© Fox Williams LLP 2006

I started my designer clothes company a year ago and it is expanding rapidly. None of my employees have contracts. Do I need to give all employees a contract? If not, is it still a good idea for them to have contracts?
 All employers are legally required to give their employees a written statement of particulars within 2 months of starting work. This must contain certain specified information including the start date, job title/description, place of work, notice period and details of pay, hours, holidays and sick pay.

Although this is the minimum legal requirement, there are a number of other provisions which employers can include in an employment contract in order to protect their business. An express confidentiality provision will prevent the employee from being able to use or disclose confidential information both during and after employment. The contract can also set out examples of circumstances in which employment can be terminated summarily i.e. without notice or payment for the notice period, for example theft, dishonesty, violence or abusive behaviour, or incapability through alcohol or drugs. It is also useful if the contract allows the employer to deduct salary any amounts owed by the employee. Without such a provision any such deduction will be unlawful. You may also want contractual provisions governing employee's obligations during any sickness absence.

For senior or key employees, additional protection can be achieved with post-termination restrictions to prevent these employees from, for example, competing, or soliciting or dealing with certain key customers, or poaching employees, for a certain period after termination. Such restrictions must be drafted very carefully in order to be enforceable.

As your business grows, you would be well advised to establish policies which do not form part of the employment contract but provide useful guidelines for employees, such as an equal opportunities/harassment policy and a disciplinary and grievance procedure.

One of the managers at my flagship store is not pulling his weight. Stock management is poor, he seems incapable of treating my clientele properly and he is failing to manage staffing levels. What should I do?
 Where an employee is not performing, it is important to follow a fair procedure in order to reduce the risk of a successful unfair dismissal claim. All employees with one or more years service have the right to claim unfair dismissal. This is statutory right which is separate from any rights under the employment contract - (such as the right to notice of termination). Unfair dismissal compensation consists of a basic award of up to £7,800 (depending upon the employee's age and length of service) and a compensatory award, based on the employee's losses, of up to £53,500.

A fair performance procedure requires the employer to allow the employee a reasonable opportunity to improve before dismissing. You should explain to this manager exactly how he is failing to meet the standards expected, set out clearly the improvements required and set a reasonable time period within which to achieve these improvements. If after this period, the manager's performance has not sufficiently improved, you should have a further meeting to discuss performance, and again set out the specific improvements required and a reasonable further time period within which to achieve these improvements.

The manager should be made aware at all stages of the procedure that dismissal is a potential outcome of the procedure if his performance does not improve sufficiently. The manager also has the right to be accompanied by a colleague or trade union representative at these meetings.

You should note that in Autumn 2004 a minimum disciplinary procedure (which will apply also in cases of dismissal for poor performance) will be implied into all contracts of employment. Under this procedure, employers will have to write to the employee setting out details of the employee conduct, and then hold a meeting with the employee before dismissing. The employee must have a right to appeal against the dismissal decision at an appeal hearing. Failure to comply with this procedure will entitle the employee to compensation of 2 to 4 weeks' pay (capped at a maximum of £260 per week) and may also lead to increased compensation for unfair dismissal (though compensation will not exceed the cap of £53,500).

My sales director has developed close contacts with the buyers of my major customers. How can I stop her from using those contacts for the benefit of a competitor if she decides to leave?
 Whilst in employment, the sales director is subject to a duty of loyalty, and therefore if she tries to solicit customers for the benefit of a competitor during her employment this will amount to a fundamental breach of her employment contract, entitling you to dismiss her.

After employment ends, the sales director is only prevented from using or disclosing trade secrets (i.e. information of a highly confidential nature) belonging to your company, unless there are any other specific contractual provisions. In order to protect yourself against unfair competition, you should ensure that employment contracts for senior and key employees contain appropriate confidentiality obligations and post-termination restrictive covenants.

Restrictive covenants can prevent a former employee from soliciting or dealing with clients for a certain period after termination. They must be drafted carefully so that they are no wider than necessary to protect your company's customer connections. If they are too widely drafted they will be unenforceable. Non solicitation/non dealing covenants should be limited to customers with whom the sales director dealt for a certain period prior to termination, and they should last only for a reasonable period after termination. A reasonable period in this case will be the time which it would take for your company's new sales director to rebuild relationships with customers.