3. Starting work and the employment contract

References and employer checks

Most employers require a reference before they will employ someone. Young workers starting work for the first time are likely to come with references from school or college, plus examination results. But from then on, job offers will generally rely on employer references.

An employer generally has no obligation to provide a reference, but an employer that does provide one has a duty of care to make sure it is true, accurate, fair and not misleading. If it is not accurate because the employer has not taken proper care, the worker can bring a claim for negligence in the civil courts for any resulting financial loss (Spring v Guardian Assurance [1994] IRLR 460).

It is unlikely to be fair and reasonable for a reference to include information about complaints against an employee if these have not been brought to the employee's attention. This can also give grounds for constructive dismissal, if the reference is provided by an employer for a current employee (TSB Bank v Harris [2000] IRLR 157). However, where concerns are raised after an employee has left the employer, an employer may be able to refer to these concerns in a reference, as long as the reference makes it clear that the concerns have not been investigated:

The reference does not need to be comprehensive (Kidd v Axa Equity [1999] EWHC QB 184 [2000] IRLR 301) nor is there a legal obligation on the employer to provide a good reference. If a poor reference means that an individual does not obtain employment, there is no breach of the duty of care, provided the employer has ensured that the reference is accurate, not misleading and not malicious (Legal and General v Kirk [2001] EWCA Civ 1803 [2002] IRLR 124).

Although employers are generally not obliged to provide a reference, they may be breaking the law if they refuse to do so because the worker has made a claim against them. In the case of Jones v 3M Healthcare and others EAT/0714/00, the EAT held that three disabled workers denied or given poor references by their ex-employers because they had previously brought discrimination claims had been unlawfully discriminated against. The failure to provide a reference amounted to victimisation (see Chapter 6).

If an employer has made a job offer subject to a satisfactory reference being obtained, the contract will not take effect unless or until this happens. The prospective employer can decide whether the reference is satisfactory; the test is a subjective one (Wishart v NACAB [1990] IRLR 393). There is nothing to prevent an employer asking for references from people other than those the employee has nominated (Purvis v Luminar Leisure Ltd t/a Chicago Rock Cafe EAT/1332/99).

Although it is usually for the employer to decide whether or not the reference is satisfactory, this cannot be used as an excuse to dismiss an employee for a discriminatory reason.

In the case of Halai v Integrated Asian Advice Service EAT/0855/03, a female outreach worker was ostensibly dismissed as the result of a poor reference provided after she had begun work, but the Employment Appeal Tribunal (EAT) said the real reason was that she had claimed that she should be paid equal pay with a man doing the same job.

Checking the right to work in the UK

Since 1997 it has been a criminal offence for an employer to employ someone who has no legal right to work in the UK under the Asylum and Immigration Act 1996, which required employers to check a person's entitlement to work before employing them.

The government introduced stricter controls through the Immigration, Asylum and Nationality Act 2006 (IANA) which apply to the recruitment of workers. This law means that employers will continue to ask potential recruits for documentation that proves their right to live or work in the UK, which can include a passport, birth certificate or certificate of registration.

However, it introduced two new offences for employers: one of negligently employing an illegal worker, which is a civil offence with financial penalties; and one of deliberately employing an illegal worker, which is punishable by a fine and/or imprisonment. During 2011, £12 million in fines were issued to employers by the UK Border Agency for employing illegal workers.

Employers should ask all job applicants to prove their entitlement to work in the UK, as selecting only some individuals based on assumptions about their right to work is likely to amount to race discrimination.

Ban on pre-employment health checks

Section 60 of the Equality Act 2010 introduced a ban on asking pre-employment questions to job applicants about their health, including whether they have a disability and their previous sickness absence record, before they are offered the role.

There are exceptions. In particular:

• asking an applicant whether s/he has a disability before the interview so as to organise reasonable adjustments at interview is still allowed;

• asking whether an applicant will be able to carry out a function intrinsic to the role (once reasonable adjustments have been made) is still allowed; and

• anonymised questions for the purposes of diversity monitoring are permitted, although the information obtained should not be available to the person doing the selecting.

The Equality and Human Rights Commission is responsible for enforcement. For further information see Chapter 6: Discrimination.

Criminal convictions

The Rehabilitation of Offenders Act 1974 says that individuals whose convictions are regarded as "spent" after a period of rehabilitation do not have to declare those convictions when applying for a job, unless they work in certain specified areas of work such as nursing or teaching. Section 4(3)(b) of the Act also makes it unfair to dismiss someone because of a spent conviction, or to prejudice their employment in any way.

The period of rehabilitation varies according to the sentence and the age when convicted, although sentences of at least 30 months served in a prison, youth custody or a young offenders' institution are never spent. The different periods of rehabilitation are set out in section 5 of the Act: for example, a conviction of less than six months' imprisonment would be spent after seven years.

In the case of Wood v Coverage Care [1996] IRLR 264, an employee with past convictions was made redundant. The EAT held that her employer was entitled to refuse to consider her for alternative employment in a residential home for the elderly, an area of employment where convictions were never spent. The fact that her duties were only administrative was not relevant.

Although in most cases it is unfair to dismiss someone because of a spent conviction, an employee will still need to meet the normal qualifying conditions for unfair dismissal (see Chapter 10) in order to bring a claim. If a conviction is not spent, but the employer has not asked for details of convictions, there is no obligation on the employee to disclose it.

Under the Police Act 1997, a number of roles, especially those involving children or young adults, entitle employers to ask for a criminal records check. There are two types of disclosure: "enhanced" where checks are needed on job applicants working with children, the elderly or vulnerable, and "standard" for certain other types of work. Checks are carried out by the Criminal Records Bureau (CRB), whose Code of Practice on disclosure of information is available at: www.crb.homeoffice.gov.uk/PDF/Code%20of%20Practice.pdf

Individuals are sometimes asked to meet the cost of CRB checks themselves. Especially for people on a series of short-term contracts, this requirement for multiple checks can be onerous. Accordingly, the government has announced that it intends to introduce portable CRB checks. This will take the form of an online subscription service which will allow organisations to verify that there has been no change to an individual's record since it was last assessed, rather than carrying out a full search. Enabling measures for this are included in the government's forthcoming Protection of Freedoms Bill which is expected to be in force from early 2013.

The employment contract

The employment contract is fundamental in any employment relationship because it sets out the terms and conditions under which the work is to be done. Employees should know what those terms are and how to enforce them. Once an employer has offered a job and the employee has accepted it, there is a legal contract, even if there is nothing in writing. If the employer subsequently withdraws the offer, the employee may be able to claim damages for breach of contract (Sarker v South Tees Acute Hospitals [1997] IRLR 328).

In most cases, damages are limited to the length of notice required to terminate the contract legally. But if the contract is for a fixed period of time and there is nothing allowing for it to be ended earlier, damages could be recovered for the whole period, as the High Court ruled in Gill and others v Cape Contracts [1985] IRLR 499.

Although a verbal offer and acceptance can still be binding, proving it may be difficult. In the case of Wright v Canterbury Christ Church University College EAT/0428/04, the EAT held that an offer is binding if a "reasonable person" would infer from the words that the employer intended to be bound by the offer once it was accepted - whether or not this was actually the employer's intention.

To enforce the contract, you need to know who the employer is. This should be given in your written statement of employment particulars (see below). Employees of charities and voluntary organisations are likely to be employed by the management committee, although the individuals on that committee may change (Affleck v Newcastle Mind [1999] IRLR 405). A company that argued it was not an individual's employer in an attempt to avoid liability for unpaid wages was given short shrift by the EAT, as its name appeared on the wage slips (Alternative Welding Services Ltd v Knox EAT/0099/04).

In the absence of a TUPE transfer (see Chapter 12) the legal identity of an individual's employer cannot be changed without the employee's consent (Gabriel v Peninsula Business Services [2012] UKEAT/0190/11/2302).

Academies are spreading quickly, but local authorities continue to employ most teachers , even though there may be local management of schools (Askew v Governing Body of Clifton Middle School [1999] IRLR 708). School governing bodies can be the employer in some cases. Local authorities are liable for the actions of elected councillors where these affect the ability of employees to carry out their duties (Moores v Bude-Stratton Town Council EAT/313/99 ([2000] IRLR 676)).

Written statement of employment particulars

Under sections 1 and 2 of the Employment Rights Act 1996 (ERA 96), employees have the right to a written statement of particulars of their employment. This must be given to the employee no later than eight weeks after their employment begins, and must include:

• the names of the employer and the employee;

• the date on which employment began and the period of continuous employment;

• the scale and rate of remuneration, pay intervals and the method of calculating pay;

• terms and conditions relating to hours of work and holiday entitlement (including public holidays);

• the job title or description; and

• the employee's place of work.

These must all be detailed in a single document. However, provided that they are given within the two-month deadline, other employment particulars can be documented by instalments. These are:

• whether employment is permanent or for a fixed-term;

• details of sickness, pensions and notice;

• details of the employer's disciplinary and grievance procedures (see Chapter 10: Disciplinary procedures);

• details of collective agreements affecting employment; and

• details of any requirements regarding work outside the UK.

The written statement can refer the employee to another document (provided there are opportunities for reading it at work) for employment particulars relating to sick leave and pay and pension schemes.

Overtime is not mentioned in this list. However, in the case of Lange v Georg Schunemann GmbH C-350/99 ([2001] IRLR 244), the European Court of Justice (ECJ) ruled that, if overtime is an essential element of the contractual relationship so that employees should normally do it if requested, a reference to it must be included in the written statement.

According to the ECJ in the case of Kampelmann and others v Landschaftsverband Westfalen-Lippe and other cases C-253/96 to C-258/96 ([1998] IRLR 333), just putting the job title without any further description is not sufficient.

As far as notice requirements are concerned, it is sufficient for the statement to refer the employee to the law on the matter (see Chapter 10: Termination with/without notice) or to a collective agreement, as long as there are opportunities to see it at work. If there are no terms relating to any of the above items, this has to be stated.

The right to a written statement does not apply only to new employees.Existing employees can ask for a statement of their particulars if they do not have one.

If the employer does not provide a written statement, the employee can refer the matter to a tribunal at any time while they are working for the employer or within three months of the employment ending (or later, if a tribunal decides it was not reasonably practicable for them to do so within the three months).

A tribunal can determine what terms and conditions have been agreed, based on whatever evidence is available, but it cannot change terms that have been agreed (Eagland v BT [1992] IRLR 323).

If the particulars of employment change, the employer must give the employee a written statement of the change within one month of the change (section 4, ERA 96).

Terms of the contract

The contract sets out the rights and obligations of the employee and the employer. Contractual terms can be written down or verbally agreed. They can be express or implied, and can include terms agreed in a collective agreement or through custom and practice.

Express terms

Express terms are those that have been specifically agreed by the employer and employee. These take precedence, and an express term can usually only be overridden if it attempts to take away a statutory right. For example, an express term saying that a worker is entitled to two weeks' holiday would be overridden by the Working Time Regulations 1998, which give a right to 5.6 weeks' holiday (see Chapter 4: Holidays).

If a contract term is ambiguous, the tribunal will look at what has happened in practice to interpret it. In Driver v Air India Limited ([2011] EWCA Civ 830), the fact that the employer had paid overtime in the early years of the employment contract was highly relevant to the existence of a contractual obligation to pay for overtime, as was the behaviour of senior officials who accepted that the company ought to settle Mr Driver's overtime claims.

Any ambiguous contract term will generally be interpreted against the interests of the party who insisted on including it - usually the employer.

In Cook and others v Diageo EAT/0070/04, the EAT held that the employer was entitled to change the dates of additional holidays so that they no longer coincided with bank holidays, because the contract said that it could set them according to local circumstances. However, employees of another company successfully argued that they were entitled to triple pay on bank holidays, despite a written agreement that suggested they should receive only double time. This was because the practice of paying triple time had operated for more than 30 years and continued after the new agreement was introduced. The Court of Appeal said this made the term ambiguous, and it could therefore take account of what had happened in practice to decide what employees were entitled to (Dunlop Tyres v Blows [2001] EWCA Civ 1032 ([2001] IRLR 629).But if the term is too uncertain, the tribunal may be unable to enforce it.

In the case of Fontana v Fabio EAT/140/01, a contractual term which obliged the employer to pay pension contributions but did not specify the amount was held to be too unclear to enforce. There was no way of assessing what might be a reasonable amount, since different employers pay different levels of contributions. Furthermore, the EAT noted that the employee had never suggested to the employer what he thought might be a reasonable contribution.

Private health insurance, where available, is almost always an express term (Marlow v East Thames Housing Group ([2002] IRLR 798).

An equal opportunities policy can, in certain circumstances, amount to an express term (Taylor v Secretary of State for Scotland [2000] IRLR 502). But some company policies may only amount to statements of principle, rather than of contract. In the case of Wandsworth LB v D'Silva [1998] IRLR 193, the Court of Appeal ruled that the authority's sickness absence procedure was not contractual and could therefore be changed unilaterally without causing a breach of contract.

Mobility clauses (permanent or temporary relocation) must be expressly agreed and should be drawn to the attention of the employee when the contract is entered into. They should not be hidden, for example, in a staff handbook.

Implied terms

If terms have not been expressly agreed, they can be "implied" through conduct or custom and practice. If the conduct of the parties demonstrates that they have agreed a certain term, it may be implied into the contract. However, it is not necessarily enough to show that something has happened for a certain length of time. There must be evidence that both parties intended it to be part of the contract. For example, in the case of North Lanarkshire Council v McDonald & another UKEATS/0036/06, the fact that workers had worked half an hour of overtime every day for a year did not make the extra hours a contractual right.

In the same way, terms that have been regularly adopted in a particular trade or industry or in a particular area and have become standard practice can be said to be implied through custom and practice. The term must be "reasonable, notorious and certain" (notorious meaning that it is well known).

If a term is truly discretionary it cannot be regarded as a contractual right through conduct or custom or practice, but the employer must be able to demonstrate that it exercised its discretion whenever that term was applied. In the case of Horkulak v Cantor Fitzgerald International ([2004] IRLR 942), which concerned an employee's entitlement to compensation in respect of a discretionary bonus following his successful claim for wrongful dismissal, the Court of Appeal held that where a term is discretionary, there is an implied term that the employer will exercise its discretion genuinely and rationally. For a discussion of the question whether a term is discretionary or a contractual right in the context of enhanced redundancy pay (see Chapter 11: Redundancy pay).

There is no implied term that on promotion an employee should be better off:

An employee's implied terms include fidelity and good faith - for example, not giving away trade secrets (Ticehurst and Thompson v BT [1992] IRLR 219). The terms of a contract can also be implied if there would be no workable contract without them. These can be terms that both parties would have agreed to, had they thought about it, or terms that have been held to be essential to all contracts of employment.

Well-established implied terms include the duty not to destroymutual trust and confidence, which binds both employer and employee. Neither party should, without "reasonable and proper cause", act in a manner that is likely to destroy the trust or confidence that exists between employer and employee.

If the employer fundamentally breaches the contract (for example, the duty of mutual trust and confidence) this can give rise to a right to resign and to claim constructive unfair dismissal in the employment tribunal (see Chapter 10: Constructive dismissal).

In the case of Malik v BCCI [1997] UKHL 23 [1997] IRLR 462, the House of Lords (now Supreme Court) ruled that the Bank of Credit and Commerce International (which had gone bust) was responsible for its former employees' inability to secure new employment because of its reputation, based on dishonesty or corruption. The employees were entitled to "stigma damages", based on a breach of the implied term of mutual trust and confidence.To succeed, employees must have credible evidence that the stigma had a "real or substantial effect" on their ability to get a new job, and be able to demonstrate actual financial loss (BCCI v Ali (No 3) [2002] EWCA Civ 82 ([2002] IRLR 460).

Employers can also be in breach of an implied contract term if they negligently misrepresent a situation, as a result of which employees take or accept a course of action which they would otherwise have rejected. In Hagen v ICI Chemicals [2002] IRLR 31, employees agreed to transfer under TUPE (see Chapter 12) because they had been told their pension rights would be more or less the same, but this was not the case and some employees lost out substantially. The High Court held that this was a breach of contract and that the employees could sue their old employer for damages.

Where a term has not been negotiated with an individual employee, the Supreme Court has held that the employer has an implied duty to take reasonable steps to bring that term to their attention (Scally and others v Southern Health Board [1991] IRLR 522). The ruling came in the case of four doctors who were unaware of their right to purchase additional years towards their pension entitlement.

The extent of this duty was considered by the Court of Appeal in the case of Ibekwe v London General Transport Services Ltd ([2003] IRLR 697):

The duty to inform does not oblige the employer to advise employees of their best choice (University of Nottingham v Eyett [1999] IRLR 87) or to protect their economic well-being (Crossley v Faithful & Gould Holdings ([2004] IRLR 377)). In the case of Reda v Flag Ltd ([2002] IRLR 747), the employment contract gave the employer the right to choose how to terminate it: either at the end of its term or with pay in lieu. There was no implied term that the choice will be exercised in a way that would be most beneficial to the employee (see Chapter 10: Dismissal).

Psychiatric harm

Employers also have the implied duty of care towards their employees to provide a safe system of work and a suitable working environment, as well as a duty in negligence. In Walker v Northumberland CC [1995] IRLR 35, the High Court held that this extends to a duty not to cause an employee psychiatric damage, where it is reasonably foreseeable that the employee might suffer psychiatric harm as a result of the employer's actions (or failure to act).

A breach of this duty of care can give rise to a claim for damages in the civil courts as a personal injury claim, if the employee can show that the injury was foreseeable. In 2002, the Court of Appeal set out the principles for dealing with psychiatric injury claims arising from stress at work in a leading case, known as Sutherland v Hatton ([2002] IRLR 263).

The key to establishing liability for any sort of work-related injury is "foreseeability" - to what extent was this particular kind of harm foreseeable to this particular employee by a reasonable employer? A claimant is more likely to succeed if there is evidence that the likelihood of injury has been brought to the employer's attention, for example because the employee had a previous period of sickness absence linked to stress, or is known to have suffered from earlier mental health problems such as anxiety or depression. The employer's liability is often triggered by failure to provide sufficient support when a person returns to work after a period of absence. See for example, Barber v Somerset CC [2004] UKHL 13.

The Courts have emphasised that an employer is not automatically liable just because an individual can be shown to have suffered stress as a result of work (Hartman v South Essex Mental Health and Community Care NHS Trust [2005] EWCA Civ 6). This case also demonstrates that an employer cannot be assumed to be aware of a pre-existing condition if this was disclosed confidentially to occupational health as part of a pre-employment health screening.

Equally, employers accused of psychiatric harm caused by bullying are only likely to have breached the implied duty of care if they knew, or should have known, about the risk to employee's health. This underlines the importance of spelling out these risks in particular cases, so that employers cannot later claim that they did not foresee the risk of harm.

In Dickens v O2 plc [2008] EWCA Civ 1144, Ms Dickens was promoted in the space of 10 years, from being a secretary to a management accountant and on to Finance and Regulatory Manager. Ms Dickens, who had no formal accountancy training, was then assigned to conduct audit work with which she struggled (having not received enough training and support). Ms Dickens had a crisis at work causing her to go home. She said that she could not cope and was suffering from stress and depression including Irritable Bowel Syndrome. She was frequently late to work and was asked to take a sabbatical. Her employer referred her to its confidential counselling helpline and only subsequently to occupational health.

The Court of Appeal decided that Ms Dickens' illness was reasonably foreseeable and that O2's failure to address her work issues had aggravated her depressive condition. The Court found that O2 should have sent Ms Dickens home and instructed occupational health to investigate earlier. The employer was liable for failing to do anything of substance.

In the case of NWT Freight Forwarding v Owen EAT/0643/01, a requirement for a driver to work without a reasonable break was found to be a breach of contract:

Employers are also liable if their employees act in a way that would breach a contract and as a result cause harm to a third party to whom the employer owes a duty of care.

Works rules and collective agreements

Works rules, guidelines or rules about how work should be carried out can be part of the contract, even if the employee has no option but to accept the rule.

Although most collective agreements are not legally binding on the parties who have concluded them (the employer and the union), items within the agreement that can be incorporated into the individual's contract become binding conditions of that contract.

A company reached an agreement with the T&G general union giving workers the right to 20 days' leave plus bank and public holidays. The company then published a staff handbook which said that bank and public holidays were part of the 20 days. The EAT held that the collective agreement's effect was to amend existing contracts, and the employer could not unilaterally change them (Wood Hall Personnel & Transport v Harris and Gonsalvez EAT/156/02).

Tribunals have to look at the "contractual intention" of the parties, when deciding whether the terms of a collective agreement are incorporated. In the case of Kaur v MG Rover ([2005] IRLR 40), the Court of Appeal held that a term in a collective agreement which stated that there would be no redundancies was "aspirational" and did not amount to a contractual term. A similar conclusion was reached by the Court of Appeal in the following case:

Changes agreed in negotiations are binding on all employees, even if they might not like what has been negotiated, particularly where a considerable amount of time has passed before they voice their objections (Henry v London General Transport Services ([2002] IRLR 472)).

In Trotter v Grattan EAT/0179/03, a collectively agreed stop and search policy was incorporated into the contracts of every employee, even if they had not all individually agreed to the policy:

If a workplace rep has apparent authority to negotiate, the employer can reach a deal at that level, even if the procedures say that a full-time official should be informed of any deals concluded (Harris v Richard Lawson Autologistics ([2002] IRLR 476)). However, if a change has not been agreed by all recognised unions, it may well be the case that it is not universally incorporated:

Once a change is incorporated into an employee's contract, it becomes a binding contractual term. Neither side can revert to the previous contractual arrangement without a further agreement.

Illegal clauses

If the employer proposes something illegal in the contract, such as a method for non-payment of tax by paying "cash in hand", or paying part of the salary as "expenses", employees need to be wary. It may mean that they cannot enforce any part of the contract, including statutory rights under it.

For an employee to be barred from enforcing employment rights on the grounds of illegality, a tribunal must identify the facts that made performance of the contract illegal, and must establish that:

• the employee knew that it was illegal; and

• the employee actively participated in the illegality (Kaid v Gruppo EAT/0546/03).

In Wheeler v Qualitydeep [2004] EWCA Civ 1085, the Court of Appeal considered the case of a Thai employee who had only received two pay slips in three years. Although Ms Wheeler's husband was a native Englishman, she barely spoke English and was unaware of what the Revenue's requirements were. The Court of Appeal found that there was insufficient evidence that Ms Wheeler was aware of the employer's tax fraud. Accordingly the employee was not prohibited from bringing a claim.

In Blue Chip Trading Ltd v Helbawi UKEAT/0397/08, the EAT examined a claim made by a foreign student who worked nights as a security guard:

An employee who participates in an illegal contract may not be able to bring a claim of unfair dismissal. The High Court has held that this is not a denial of the right to a fair trial under human rights law (Soteriou v Ultrachem ([2004] IRLR 870)).

However, employees have been allowed to bring unfair dismissal claims in cases where:

• the employer refused their request to make arrangements to pay their tax and National Insurance (Warp Technologies Holdings v Nunoo and Vermani EAT/0527/04); or

• they were paid occasional sums cash in hand (Annandale Engineering v Samson [1994] IRLR 59).

Although there have been cases where employees have been denied employment rights even though they had not known what they were doing, in the joined cases of Enfield Technical Services Ltd v Payne UKEAT/0644/06 and Grace v BF Components Ltd UKEAT/0367/06, the EAT said this had only happened because they had misrepresented the situation in some way by, for example, declaring part of their wages as expenses.

Employers cannot usually avoid discrimination claims just by claiming that the contract is illegal. For example, in Leighton v Michael [1996] IRLR 67, an employee was allowed to bring a sex discrimination claim even though she had turned a blind eye to her employer's failure to deduct tax and national insurance.

However, where a discrimination claim is "inextricably linked" to a claimant's illegal behaviour, a tribunal may well decide not to allow it to proceed. For example, a claimant who worked in the country illegally, knowing he lacked the necessary permit, was not allowed to bring a discrimination claim (X v Governing Body of Addey and Stanhope School [2004] EWCA Civ 1065). For a recent startling example:

Restrictive covenants

If an employer wants an employee to be bound by terms after their employment has ended - for example, to restrict who they can work for or to protect confidential information - they must include a specific term in the contract. This is called a restrictive covenant.

There are limits on the extent to which an employee can be bound by a restrictive covenant. A clause that is a restraint of trade is unenforceable, but a clause that protects an employer's legitimate business interests is allowed.

A person could set up in competition with a former employer, but a restrictive covenant may prevent them from soliciting or having dealings with the former employer's customers or from taking similar employment for a period of time.

A restrictive covenant will only be enforced if it is reasonable. This will depend on:

• the extent to which it tries to limit the employee's activities;

• the geographical area covered; and

• how long it lasts for.

If a term is too wide it will not be enforced:

The Court of Appeal ruled that a clause preventing an employee from working in any capacity in any business within the UK for anyone who was in competition went beyond what it was legitimate to protect and was unenforceable (Wincanton v Cranny [2000] IRLR 716).

The Court of Appeal held that a clause entitling an ex-employee to receive commission payments as long as he did not work for a competitor for a year was an unreasonable restraint of trade (Marshall v NM Financial Management [1997] IRLR 449).

Employees who are dismissed in fundamental breach of contract (see Chapter 10: Dismissal) are released from their obligations under that contract. This means that any restrictive covenants (other than in relation to the duty of confidentiality) cannot be enforced (Rock Refrigeration v Jones [1996] EWCA Civ 694 [1996] IRLR 675).

Even if a restrictive covenant is valid, an employer wishing to rely on it must still show that a breach will do it some harm. In the case of Jack Allen (Sales & Service) Ltd v Smith [1999] IRLR 19, the Court of Session refused to enforce restrictive covenants because the employer had been unable to identify any real loss.

Contract changes

Employers should never introduce contract changes without consulting either the union, other employee reps (if there is no recognised union) or the individual employee.

Contracts may be changed lawfully:

• where the contract allows for a change - for example, if there is a reasonable mobility clause (which has been recently exercised) allowing the employer to change the place of work;

• if the parties agree to the change;

• through collective bargaining; or

• by terminating the existing contract and offering new terms (although this could amount to an unfair dismissal - see Chapter 10: Unfair dismissal).

If an employer insists on changing terms without agreement, this is a unilateral variation of contract and the employee may be able to pursue a claim for breach of contract (see below).

Agreement to a change of contract can either be "express" (the employee verbally consents or signs a new contract, for example) or "implied" by the employee's conduct. If an employer announces that the hours of work will change from a 9.30am start to a 9.00am start and the employees come in at 9.00am the next day and carry on coming in at 9.00am without objecting, this is an implied agreement to change their hours to a 9.00am start - even if they have not said "yes" or "no" to it.

It is important that employees are made aware that a failure to oppose a change could mean that they will be taken to have accepted it and may not be able to challenge it at a later date.

However, this is not necessarily the case if the proposed change does not take immediate effect:

If the terms change, the employer must issue a new statement of employment particulars detailing the changes within a month (section 4, ERA 96). If the employer changes its name, a new statement must be provided, which must include the date on which the employee's continuity of service began.

In workplaces with a recognised union, contractual changes usually occur through collective bargaining. Collective agreements typically are incorporated into individual employees' employment contracts by a specific reference to the agreement in the contract. However, if changes have always been made through collective bargaining in the past, this might be taken as implied agreement to changes made in that way (see Works rules and collective agreements).

Sometimes, the contract of employment itself may seek to allow for changes to the terms and conditions. For example, it may include a mobility clause purporting to permit the employer to change the place of work, or a flexibility clause allowing it to change employees' duties.

If there is an express clause allowing for a change, there is no implied term that this must be exercised in a reasonable way. However, the employer can only impose it in such a way that the employee can comply, and it must not do so in a way that destroys trust and confidence (White v Reflecting Roadstuds [1991] IRLR 331).

Also, a change for which the employer fails to offer any consideration (something in exchange), or results in too much being asked of the employee, may be a breach of the implied term of trust and confidence (St Budeaux Royal British Legion Club v Cropper EAT/39/94).

In Land Securities Trillium Ltd v Thornley ([2005] IRLR 765), the EAT held that a flexibility clause did not require the employee to do whatever the employer asked:

An employer may be able to force employees to move to another location instead of making them redundant if there is a mobility clause in their contract (Home Office v Evans & Laidlaw [2007] EWCA Civ 1089) (see Chapter 11: Redundancy). Note that there is no entitlement to be paid to relocate unless the contract says so. However, in United Bank v Akhtar [1989] IRLR 507, a requirement for an employee to relocate from Leeds to Birmingham the following week with no relocation expenses was held to be a breach of contract, because the employee was unable to comply. Reps should also consider whether the effect of a mobility or flexibility clause is discriminatory (see Chapter 6) or in breach of terms protected following a TUPE transfer (see Chapter 12).

Mobility clauses generally tend to be interpreted narrowly, and any ambiguity will usually be resolved against the party trying to enforce them (almost always the employer). Especially in a TUPE transfer, this can have the effect of defeating the clause altogether. For two recent examples, see Tapere v South London and Maudsley Trust [2009] UKEAT 0410/08/1908) and Abellio London Limited v Musse (UKEAT/0283/11), both discussed in Chapter 12: TUPE transfers.

Breach of contract

If the employee does not agree to proposed changes and the employer goes ahead and changes them unilaterally, this is generally a breach of contract. The employee can do a number of things in response:

• accept the change;

• refuse to work under the new terms - it is then up to the employer to decide what to do;

• object to the new terms but carry on working under them while they take legal action;

• carry on working but claim unfair dismissal (if there is a substantial difference in terms); or

• resign and claim constructive dismissal (if there is a fundamental breach).

See also Chapter 10: Dismissal.

Employees who continue working following a breach of contract may be taken to have accepted the change and therefore waived their right to pursue a breach of contract claim. If they wish to challenge the breach, it is important for them to make it clear that they do not accept the changes, and to act quickly in getting legal advice and in pursuing a claim. If they are not immediately aware that there has been a change, they should protest as soon as they become aware of it.

An employee cannot bring a breach of contract claim in an employment tribunal unless the employment has ended. In most cases, the only legal action an employee can take for a breach of contract while they are still employed is in the civil courts (County Court or High Court).

Employees may also choose to take this route rather than the tribunal route in other circumstances - for example, if their claim is worth more than £25,000; or because they are past the tribunal time limit. The time limit for breach of contract claims in the civil courts is six years (as opposed to the three-month limit in employment tribunals). For example, in Birmingham City Council v Abdullat [2011] EWCA Civ 1412, the Court of Appeal confirmed that 174 former dinner ladies could bring equal pay claims against the Council as breach of contract claims in the civil court after they missed the deadline for a claim in the employment tribunal.

A court has the power to order the employer to restore the contract to its original provisions, and to award damages (losses). The House of Lords (now Supreme Court) upheld a High Court ruling in the case of Rigby v Ferodo Ltd [1987] IRLR 516, where the employer had imposed a pay reduction:

Note that in these circumstances, a statutory claim in the employment tribunal for unlawful deduction from wages would usually be a cheaper, simpler and less risky way forward than a claim for breach of contract in the civil courts. (See Chapter 4: Unlawful deduction of wages). An unlawful deduction of wages claim is also better if there is a risk of the employer trying to counter-claim for breach of contract by the employee (see Other remedies).

It is important to note that in Rigby, the employer tried to impose the contract change without the consent of the workforce (express or implied). The case illustrates how contracts cannot be changed unilaterally by the employer. However, employers who fail to secure the consent of the workforce to a contract change may decide to give notice to end the contracts of employment, while at the same time offering new (usually less favourable) terms and conditions. A large number of employers, especially local authorities, have been taking this draconian step since the start of the economic downturn.

If an employer terminates the existing contract and offers new terms, this is not a breach of contract, as long as the employer gives adequate notice (either the statutory minimum or the amount stated in the contract, whichever is longer) (Kerry Foods v Lynch EAT/0032/05 ([2005] IRLR 680)). Employees in this situation can bring a claim for unfair dismissal as long as they have sufficient period of service.

Whether the dismissal is fair will depend on whether the employer had a good business reason for introducing the change and acted reasonably in all the circumstances. Employers will usually argue that the dismissal is fair for "some other substantial reason" (see Chapter 10: Dismissal).

Where an employer terminates 20 or more employment contracts with immediate offers of re-engagement, this will trigger the duty to engage in collective consultation with the union and potential liability for a protective award (GMB v Man Truck & Bus UK [2000] IRLR 636) (see Chapter 11: Redundancy).

If changes to a contract are substantial, an employee may sometimes be able to accept the new terms and still bring a claim of unfair dismissal without having to resign and claim constructive dismissal, although such cases are rare. For an example, in the following case:

The same principle was applied in Alcan Extrusions v Yates and others [1996] IRLR 327, where the employer's fundamental change to the shift system resulted in different hours of work including working on weekends and bank holidays.

Other remedies

If the contractual change results in a loss of pay, a worker can bring a claim under Part II of the ERA 96 for outstanding wages (see Chapter 4: Deductions and underpayments). The EAT has also confirmed that a failure to pay wages on time is an unlawful deduction from wages (Elizabeth Claire Care Management Ltd v Francis [2005] IRLR 858).

An employee may be able to get an injunction (interdict in Scotland) via the civil courts to prevent their employer changing the contract before any breach occurs, or to force the employer to follow a particular contractual procedure before reaching any decision on change.

It is possible (although rare) for employees also to be sued for breach of contract by the employer. In Attorney General v Blake [2001] IRLR 36, the House of Lords (now Supreme Court) held that employers can take account of any profits made by an employee as a result of their breach, and can claim damages based on these.

However, it is often difficult for an employer to establish the nature of the financial damage caused by an employee's breach. In Giraud v Smith [2000] IRLR 763, the EAT held that an employer could not enforce a contractual clause saying that employees who left without giving proper notice had to pay the employer the equivalent of their notice.

Remember that an employer is only able to bring a claim for breach of contract against an ex-employee in the employment tribunal if that individual has already brought a tribunal claim for breach of the employment contract.