The importance of ensuring employment contracts are signed and records are kept up-to-date was highlighted during the recent case of Tenon FM Ltd v Cawley.
Ms Cawley worked at facilities management company, Tenon FM Ltd. During her 10 year tenure, she held several positions and was finally promoted to Operations Director until she resigned in 2018.
After resigning she moved to a rival company, an action that Tenon alleged was in breach of the restrictive covenants in her latest employment contract. However, the company was unable to produce a signed copy of the contract. As such, the court had to decide whether Tenon could establish that Cawley was bound by the covenants.
The court decided that Cawley could not be bound by restrictive covenants that she had not signed. In addition, it was not possible to infer acceptance due to her conduct, ie continuing to work for the company after being issued with a new contract. The court noted that inferred acceptance would only be possible where the terms had an immediate effect on the employee. In this case, there was no immediacy because the restrictive covenants only applied post-termination.
Writing in Lexology Stephen Moore, partner and Hannah Pettit, trainee solicitor, both from Ashfords LLP, highlighted three key takeaways from this case.
“The court paid particular attention to the fact that Tenon had an established HR department, yet were unable to locate even one signed employment contract for Cawley,” commented Moore and Pettit. “This suggests that employers with a designated HR department will be held to a higher standard and should take special care to ensure that all personnel files are kept up-to-date.”
The court also noted that Cawley had not provided any consideration for either of the revised versions of her employment contract, issued in 2011 and 2012.
“A further warning to employers, [is] to ensure that employees receive adequate consideration when entering into a variation of their employment contract. Examples are increased salary or an additional day's paid holiday,” the pair added.
Finally, the court compared Cawley’s contract with her colleagues’ contracts. It found that the restrictive covenants were not in at least two other members of the company’s senior leadership team.
“This stresses the importance of keeping restrictive covenants consistent between your employees. Failing to use a restriction with all employees of a certain role, or all employees within a certain team, will make it harder to argue that the restriction is necessary for your legitimate business interests,” concluded Moore and Pettit.
