Employment Contracts in UK Law

Introduction

The contract of employment is the foundation of the employment relationship in UK law. While the contract is subject to the general principles of contract law, it is also regulated extensively by statute and by implied terms that reflect the inherent inequality of bargaining power between employer and employee. The Employment Rights Act 1996 (ERA 1996) provides the core statutory framework, including the right to a written statement of particulars, minimum notice periods, and protection against unfair dismissal.

The Contract of Employment

The contract of employment may be express (written or oral) or implied. While the general law of contract governs its formation and interpretation, the employment contract is distinct in several respects: the relationship is one of continuing obligations, the implied duty of mutual trust and confidence underpins all express terms, and statutory rights cannot be contracted out of.

The distinction between an employee and a worker is fundamental. An employee has a contract of service and enjoys the full range of statutory employment rights, including unfair dismissal, redundancy pay, and family leave. A worker has a contract for services or a more limited contract and has only certain statutory rights, including the national minimum wage, working time limits, and protection against unlawful deductions from wages.

Written Particulars

Section 1 of the ERA 1996 requires employers to provide employees with a written statement of particulars of employment within two months of the start of employment. The statement must include: the names of the employer and employee; the date employment began; the scale or rate of remuneration and the intervals at which it is paid; the hours of work; holiday entitlement and holiday pay; sick leave and sick pay; pension arrangements; the notice period; the job title or description; the place of work; any collective agreements affecting the terms; and the disciplinary and grievance procedures.

The written statement is not the contract itself but is evidence of the terms of the contract. The statement must be updated if the terms change. The Employment Rights (Miscellaneous Amendments) Regulations 2025 introduced additional requirements, including the right to a statement of all terms from day one.

Implied Terms

The law implies a number of terms into every contract of employment. The implied duty of mutual trust and confidence is the most important, requiring that the employer shall not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

The duty was established in Malik v BCCI SA (1998), where the House of Lords held that an employer’s conduct in running a corrupt business breached the implied duty, entitling employees to damages for loss of reputation and employability. The duty also informs the law of constructive dismissal: an employee who resigns in response to a breach of the duty may claim constructive dismissal.

Other implied terms include: the employer’s duty to provide a safe system of work; the employer’s duty to provide work (limited to certain cases, such as piece workers); the employee’s duty of fidelity and loyalty; the employee’s duty to obey lawful and reasonable orders; and the employee’s duty to take reasonable care in the performance of their duties.

Termination of Employment

Employment may be terminated by notice, by summary dismissal for gross misconduct, by resignation, by expiry of a fixed term, or by operation of law (frustration). Section 86 of the ERA 1996 sets out the minimum notice periods: one week for continuous employment of one month to two years, and one week for each year of continuous employment up to a maximum of 12 weeks for 12 or more years.

Summary dismissal without notice is justified only where the employee commits gross misconduct — conduct that fundamentally undermines the employment relationship. The test is whether the employee’s conduct is so serious that it destroys the relationship of trust and confidence.

Variation of Contract

The terms of the employment contract may be varied by agreement between employer and employee. Unilateral variation by the employer is a breach of contract. In practice, employers often seek to vary terms through consultation and, where agreement cannot be reached, may dismiss and re-engage on the new terms — a process that carries significant legal risk and may give rise to claims of unfair dismissal.

Restrictive Covenants

Employment contracts may include restrictive covenants that limit the employee’s activities after the termination of employment, including non-competition clauses, non-solicitation clauses, and non-dealing clauses. Restrictive covenants are void as an unreasonable restraint of trade unless they protect a legitimate business interest and are no wider than reasonably necessary.

Conclusion

The contract of employment is the foundation of the employment relationship, setting out the rights and obligations of both parties. The statutory requirement for written particulars, the implied duty of mutual trust and confidence, and the rules on termination and variation provide a framework that balances the employer’s need for flexibility against the employee’s need for security and fairness.