CONTRACTS - 07.05.2020

The pitfalls of unsigned employment contracts

Although there’s no legislation requiring employment contracts to be signed by employees to be binding, obtaining their signature is best practice as it provides clear evidence of their acceptance of the terms. But what’s the risk with an unsigned contract?

Express consent

When you issue a new starter with an employment contract, you should always provide two copies, one for them to sign and return (either manually or electronically) to signify their agreement to its terms and the other for them to retain (see Follow up ). In most cases, the employee will sign and return the document within a few days, you will place it on their personnel file and that’s the end of the matter - those are the terms they’ve agreed to be bound by, even if they didn’t bother to read the contract properly. Do put a system in place though to stop unsigned contracts slipping through the net, e.g. make a note to send the employee a chaser letter after a week if they haven’t returned it (see Follow up ). It may transpire that they haven’t yet signed it because there are terms in it that they don’t understand or don’t agree with. So, ensure your chaser letter also asks them to contact you if they have any queries or would like to discuss any of the contract’s terms.

Pro advice 1. A quick discussion with the employee should hopefully resolve any concerns and they will then sign the contract but do be prepared to amend specific terms if necessary following your discussion.

Pro advice 2. A contract must be agreed, either expressly (in writing or verbally) or impliedly (by conduct) to be enforceable, but unsigned employment contracts create uncertainty as to whether the terms have been accepted by the employee. Importantly, terms within a contract are each construed separately, meaning some terms within it may be accepted but others may not be.

Implied consent by conduct

Where a contract remains unsigned, the employment tribunals and courts will usually determine acceptance of it based on the employee’s conduct.

Pro advice 1. If a contract term has an immediate practical effect on the employee and they continue to work without specifically objecting to it, a court is likely to conclude that they’ve impliedly consented to it by their conduct, and therefore it’s enforceable, provided it’s fair and reasonable. This is sometimes called the principle of “deemed acceptance” , and it can apply to the terms that operate on a day-to-day basis, such as hours of work, rest breaks, pay, holidays, job duties, etc.

Pro advice 2. There is no set amount of time after which deemed acceptance applies - it will depend on the circumstances of the case.

Pro advice 3. Conversely, if a contract term has no immediate practical effect on the employee, such as terms relating to notice periods to terminate employment, restrictive covenants, etc., it’s impossible to infer acceptance by conduct because the terms relate to the future. The employee’s silence, or lack of objection, is insufficient to indicate their implied consent to these types of terms. You will then have difficulties later if you need to enforce these terms and the employee argues that they didn’t ever accept them, either expressly or impliedly through their actions.

Pro advice 4. Under s.13 Employment Rights Act 1996 a deduction from the employee’s wages won’t be unlawful if it has been required or authorised to be made by virtue of a relevant provision of their written contract, and here there’s also no explicit requirement in s.13 that the contract must have been signed by the employee. But without a signature you may struggle to evidence that the contract was provided to the employee before the deduction was made from their wages.

Letter enclosing contract of employment

Letter requesting return of contract of employment

The key risk is that certain terms of the employment contract, i.e. those with no immediate practical effect on the employee such as restrictive covenants, will be unenforceable. Therefore, always ensure you obtain a signed version of the contract from the new employee as soon as possible.

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