Specialist Employment Solicitors
It’s surprising how often this query comes up. For many employers, especially those with a number of staff but without a dedicated HR person, it’s not unusual to find one or two members of staff never actually got round to signing their contract of employment.
So what happens when an employer comes to try to enforce part of the contract? Can they rely on it? What are the legal implications?
The starting position is simple – if you sign the contract, you’re bound by it, even if you did not you read it (unless of course there has been some type of misrepresentation or fraud).
But is the reverse true? Not necessarily.
What affects enforceability of an unsigned contract?
A contract does not necessarily have to be in writing or indeed signed – any contract can be agreed verbally – or implied through the behaviour of the parties.
In looking to decide whether or not an unsigned contract is enforceable, the court will have a good look at the behaviour of both parties – in particular, has any money changed hands under the contract [ e.g. has a salary been paid?] and have employer and employee actually conducted any of the terms of the contract.
If an employee has received a salary and if both employer and employee have been acting under the terms of the contract – it’s more likely that that contract of employment will be both valid and enforceable.
The term of the contract in question will also need to be both reasonable and fair, and it’s best if the employee has never objected to it.
In these circumstances, arguing that an unsigned contract is entirely enforceable is probably a very weak one, and the employer should be able to rely on the contract, even if it remained unsigned.
Having said that, the safest position is always to have a signed contract on file for each and every employee.
Even if an unsigned employment contract is held to be valid – some of its individual terms may not be.
The reason for this is simple. In these circumstances, each term within the contract must be looked at separately – so while the employment contract in general could be valid, individual terms might not be. This largely depends on the conduct of the parties.
So while, for example, the fact that an employee turns up to work as agreed and is paid a salary, would probably be sufficient evidence to prove that there is a contract of employment, other terms which have not been tested, (e.g. any restrictive covenant) may not automatically be included.
In fact it is the kind of contractual term dealing with a departing employee that may be hardest to prove in the absence of a signed contract. Gardening leave is unlikely to be enforceable, you may have difficulty with establishing ownership of intellectual property created by the employee during employment. and any restrictive covenant, limiting their future work for a competitor locally, may also be difficult to establish
In short, an unsigned contract of employment can create uncertainty.
Our advice for employers – if you have not already got one in place, construct a system to make sure that everyone signs their employment contract and that every new job automatically involves a new contract – and if you’re ever unsure about whether or not you can rely on an unsigned contract, speak to one of our specialist employment lawyers.
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