What is an employment contract review, and do you need one?

Your employment contract is drafted by your new employer – probably with the assistance of the organisation’s legal team. You on the other hand are an individual and may not have any knowledge of employment law. You therefore have unequal bargaining power and may need separate legal advice on the terms of the contract to ensure that the terms are fair and reflect what you may have already agreed with your new employer verbally, especially when it comes to important benefits including share options, bonus entitlement and commission structure.

An employment lawyer will evaluate an employment contract between an employer and employee for fairness, thoroughness, and legal compliance. The lawyer will then highlight any risks in the employment contract to the employee and will suggest necessary amendments to the contract before the employee signs the contract.

The first stage of the process is for the lawyer to review the employment contract. If the lawyer identifies any unfair, unenforceable or risky clauses for the employee, the next stage would be the negotiation stage in which the lawyer will request the employer to make necessary amendments to the contract. The third stage would be revisions to the contract (if the employer is agreeable to making the revisions). The final stage is signature (otherwise referred to as execution) of the contract by both parties.

Senior employees are more than likely to have financial rewards set out within their employment contracts, examples are profit share, bonuses, commission and share options. Clauses that deal with financial rewards are generally bespoke in nature and it is imperative that both the employee and employer are clear on what has been agreed, otherwise there is a real risk that an employee will not receive the financial reward they had expected to receive under the contract. Involving employment lawyers in the drafting and review process will ensure that clauses are enforceable and unambiguous.

Additionally, contracts for senior employees often contain Restrictive Covenants, the most common of which are non-compete clauses or non-solicitation clauses. It is important that these clauses are drafted fairly so as to avoid a restraint of trade on the employee.

The Senior Managers and Certification Regime (SM&CR) has been in force since 7 March 2016.

It replaced the Approved Persons Regime (APR) in relation to UK banks, building societies, credit unions and PRA-designated investment firms, as well as UK branches of non-UK firms. These firms are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) and compliance with the SM&CR is enforced by these bodies acting individually or jointly as appropriate (the regulator(s)).

If you are commencing a Senior Manager role and are likely to perform Senior Management Functions (SMFs) then your employment contract will expressly confirm your obligations under the conduct rules and include express termination rights for the firm in the event that you:-

1. breach the conduct rules
2. cease to be fit and proper, or
3. otherwise fail to comply with your duties under the SM&CR

Your employment contract is also likely to include clauses stating that your employment is conditional on:-

• You obtaining FCA approval for carrying out the relevant Senior Management Function(s) (SMF(s));
• You satisfying the criminal records check;
• The firm obtaining satisfactory regulatory reference(s) in respect of your previous employment;
• Your compliance with any SMCR-related induction obligations; and
• You passing the firm’s fitness & propriety (F&P) assessment, both at the outset of employment and annually.

Your employment contract may also contain a section on your specific duties and a contractual obligation to read, understand and comply with the Conduct Rules; and attend all training in respect of the Conduct Rules.

3 working days is generally enough time for a contract review to take place

There is no legal requirement for an employer to provide an employee with a written contract of employment. Employment contracts can be oral or in writing. If you are not provided with an employment contract you may be classed as a worker or contractor.

All employees and workers do however have a legal right to a written statement of terms also referred to as a Section 1 Statement.

Most of the particulars in a Section 1 Statement must be provided to the employee or worker on the day they commence work. The particulars that must be set out in the ‘Principal Statement’ are:-

• The names of the employer and the employee or worker
• The date when the employee’s employment, or worker’s engagement, began
• In respect of employees, the date on which the employee’s period of continuous service began
• The rate of pay and frequency of payment
• The hours of work (including normal working hours, days of the week and whether hours/days are variable (and, if so, how they vary)
• The terms and conditions relating to holiday entitlement, including public holidays, and holiday pay
• Any other benefits (including non-contractual benefits)
• The length of notice that must be given by either party to terminate the contract
• The job title or a brief description of the work the employee or worker is employed or engaged to do
• Where the employment or engagement is not expected to be permanent, either the period for which it is expected to continue or, if it is for a fixed term, the date when it is to end
• Any probationary period, including any conditions and its duration
• The place of work or, where the employee or worker is required or permitted to work at various places, an indication of that and the address of the employer
• whether the worker is required to work outside the UK for over one continuous month (and details of that arrangement re salary currency etc). If not required, that fact must be stated
• any training entitlement which the employer requires the employee or worker to complete and any other training which the employer requires the employee or worker to complete but which the employer will not pay for