impose a duty on the employer to act reasonably. So the mutual trust and confidence implied term would impose a duty on the employer to exercise those express terms reasonably. 

Barry Stanton: 6:24 

And can we just move on and talk about notice and notice provisions to terminate a contract? Are there statutory provisions or is it just down to what the parties agree? 

Claire Taylor-Evans: 6:33 

So there are minimum statutory provisions in relation to notice, depending on how long a person is employed by an employer, which need to be adhered to. So if an employee has been employed between one month to two years, they're entitled to one week's notice of termination. If they've been employed longer than two years, they are entitled to an additional one week's notice per year of continuous service, subject to a maximum of 12 years. But of course it's entirely possible, and in fact recommended, for an employer to put in place longer contractual notice periods if they wish to do so. But if the contract was to have in place lesser notice provisions than the statutory situation, the statutory position would prevail. 

Barry Stanton: 7:27 

We've talked about the statutory provision in respect of employers giving notice to employees. What's the position from a statutory point of view for employees giving notice to an employer? 

Claire Taylor-Evans: 7:36 

Absolutely, so that would be one week. 

Barry Stanton: 7:39 

So therefore, it'd be much better to have a written contract with longer notice being given by employee to employer. 

Claire Taylor-Evans: 7:51 

Yeah, absolutely, because, of course, the notice period is really there as a tool that the employer can use to essentially govern the relationship with the employee after they have resigned. 

Barry Stanton: 7:58 

And keeping employees away from their contacts. Is that possible? 

Claire Taylor-Evans: 8:03 

Yeah, so another common clause we would recommend is inserted in an employment contract is a garden leave clause. So essentially that requires the employee to stay in the garden or away from the workplace during their notice period. There are specific provisions that we would recommend drafting in relation to contacting customers or clients or suppliers, requiring them not to do so and also not to engage in any work during that period, and that, of course, enables the employer to allow the new replacement for that outgoing employee to connect with the customers and build relationships during that period of time. 

Barry Stanton: 8:46 

We talked about notice. Is that all that an employer has to worry about in terms of terminating an employee's employment? 

Claire Taylor-Evans: 8:52 

No, I'm afraid it's not that simple and it's likely to get a lot less simple, Barry, which we'll come on to shortly. 

Claire Taylor-Evans: 8:59 

But no, you can't just terminate lawfully on notice if an individual has more than two years service. 

Claire Taylor-Evans: 9:08 

So as soon as an individual acquires two years service, they acquire the right not to be unfairly dismissed. What does that mean? Essentially, an employer can only terminate their employment if they have a potentially fair reason, of which there are five potentially fair reasons prescribed by statute. And they are conduct, so anything relating to the conduct of the employee, capability which is related to the performance of the employee, or it can also relate to ill health Redundancy, so that's where an employer has a reduced need for employees to do work of a particular kind, or they're closing their operations, or they're closing an office or a site. Statutory restrictions, so that's where, for example, an employee needs to have a driving license to perform their role and they no longer have that, so it's illegal for them to continue in that role. And then the final potentially fair reason is some of the substantial reason, which is essentially a catch-all category for every other reason that doesn't fit neatly into any of the four previous reasons. 

Barry Stanton: 10:24 

And whilst there are those potentially fair reasons, presumably there's some sort of process that has to be involved as well. 

Claire Taylor-Evans: 10:30 

Yeah, that's absolutely right, Barry. So the fair process that needs to be followed depends on which particular reason the employer relies upon. So, for example, in a conduct potentially fair reason process, you would normally expect the employer to have followed a disciplinary process which would involve meeting with the setting out the allegations against them, giving them opportunity to counter those allegations and provide any evidence, taken into account what the employee says, the level of contrition that they might show and coming up with an appropriate sanction in relation to those allegations. Often in a case of misconduct, it will be unfair to dismiss for a first offence, unless in the case of gross misconduct which would be sufficiently serious conduct which would warrant termination of the employment relationship. So, for example, theft, serious misuse of confidential information, violence, sexual harassment. 

Barry Stanton: 11:40 

Okay, and then there are other processes for performance or capability in terms of ill health, presumably. 

Claire Taylor-Evans: 11:47 

Yes, so in relation to poor performance again similar there will normally be a process that an employer will have in place that they must adhere to and if, in the absence of that, they would be required to follow the ACAS code. And that would normally relate to, in a poor performance situation, making sure that the employee is aware of what the performance is, making sure that clear goals have been set and the individual is aware of those goals and has sufficient time in which to meet those goals. Often it may include additional training and support from the employer and also warnings, so a period of time in which to improve their performance and obviously, if they don't improve their performance, they would then be subject to a warning under a performance improvement plan and the plan would continue until it got to dismissal if indeed the employee didn't improve in that period of time. 

Barry Stanton: 12:54 

How quickly would it be reasonable for an employer to go through that process? Do you think? 

Claire Taylor-Evans: 12:59 

It really depends on the nature of the role, Barry, and the nature of the end of performance, but we would normally say you wouldn't be able to fairly complete that process in less than six months. 

Barry Stanton: 13:12 

And then you've touched on redundancy, but redundancy is quite complex, as I understand it. 

Claire Taylor-Evans: 13:18 

Yes, redundancy in the UK is quite complex. I work with a lot of American clients and it's obviously not so complex in the States when you're going through reductions in force, but there are provisions in the UK that require employers to give a lot of consideration if they're planning to reduce their workforce. So the first is they need to think about the statutory entitlement to a redundancy payment, so all those employees in the UK who have over a two-year service. If they're losing their jobs through redundancies, then they are entitled to a statutory redundancy payment, which can be potentially quite costly if an employee has been with the business for a long period of time. Often we find in redundancy situations that, in addition to the statutory redundancy payment, an employer will offer an additional enhanced redundancy payment, which is sometimes made conditional on signing a settlement agreement whereby the employee waives all the claims against the employer. But the statutory redundancy payment itself, that element of it, can't be made conditional on them signing a settlement agreement. They're entitled to that no matter what. 

Claire Taylor-Evans: 14:36 

In terms of what the calculation is for a statutory redundancy payment, I was talking to a client recently, a Canadian client, who was very surprised at how small the payment was, because it is based on the individual's length of service and it's a statutory calculation based on weeks pay, which is set by statute every year in April. Currently it's 700 pounds and the calculation is half a week's pay for each full year of service. The employee was under 22. One week's pay for each full year. They were over 22 but under 41, and one and a half weeks pay for each full year. The employee was over 41 and the cap for the length of service is 20 years. So the maximum statutory redundancy award is £21,000 currently. 

Barry Stanton: 15:25 

And we've talked about individual redundancies, but in terms of when there are more than 20 employees, I understand there's a more complicated process that has to be followed. 

Claire Taylor-Evans: 15:35 

Absolutely right, Barry. So there are specific obligations if you are proposing to make 20 or more redundancies at one establishment in a 90-day period. And currently an establishment is defined as essentially a geographical location in a legal entity of the employer. Although there are proposals under the new UK government to potentially change that and if that comes into force in the future, then it's going to be even more difficult for employers because they will need to look at their proposals across various geographical locations, whereas at the moment they would consider each office or site individually. So currently, if an employer is proposing to make 20 or more redundancies at a single workplace in a 90-day period, they must collectively consult for 30 days before the first dismissal takes effect. If they're proposing to dismiss 20 or more employees and if they're proposing to dismiss 100 or more, they need to consult for 45 days before the first dismissal takes effect. 

Barry Stanton: 16:42 

And then there'd be individual consultation on top of that, presumably. 

Claire Taylor-Evans: 16:46 

Yes, absolutely, and in advance of that period. You would also need to allow time to elect representatives, because the consultation needs to be with the elected representatives of the employer and now sometimes employers have in place already representatives that can serve this purpose, and consultation should be with a view to reach an agreement with an open mind and reducing dismissals or avoiding them altogether. So it is quite difficult for employers because they can't take any final decision until the consultation is complete. They have to obviously enter into meaningful consultation, they have to work closely with the elected representatives and they also have an obligation to notify the Secretary of State and provide written information at least 30 days before the first dismissal takes effect as well. Otherwise they can be faced with statutory fines. 

Barry Stanton: 17:47 

And just winding back a little bit, we've talked about the two-year time limit, but there are proposals afoot from the Labour government to change that. I understand. 

Claire Taylor-Evans: 17:56 

Yes, and I think that's perhaps we touched on it slightly earlier but the idea of probationary periods in the contract of employment. So often these are used as tools by the employer to assess a new recruit. So often the period of a probationary period is anything between three and six months. An employer will often say that the employment can be terminated on a lesser notice period, so normally a week, and this gives the employer a time period in which to assess that individual, to assess whether their performance is good enough, obviously and also it gives them that time in which to terminate on a shorter notice. The problem with probationary periods is often we find that managers are very busy and they perhaps don't manage probationary periods as well as they should, and the employee will inadvertently pass that three-month period without any formal review process having taken place. So for that reason we recommend drafting into your probation period clauses that until probation period is confirmed as passed, you remain on probation. 

Claire Taylor-Evans: 19:12 

Why is this relevant? It's a very long winded way of getting to the answer, but the Labour government which has just come into power in the UK has said that employees will be given day one unfair dismissal rights. So I talked earlier about employees who acquired two years service acquiring the right not to be unfairly dismissed. But under these new proposals all employees, as soon as they start employment with an employer, will have that right. But the government has said that will be subject to a right for the employer to operate probationary periods. We await further details but needless to say, it will be much more difficult for employers to terminate employment going forward and contracts are going to become even more important. 

Claire Taylor-Evans: 20:06 

The other point I just wanted to make on redundancy is this situation with employees on parental leave, so employees on maternity leave or shared parental leave or adoption leave. So it used to be the case under UK employment law that employees on maternity leave were entitled to be treated more favourably essentially as an example of positive discrimination. If a redundancy situation arose and an employee was on maternity leave then she was entitled to any suitable alternative vacancy in preference to any other affected employee, and that has now been extended since April this year to cover those who are pregnant and also those who have returned from maternity leave. So it's widened the scope of these protected individuals. So that's another area where I think employers who are embarking on a redundancy or restructuring process need to really consider these protected employees and make sure that they're fully aware of where they are in terms of their leave dates and when they return to work, to ensure that they don't come into difficulty in relation to that. 

Barry Stanton: 21:30 

Yes, that's quite a challenge, isn't it? 

Claire Taylor-Evans: 21:32 

It really is. It really is, and I also think there's quite a lot of misconceptions about what it means. Certainly, I know a number of clients have said well, does that mean I can't dismiss someone who is pregnant on or on maternity leave, even if there's a genuine redundancy situation? No, that's not what it means. I've had people say does that mean I have to make sure that I keep the individual's who is on maternity leave or pregnant out of the redundancy pool in the first place? No, that's not what it means either. What it means, of course, is if, having gone through a fair selection process, the individual who is pregnant or on maternity leave or adoption leave or returned in the last six months from that leave falls out of the bottom of the selection pool, then they are entitled to be put in this position where they get preference for any suitable alternative vacancy. 

Barry Stanton: 22:27 

Thank you. And then just turning finally to the issue of flexible working, and that as a right, because I understand that that right has been expanded recently. 

Claire Taylor-Evans: 22:35 

That's right. So we've had the right, or employees have had the right, to request flexible working since 2017. It's been in place a long time, but it used to be the case that individuals would need 26-week service in order to make that request. That was then expanded to all employees and most recently, in April, was expanded to be a day one right. So as soon as somebody starts employment with you, they are entitled to make a request to work flexibly, and working flexibly can mean not just the location of where they work, but that could mean their hours working compressed hours or working part time or working any other variety of working practices that are not traditional or standard, and I think we've seen that it's become much more of the norm for employers to consider these flexible working requests and, in fact, grant them. 

Claire Taylor-Evans: 23:32 

And as soon as employers started requesting that employees come back to the office the traditional office environment full time, they were faced with a lot of these flexible working requests. So I think businesses in the UK are, and globally are, increasingly faced with these changing expectations of the workforce and how individuals want to manage their work-life balance. But the important thing to note, I think, in relation to the flexible working request regime is that there is even a recommendation now that when you are scoping roles, that you consider whether they can be done flexibly and going forward. Under the new Labour government there is a proposal that agreeing to flexible working requests will be a default. So we shall wait and see what leads to, but at the moment it's something I think that businesses really need to consider. 

Barry Stanton: 24:30 

Yes, that's going to be quite challenging if it comes in for many employers, I think. 

Claire Taylor-Evans: 24:33 

I think so, yeah, absolutely. 

Barry Stanton: 24:35 

Claire, thank you very much for that very interesting insight into some of the key issues in English employment law, and I'm sure our listeners will have gained a lot from that. Thank you. 

Claire Taylor-Evans: 24:45 

Thanks, Barry, it's been a pleasure. 

Barry Stanton: 24:47 

Thank you for joining us today. I hope you've enjoyed our conversation. If you want to listen to more episodes in this series, you can follow or subscribe to our podcast. Goodbye.