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Exploding some employment law myths

Posted
January 17, 2017
Employment Law

Where do they come from?  You know what we’re talking about.  Those myths, those misconceptions that people swear blind are true.  Yet they have no basis in reality.  Their very existence can make it difficult to separate the fact from the fiction.  Need help telling one from the other?  We’re here to lend a hand.

In this information sheet, we highlight some commonly held misconceptions about employment law and provide you with the truth about where you really stand!

Myth #1

“You can avoid employment rights by calling someone a ‘consultant’, requiring them to invoice you for their services and expecting them to pay their own taxes”

Perhaps surprisingly, very complicated legal disputes can arise over the question of whether someone is an employee or not.  This is because there is no single factor that determines someone’s employment status.  Instead, courts and tribunals will consider a variety of factors when working out whether someone is an employee.  These include:

  • the amount of control that the ‘employer’ exercises over the person in question (who, what, where, when and how they do their job);
  • whether the person is personally required to provide their own service or whether they can send someone else in their place;
  • whether there is ‘mutuality of obligation’ (i.e. an obligation to provide work and a reciprocal obligation to undertake that work);
  • how the person is treated for tax purposes; 
  • whether the person could be said to be genuinely in business on their own account; and
  • the extent to which the person is an integrated part of the business and otherwise treated as a member of staff.

As you can see, this is not a straight forward issue.  Simply calling someone a ‘consultant’ and treating them as such for tax purposes is unlikely to be sufficient if all other factors suggest that they are an employee.  

If in doubt, this is definitely one of those issues on which you should take expert legal (and quite possibly tax) advice.

Myth #2

“You shouldn’t give an employee an employment contract until the end of their probationary period”

Normally, we recommend that you ensure you have a fully signed contract of employment in place by the time an employee starts working for you.  Without a written contract of employment, considerable doubt can arise as to the terms on which an employee has been engaged.  What’s more, for technical legal reasons with which we won’t bore you, the validity of written contracts entered into after the employment relationship has commenced can be called into doubt.

Additionally, quite apart from anything else, section 1 of the Employment Rights Act 1996 requires you to issue all employees with a written statement of main terms and conditions of employment within 2 months of employment starting.  So why not get the paperwork out of the way nice and early, before there is any danger of you forgetting!

Myth #3

“An employee’s period of continuous employment only starts once they have successfully completed their probationary period and/or been given a written contract of employment”

An employee’s period of continuous employment begins on the first day that they work for you, regardless of whether they are on probation or whether they have been issued with a written contract of employment.  Similarly, it makes no difference if they start out on a temporary or fixed-term contract and only subsequently move to a permanent role.  Normally, the full period of service counts when calculating an employee’s length of service for legal purposes.

Myth #4

“If the employment contract isn’t signed, it isn’t binding”

It goes without saying that the very best evidence of a binding contract is a written document that has been validly signed by both employer and employee.  However if, for whatever reason, a signature is missing, don’t assume that the contract is invalid.  Courts and tribunals will take into account a variety of factors when considering what contractual terms have been agreed.  So if you have issued an employee with a written contract of employment and, to all intents and purposes, you and the employee have acted consistently with the terms of that document, this may be good evidence that the terms have been legally agreed, regardless of whether the document has been signed.

Myth #5

“If an employee is within his probationary period, I can dismiss him for whatever reason I like”

It is certainly true that, typically, employees have fewer legal rights in the early stages of their employment.  Indeed unfair dismissal rights don’t normally kick in until a person has been continuously employed for at least two years.  However, it would be very dangerous to assume that this means that you always have ‘carte blanche’ to dismiss short-serving employees.  Dismissals can be unlawful, regardless of the employee’s length of service, if the reason for the dismissal is:

  • ‘automatically unfair’ because it is, for example, pregnancy-related, health and safety related, trade union related or whistleblowing related; or
  • related to a ‘protected characteristic’ such as gender, race, disability, sexual orientation, religion/belief or age. 

You also have to take account of the terms of the employee’s contract of employment which, if broken, can sometimes give rise to very valuable claims.  

Bearing all of this in mind, it pays to give careful thought to each potential dismissal before you proceed.  Are there any particular risks that you need to factor in?  How do you manage those risks in order to keep them to a minimum?

Myth #6

“If I pay an employee weekly, their notice period is a week.  If they are paid monthly, it’s a month”

With any luck, your written (and signed) contracts of employment will clearly set out the period of notice that each side needs to give to the other in order to terminate the employment relationship.  In the absence of agreed notice periods, the Employment Rights Act 1996 establishes statutory minimum notice entitlements; these can be as long as 12 weeks for long-serving members of staff.  Additionally, if push comes to shove, the courts and tribunals can decide what ‘reasonable’ notice period ought to be implied into the contract.  When making their decision, judges will take account of the nature of the employment, the seniority of the role, industry practice and other relevant factors.  The frequency with which the employee is paid is unlikely to be a material factor.

Myth #7

“You can’t dismiss an employee who is pregnant or on maternity leave”

For good reason, pregnant employees and mums on maternity leave have a specially protected status under the law.  However, this does not mean that they are ‘bullet-proof’.  If you have a good reason for dismissing a pregnant employee (e.g. their role is redundant or they have committed an act of gross misconduct), then it may be entirely lawful to terminate their employment, as long as the decision is reasonable and a fair process has been followed.  Having said that, these sorts of dismissals throw up some additional complications that you need to factor in when assessing the risks.  For example:

  • if an employee who is on maternity leave is at risk of being made redundant, they normally enjoy ‘supercharged’ rights in relation to alternative employment and get ‘first dibs’ on any suitable roles available with the business; and
  • employees who have otherwise qualified for statutory maternity pay may continue to be entitled to receive it, even if their employment terminates before or during the maternity pay period.

These and other additional issues need to be considered when dealing with a dismissal of this nature.

Myth #8

“If an employee is working under a fixed-term contract,  I can just let it expire without running any legal risks”

This is a very commonly held misconception and we can see why employers might reasonably assume it to be true.  However, the point to bear in mind is that the expiry and non-renewal of a fixed-term contract is a dismissal in law.  This means that, like any other dismissal, it can be found to be unfair if you:

  • cannot substantiate a fair reason for the dismissal;
  • act unreasonably in deciding to dismiss; and/or
  • otherwise fail to follow a fair dismissal process.

If you are thinking of allowing a fixed-term contract to expire without renewing it, the best advice is to treat it like any other dismissal.  This means following the same sort of dismissal procedure as you would for a permanent member of staff.

Myth #9

“Post-termination restrictions are always/never [delete as appropriate] enforceable”

It’s funny how polarised people’s views on the enforceability of post-termination restrictions can be.  Some assume that whatever the written contract says will be upheld by a court, regardless of its terms.  Others assume that non-competition restrictions aren’t worth the paper they are written on.  In reality, the truth lies somewhere in between.  Admittedly, a judge starts from the position that post-termination restrictions are void and unenforceable.  After all, they potentially prevent people from earning a living.  However, if an employer can show that the restrictions reasonably protect its legitimate business interests (e.g. its customer connections, confidential information, the stability of its workforce), then a judge may be prepared to uphold them.

This is a complicated area of law and employers are well advised to think very carefully when drawing up their restrictions and even more carefully when seeking to enforce them.

Myth #10

“If I make an employee redundant, I cannot recruit someone into that same or a similar role for 12 months” 

If you are legitimately making someone redundant, then I would expect the chances of you wanting or needing to recruit for the same or a similar role to be relatively small anyway.  That said, things can change very quickly sometimes.  So if a previously struggling business suddenly experiences an unforeseen upturn in work, it is possible that a company which has recently made redundancies could find itself in need of additional staff.  If the decision to dismiss by reason of redundancy was reasonably made at the time, the need to recruit new employees a few months later should make no difference to the fairness of the original dismissal.  That said, in an ideal world, I would recommend leaving a gap of comfortably more than 3 months (and the longer, the better) between the dismissal of one employee and the recruitment of another into a similar role.

Myth #11

“You can’t provide a former employee with a bad reference”

For good reason, employers should be slow to provide a bad reference in relation to a former employee. After all, what’s in it for you?  If you give someone a bad reference, they are bound to hold it against you.  Do you really want to pick that fight?  However, when providing an employment reference, your main legal obligation is to ensure that the reference is true, accurate and fair and does not give a misleading impression.  So if you dismissed an employee for theft and you are confident that you can prove that, there is no legal reason why you cannot say as much in your reference.  That said, there is a lot to be said for the old adage: “if you can't say something nice, don't say nothing at all”.  It may be preferable to refuse to provide a reference, rather than to provide a bad one.  The impact on the employability of the employee may be much the same, but the risks for you may be significantly lower.

Are you wrestling with another employment law conundrum?

If you are struggling to identify the truth behind another potential employment law myth and need our helping in getting to the bottom of it, please contact us

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