BUSINESS MATTERS Question legal matters
This month our legal expert Martine Nathan, Partner at Teacher Stern Solicitors, addresses some frequently asked questions raised by clients in the telecoms and technology sectors.
Martine Nathan
If we lose a supply contract can we cherry-pick staff that we want to retain? Yes, usually. On the transfer of a contract from one supplier to another it is well known that the TUPE Regulations will often apply to transfer staff who are assigned to the contract from one supplier to the next. The staff do not, however, have to move if they do not want to. Ordinarily, ‘opting out’ of the transfer will amount to a resignation from the outgoing contractor. The outgoing contractor is, however, free to offer to keep the employee in a different role. The outgoing contractor can also take the lead in the process by approaching those employees and offering them the chance to stay behind in another role if they want to. Beware of contract terms that might prevent this. Sometimes, the contractor will have agreed terms with its client that prevent it from changing personnel on the contract without prior consent, or recruiting staff that are (or should be) assigned the contract.
We have just lost a team of employees to our biggest rival. How can we ensure that this does not happen again? There are two points to this answer. The first is not so much a question of legality, but a question of employee satisfaction. Employees move for a reason, and it usually means that they are not entirely happy with their current situation. This could
relate to pay, benefits, working hours, colleagues, prospects or any number of other things. In order to retain staff, employers should not be paying over the odds or being over generous, but it is important to regularly review employee satisfaction and listen to staff.
There is also a legal answer. Employers can use restrictive covenants in employment contracts to prevent employees from joining their competitors, and/or from soliciting or dealing with valuable clients and poaching employees when they have left. All employers should consider adding provisions like these to their employment contracts for new staff. Legal advice needs to be taken to ensure that the covenants are likely to stand up in court, and do not go further than is legally permissible.
Adding restrictive covenants to contracts for existing staff is more difficult. Employees cannot be forced to accept them, so there will usually need to be some incentive for them to amend their terms and sign up to this sort of thing. Employers commonly choose to negotiate and implement the source of terms at bonus time or pay rise time, or in conjunction with a promotion. In some cases, it can be permissible to dismiss employees who do not agree to sign up to the new covenants to protect the business, but legal advice should be taken based on the individual facts of the case.
An employee has resigned after his annual bonus was announced but before it was paid. We do not want to pay it to him, but he says we owe it. Firstly, check the wording of the employment contract. Many employment contracts contain terms that say that if the employee is not in employment on the day the bonus is paid, it will be forfeited. Some contracts go slightly further, and distinguish between employees who resign or are dismissed for misconduct (who would lose the bonus), or employees who are asked to leave without fault on their part (who would ordinarily keep it). In most cases, the employment contract will contain the final word on the matter. Legal cases have confirmed that it is lawful for employers to use employment contracts that allow them to retain a bonus and not pay it to departing employees, even when they have worked for the whole of the bonus year.
Other bonus provisions are less specific, but refer to ‘discretionary’ bonuses. In this case, it may be permissible for an employer to choose to exercise its discretion and not pay an employee a bonus if he or she is leaving. In order to be safe, though, the employer will need to be able to demonstrate that the bonus was being paid not just to reward past performance but to incentivise the employee for future loyalty and strong performance. The employee may be able to make out a legal claim if he or she can show that the discretion was exercised irrationally or perversely. If there is nothing in writing at all about the bonus, then in the absence of a verbal promise that it will be paid, the employer
2011
Marriot St. Pierre, Chepstow,Gwent. 16th June 2011
58 COMMS DEALER JUNE 2011
should be able to withhold it and not pay it to its ex-employees.
We recently let an employee go for poor performance. We have been asked to reference him. What should we do? Employers do not have to give a reference about former employees if they do not want to. It is very important, however, that any reference they do give is accurate, true and not misleading. In this case, the employer clearly should not give a favourable reference saying that the employee was a good performer. This would be untrue. It is also likely to be negligent for it to give an incomplete reference saying, for example, that the employee was very pleasant and popular and worked hard, while omitting to mention that the work they did was of a poor quality.
We would normally advise employers against giving a reference in these circumstances stating that the employee was a poor performer. This may cause the employee to lose the job, and they may be able to allege that the reference gave an untrue or unfair impression depending on the extent of the poor performance and the extent to which they were warned and notified about it. In these circumstances, it would almost always be advisable to give a plain factual reference that describes the employees position and responsibilities, but give no comment at all about the quality of their work. The reference should go further and say that it is the employer’s policy only to give factual references and no reliance is to be made on the contents of the reference.
m.nathan@
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