A warning for employers: the perils of an unsigned employment contract

The recent case of Tenon FM Ltd v Cawley [2018] EWHC 1972 (QB) highlights the importance of not only getting employment contracts signed, but also making sure records are kept up-to-date with signed contracts for all employees.

The facts

Ms Cawley was employed by Tenon FM Ltd (Tenon), a facilities-management company, from 2008 until she resigned in 2018. During this period she was promoted several times, from Regional Operations Manager, to National Operations Manager and then finally to Operations Director.

After resigning, Ms Cawley began working for a rival company. Tenon alleged that in doing so Ms Cawley was in breach of the restrictive covenants in her latest employment contract. However Tenon were unable to produce a signed copy of the latest contract dated 2012, nor were they able to produce a signed copy of the 2011 contract which contained identical covenants.

In the absence of a signed contract containing the relevant restrictive covenants, the court had to decide whether Tenon could establish that Ms Cawley was bound by the covenants.

The decision

Ultimately it was held that Ms Cawley could not be bound by restrictive covenants that she had not signed.

It was not possible to infer acceptance of the covenants from Ms Cawley's conduct: continuing to work for the company after being issued with a new employment contract. It will only be possible to infer acceptance of new employment terms from conduct, where the new terms have an immediate effect on the employee. On the facts there was no such immediacy - the restrictive covenants only applied post-termination.

What we can learn from Tenon's mistakes

The court paid particular attention to the fact that Tenon had an established HR department, yet were unable to locate even one signed employment contract for Ms Cawley. This suggests that employers with a designated HR department will be held to a higher standard and should take special care to ensure that all personnel files are kept up-to-date.

The court also noted that Ms Cawley had not provided any consideration for either of the revised versions of her employment contract, issued in 2011 and 2012. A further warning to employers, to ensure that employees receive adequate consideration when entering into a variation of their employment contract. Examples are increased salary or an additional day's paid holiday.

Lastly, the court drew a comparison between Ms Cawley's employment contract and her colleague's contracts. The restrictive covenants that Tenon sought to rely on were not present within at least two other members of the company's senior leadership team. This stresses the importance of keeping restrictive covenants consistent between your employees. Failing to use a restriction with all employees of a certain role, or all employees within a certain team, will make it harder to argue that the restriction is necessary for your legitimate business interests.

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