David L
Programme director specialised in corporate transformation and global sourcing
Checking the legality of a employment contract
I have been recently offered a position with a joint 3 month termination clause. In principle, there is no issue with that, except for the fact the my prospective employer is insisting on the following clause: "The employee is required to give a three (3) month termination period in the event that the employee wishes to leave the company. Should the employee leave the company before the end of the three month termination, the employee is obligated to pay the Company the equivalent of three months salary to the Company"
I of course refused to sign this.
Questions:
1> Is this clause legal under UK employment law?
2> Is this enforceable?
2a> If so, what mechanism can the employer use to enforce the clause?
Any comments very welcome.
Thank you much.
David
Clarification added September 17, 2007:
I have received loads of considered opinions on this subject, and I thank each of you for your time and attention. My apologies for not being able to respond in person, but know that my thanks are there.
Warm regards to all,
David
Answers (11)
Philip S
Director at Stunell Technology Ltd Owner, Stunell Technology Limited
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Philip S suggests this expert on this topic:
Susan specialises in commercial and employment law, and will offer legal advice in plain English.
David,
Sorry I cant help you with a definitive answer on the legality of the clause, however, for me it would be a 'red-flag' on the nature of the employer. How did they justify the cluase?
Mike D also suggests this expert on this topic:
Sheilah E
Owner, ★SME Management:.......... Business Management and Accounting Consultant
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I cannot state whether it is legal or not in the UK, but I would strongly advise against signing it. This clause is a huge red flag and would make me wonder if perhaps they have retention issues among their employees. Find another job with a more ethical employer. Or better yet see if they will sign an agreement stating they cannot terminate you without the same 3 month grace period. Bet they won't sign one like that, yet they expect you to.
Run far and run fast.................
Sheilah
Josephine F
Licensed NYC Psychotherapist, Hypnotherapist, EMDR therapist, and Life & Business Coach
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Hi David,
I think you should have a consultation with an employment attorney. I'm not an attorney, but I'm wondering if the contract was presented as a draft of an agreement with the understanding that you or your attorney would make changes or as a fait accompli? Do you have any leverage? Conferring with an attorney might prevent costly consequences in the future. Hopefully, there's a LinkedIn employment attorney who will respond to your question. Best of luck to you.
Regards,
Josephine Ferraro, LCSW
Eileen B
IT Professional, Information Security Quality Assurance Operations & Administration / President, CMU SEI LI SPIN
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Another non attorney viewpoint:
My understanding of any contract is to forge a binding agreement between two parties. In the case of employment, this would be an enforceable agreement. There is some good information on the site linked below (nolo.com) that you might find interesting.
Eileen
Links:
If I were you I'd find someone who specializes in UK employment law. The answer is likely to be highly specific to the jurisdiction.
The website I listed with this answer includes a paragraph which implies that *employers* might sometimes make a payment in lieu of notice, which further begs questions about *employees* making a payment in lieu of notice:
http://www.roydens.co.uk/content01.htm
=========================
Notice of Termination
If express notice periods are not provided for in the contract of employment the Employment Rights Act sets out minimum statutory notice periods. In the case of employees giving notice the statutory minimum notice is only one week. This may be too short for many employers and may cause hand-over problems depending on the seniority and responsibilities of the employee concerned. The statutory minimum notice period which employers are required to give increases according to the employee’s length of service. In addition, employers need to give consideration as to whether they need to reserve a contractual right to make a payment in lieu of notice of termination.
=======================
Links:
Phyllis P
VP, Information Technology
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From a consulting company perspective, I agreed to this but only with a 2 week notice. I have been told that a recruiting company loses a lot of money if you leave a contract early. So in order for them to lower their risk they put these clauses in. I would negotiate down to something more reasonable. Three months is pretty good. Also...I'd ask if they intend to give you a 3 month notice if they decide they no longer need your service. I think it should work both ways.
Andrew S
Technology, media and telecommunications lawyer. Partner at Charles Russell LLP
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My colleagues, who are partners in our Employment and Pensions Department, may be able to help.
Kind regards,
Andrew
Hello
1) I don't know the UK law, so I can't say.
2) As far as I can see, if you sign that contract, I would say that is enough to enforce it on you - I mean, if you sign it means you agree with that.
2a) I would say they have to sue you - since the amount is rather big, I don't think they can deduct it (automatically) in any way from your salary.
my 2 cents
Ioan
Peter C
Founder Viatec Associates (Cellular/Mobile/Wireless/WiMAX), Board Member at various companies
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David,
My initial answer would be no, that cannot be the case. I base this on employment contract law which says that there must be consideration for for a contract to be valid. i.e. you contract to work, you do the work and the conideration is that you get paid.
There is not a case whereby you get paid and then they get it back. There have been similar issues before, where large companies have tried to recover training costs. I believe the outcome was in favour of the employee as the costs were deemed unreasonable.
Peter
Stephanie O
Senior Technical Program Manager
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You really do need to hear from an expert in UK law; no other opinions will be useful.
For the benefit of all, although contracts and enforcement thereof are certainly favored in the legal systems of developed countries, not every contract is enforceable. A contract to commit a crime is just one example; others include contracts that violate public policy, such as minimum wage laws or requirements for disability insurance or workers compensation insurance. I am sure the UK has labor laws that restrict the absolute freedom of both employer and employee to contract to anything, so the only question becomes: "What is the exact letter of the law on termination penalties, if any, and how has it been applied?"
In my jurisdiction, California, there is not 1 chance in 10,000 that such a clause would be upheld against an employee, so no one would even bother trying it. For cases where there is not an employer-employee relationship, such as a partner in a legal partnership, it may be a different matter.
I agree that, as others have said, this clause is highly unusual and in fact I've never heard of such a case. Unless this is common and accepted in your industry or job function, or you are getting some unusually attractive benefit or inducement to accept (like amazing salary, hugely valuable and portable free training etc.), I would utterly reject this clause. It smacks of indentured servitude and also of a "high-control", domineering management mindset.
