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By LegalEdge News

The Great Resignation and the importance of a well drafted employment contract

Many businesses are experiencing the Great Resignation. A reaction to Covid-19, causing many to re-assess their priorities and lifestyle. But employment relationships come to an end for many reasons, and when it happens the last thing you need is a difficult break-up.

A well drafted employment contract can help you navigate the end of employment. By clearly setting out everyone’s rights and obligations uncertainty and disputes can be avoided. At the start of employment it isn’t realistic to try and second guess every possible scenario that may occur at the end. However, with a little thought, you can put together a framework that works when the time comes.

Here are some suggestions:

If things aren’t working out this gives you the ability to extend the trial period or terminate the employment on short notice.

When an employee resigns they need to know how much notice to give, to whom and how – for example, at least 4 weeks by email to the HR manager. The notice period needs to be long enough for you to find a suitable replacement, and it must comply with the minimum periods set out by law.

This can be useful if you want to exclude an employee from the business and restrict them from contacting customers and staff during the notice period. It doesn’t end the contract immediately though (unlike a PILON – see below) so salary and benefits must continue to be provided in the normal way.

If an employee resigns and you do not want them to continue to work or have contact with clients / colleagues a PILON clause gives the option of ending the employment immediately and paying their salary for their notice period as a lump sum. The clause should expressly state if only basic salary will be paid, or if it will include other benefits too.

If the employee will lose their entitlement to a bonus and/or share options (or any other benefit) once they have given notice this must be stated clearly. And it will need to covered in any option scheme documents too.

To avoid paying potentially significant sums for untaken holiday days, state clearly that an employee must take outstanding holiday during their notice period.

Employees should be expressly prevented from carrying out any other work activities while employed, including during the notice period.

If drafted reasonably, restrictive covenants can apply for up to 6 or sometimes 12 months after termination. This can prevent employees from working for a competitor, dealing with or poaching clients, suppliers and/or staff.  If the employee is/was also a shareholder longer/ wider restrictions may be possible.

It needs to be clear as to what is confidential (e.g. sales targets, pricing information, etc) and the limits on its use during and after the end of the employment.

State clearly what is company property and what can/can’t be used after employment has ended. It may also be necessary to require the employee to provide passwords or access codes for company profiles etc.

Specify what must be returned and when – at the end of employment or during the notice period. Do you need to include a right to review what’s on personal devices to ensure that company data and documents have been removed?

Particularly in the case of senior employees, you may wish to appoint an interim person to carry out their duties during the notice period. It can be helpful to state this expressly and that the employee will fully assist, as required, in the handover (particularly if they are on garden leave, because they are still then on payroll). Consider if you might need their co-operation in respect of any on-going projects after they leave, and if so, state this clearly.


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