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The Employment Relationship: What must be included in employment contracts?

All employees must be given a written statement of their particulars of employment.

The mandatory information includes matters such as hours of work, place of work and the length of notice that is required to terminate the employment relationship. Failure to provide the necessary information can lead to penalties.

Employers should prepare, and carefully issue, considered and comprehensive employment contracts to all employees. This will establish the primary source of obligations imposed on an employee. Requirements or expectations which an employer might take for granted may not be permissible or enforceable. This is unless stipulated in the contract of employment (for example, garden leave and protecting categories of confidential information).

In addition to standard terms such as:

It is also recommended you include other key terms such as confidentiality, IP, data protection and post-termination restrictions.

Is confidentiality implied?

Broadly speaking, an employee in receipt of confidential information cannot take unfair advantage of it.  While there are protections in the employment contract, it is also important to note that employees have a  duty of confidence providing the information is confidential in nature and disclosed in circumstances purporting an obligation of confidence.

Employers must take active steps in order to protect trade secrets and other sensitive confidential information.

For example, in order to ensure confidential information is protected, you must take reasonable steps to keep the information a secret.  To do this, you should:

  • Identify the trade secrets
  • Keep an updated inventory of them
  • Train your workforce
  • Protect the trade secrets (including contractual protections)
  • Establish procedures in the event that the trade secret is stolen or leaked.

Make sure the employment contract includes a widely drawn definition of confidential information (carving out information in the public domain, or lawfully disclosed, or consented to be disclosed). It should place limitations on its use or disclosure, as well as clear treatment of ownership of the confidential information. This includes the underlying information, documents and materials which enable its use, e.g. source code and any associated code documentation.

Generally, a breach of the confidentiality clause will give rise to a breach which enables the employer to terminate the agreement summarily without notice.

 

Intellectual property

The agreement must protect the intellectual property rights of the employer.  So the employment contract usually includes a widely drafted definition of intellectual property rights alongside limitations on use and other protection. It often includes dealing with the ownership and the assignment of any intellectual property rights that are created by the employee during the course of the employment.

 

Can you stop employees going on to work for competitors?

Post-termination restrictions (also known as restrictive covenants) prevent an employee from engaging in certain activities after the termination of his employment which might damage an employer’s business. This is usually by preventing the ex-employee from working for competitors or attempting to solicit the company’s employees, or clients, customers or suppliers.

It is important that these restrictions are not a restraint on trade. They must be necessary to protect the legitimate interests of the business, such as protecting confidential information, and go no further than reasonably necessary to protect such interests.

The restrictions must be reasonable in duration, geographical area and in the definition of the market in which the parties operate and be tailored for each employee.   Where the employee is engaged in a technical sector and works on external “open source” projects, the nature of the restriction may need to be reframed.

It is essential that these restrictions are tailored to every individual case and should be considered carefully.

 

Data protection

Under GDPR (the General Data Protection Regulation) the employer must have a lawful basis for processing the employee’s personal data. Generally the employment contract will refer to the company’s employee notices to explain, among other things, the categories of the personal, purposes for processing in relation to the internal business and administrative purposes of the company, as well as the legal basis. It is a fundamental requirement that companies provide their employees with a notice.

Moreover, GDPR has placed further obligations on employers to review their practices in relation to employee (and customer, supplier) data, shoring up the rights of data subjects, while also requiring companies to put in place adequate technical and organisational measures to enable them to protect employee personal data and promptly respond to data subject requests including access, erasure and portability.  And in this way, companies are compelled to audit current systems and practices (or set up new systems and practices) to ensure that these meet the requirements under GDPR.

 

Business practices over time

Over the course of an employment relationship, duties develop and change over time. Business practices become more defined and embedded within the organisation. Other documents such as the staff handbook, collective agreements, offer letters or side letters, as well as oral exchanges and conduct including internal communications to the workforce, may further redefine the specific terms of the employment contract.

To discuss employment contracts in your organisation, contact expert Employment team now.

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