Costly Fixed Term Contract Terms
The importance of checking your employee contract terms and making sure that they are fit for your purposes was illustrated by a recent case decided by the Employment Tribunal.
When two parties enter into a contract they are promising to each act in accordance with the terms agreed, and this is the same with regards to employment contracts.
If one party to the contract breaches the terms and the other party suffers a loss or is at a detriment as a result, they are entitled to obtain compensation for their loss caused by the other party’s breach.
For example, if an employment contract contains a clause that the employer will provide the employee with 6 months’ notice and there are no clauses in the contract allowing for an earlier termination, and the employer fails to give notice the employee will be entitled to 6 months’ payment as compensation for loss of notice.
Mr Kinnear was employed by Marley Eternit Ltd t/a Marley Contract Services as an Apprentice Roof Tiler. He signed an employment contract on the 17th October 2014 and his employment started on the 20th October 2014.
Prior to starting his employment Mr Kinnear received a letter on the 7th March 2014 confirming his appointment and stating that on completion of the Apprenticeship he would obtain a Certificate of Completion of a Modern Apprenticeship in Construction.
The Contract was for a fixed period of four years and it was expected to end in November 2018.
On the 2nd December 2014 Mr Kinnear received a letter confirming he had successfully completed his initial six-month assessment period.
In around June 2016, due to a downturn in work Mr Kinnear was informed that that he was being made redundant. He then received a letter dated 13 June 2016 headed: “Termination of Employment” which stated “Due to the current situation in the construction industry we have unfortunately no alternative than to terminate your employment due to the downturn in our workload. You are entitled to one week’s notice which will commence Monday 13th June 2016. Your last day of employment with the company will therefore be Friday 17th June 2016.”
Mr Kinnear appealed the termination of his employment and he was informed by letter of 24th June 2016 that his appeal had been rejected.
Although Mr Kinnear made attempts to find a job he was unable to secure new employment. In particular due to his age he was unable to find an apprenticeship so that he could complete his qualification as a roofer. Had he been qualified he would have been more likely to find work.
Mr Kinnear made a claim in the Employment Tribunal for breach of contract against Marley Eternit Ltd t/a Marley Contract Services, claiming his loss of earnings for the full period of the contract.
The Employment Tribunal decided that Mr Kinnear had been employed as an apprentice for a fixed term. He was therefore entitled to receive training and remain an employee until the expiry in November 2018.
As his employment had been ended early and in breach of the contract Mr Kinnear was entitled to receive damages for the breach of contract.
The Employment Tribunal accepted that due to the downturn in the economy and as a result of his age, and the specific apprenticeship he was employed under, it would be difficult for Mr Kinnear to obtain new employment.
The Employment Tribunal awarded damages to Mr Kinnear in the sum of £25,000.
Points to note
The outcome of this case could have been avoided by the Employer if they had drafted Mr Kinnear’s contract differently. If you provide an employee with a fixed term contract and you don’t want to be bound to the fixed term in the event that circumstances change, then you need to ensure that your contracts include relevant break clauses.
Action to take
1) If you are considering offering a fixed term contract to any employee, ensure that you have a break clause enabling you to terminate earlier if necessary;
2) Seek advice before making employees redundant;
Employment Tribunal – Kinnear v Marley Eternit Ltd t/a Marley Contract Services
You can read the full judgement here