Q&A: Employment Law in a Corporate Context 

Q. What must an employment contract include under English law? 

Under the Employment Rights Act 1996 (as amended by the Employment Act 2002 and the Good Work Plan reforms of 2020), an employer must provide all employees and workers with a written statement of particulars of employment from the first day of employment. Historically this could be provided within two months of starting work; since April 2020 it must be given on day one. 

The written statement must include at minimum: 

• The names of the employer and employee. 

• The date employment began and (if different) the date continuous employment began. 

• The rate of pay and pay interval. 

• Working hours, including days of the week and whether hours may vary. 

• Holiday entitlement (including public holidays) and holiday pay. 

• The location or locations of work. 

• The job title or a brief description of the work. 

• Notice periods. 

• Probationary period conditions (if any). 

• Sick leave and pay entitlement. 

• Any other benefits (including non-contractual benefits). 

• Whether the employee will work outside the UK for more than one month, and if so on what terms. 

• Details of any training the employer requires the employee to complete. 

For senior employees, the service agreement will typically go considerably further — covering bonus entitlements, share option rights, garden leave provisions, post-termination restrictions, intellectual property assignment, and disciplinary and grievance procedures. 

Q. What is garden leave and how does it work? 

Garden leave is a contractual arrangement by which an employer, having given notice to (or received notice from) an employee, requires the employee to remain at home during their notice period rather than attending work. The employee remains employed and continues to receive full pay and benefits during the garden leave period, but is not required to perform their duties and is typically prohibited from working for a competitor. 

Garden leave serves several commercial purposes for employers: 

• It prevents the employee from accessing current client relationships, confidential information and commercial intelligence during the notice period. 

• It allows client relationships to naturally ‘go cold’ and to be transferred to other team members. 

• It acts as a bridge between employment and the start of any post-termination restrictions — time spent on garden leave generally counts towards the duration of post-termination covenants. 

To be effective, garden leave must be expressly provided for in the employment contract. An employee who has not been given a contractual right to be placed on garden leave cannot generally be kept at home on full pay without their consent — unless the employer is willing to accept the risk of a constructive dismissal claim. 

Importantly, courts will take into account the period of garden leave already served when assessing the reasonableness of post-termination restrictions. A six-month garden leave period served in full before a six-month non-compete begins may result in the non-compete being found to be longer than reasonably necessary in the circumstances. 

Q. What is TUPE and when does it apply? 

TUPE — the Transfer of Undertakings (Protection of Employment) Regulations 2006 — is the legislation that protects employees’ rights when the business or undertaking in which they work is transferred to a new employer. TUPE applies in two principal scenarios: 

Business transfers — where a business or part of a business (an ‘economic entity’) is transferred from one employer to another as a going concern. This typically covers an asset sale where the business continues as before under new ownership. 

Service provision changes — where activities that were previously carried out in-house are outsourced to a contractor, where an outsourced service is re-tendered and a new contractor takes over, or where an outsourced service is brought back in-house. 

When TUPE applies, the employees who are assigned to the transferring business or activity automatically transfer to the new employer on their existing terms and conditions. The new employer inherits the employees and all associated rights and liabilities, including outstanding employment claims. Any dismissal connected with the TUPE transfer is automatically unfair unless it is for an ‘economic, technical or organisational’ (ETO) reason entailing changes in the workforce. 

In the context of a share purchase, TUPE generally does not apply — because the company (and therefore the employer) remains the same; only the shareholders change. However, in an asset sale or in a business restructuring following acquisition, TUPE analysis is essential and should be undertaken before any decision is made about post-transaction staffing. 

Q. What is a settlement agreement and when should an employee sign one? 

A settlement agreement (previously called a compromise agreement) is a legally binding contract between an employer and an employee by which the employee agrees to waive some or all of their legal claims against the employer in exchange for a financial payment and (usually) an agreed reference. Settlement agreements are most commonly used to resolve or avoid employment disputes — most frequently in the context of a redundancy, a performance management process, or a negotiated exit. 

For a settlement agreement to be legally valid and to effectively compromise the employee’s statutory claims, it must: 

• Be in writing. 

• Relate to specific complaints or proceedings. 

• The employee must have received independent legal advice from a qualified adviser (typically a solicitor) about the terms and effects of the agreement. 

• The adviser must be identified in the agreement and must have a current contract of professional indemnity insurance. 

The requirement for independent legal advice is important: an employee must take advice from their own solicitor (paid for by the employer by way of a contribution to legal fees) before signing. An agreement signed without independent advice is not binding. 

Whether an employee should sign a settlement agreement depends entirely on the specific circumstances. The financial terms, the employee’s prospects in an employment tribunal, the value of any outstanding claims, the quality of the reference and any tax treatment of the payment are all factors to weigh carefully. Employees should always take specialist advice before signing — the contribution to legal fees provided by the employer is specifically intended to fund this. 

Q. What are the consequences of dismissing an employee without following a fair process? 

Dismissing an employee without a fair process — or without a fair reason — exposes the employer to claims in the Employment Tribunal and, potentially, the civil courts. The primary risks are: 

Unfair dismissal — employees with two or more years’ continuous employment have the right not to be unfairly dismissed. A fair dismissal requires both a fair substantive reason (such as redundancy, misconduct, capability, or illegality) and a fair procedure (following the ACAS Code of Practice on Disciplinary and Grievance Procedures). A tribunal finding of unfair dismissal can result in a basic award (calculated by reference to the employee’s age, pay and length of service) and a compensatory award (capped at the lower of 52 weeks’ pay or £115,115 as at April 2025). 

Wrongful dismissal — if the employee is dismissed without notice (or without pay in lieu of notice) in circumstances that do not justify summary dismissal, they have a claim for wrongful dismissal — essentially a breach of contract claim for the notice pay they were owed. Wrongful dismissal claims can be brought in the Employment Tribunal (up to £25,000) or the civil courts (no cap). 

Loss of restrictive covenants — as described in the chapter on restrictive covenants, a repudiatory breach of contract (including a wrongful dismissal) may render post-termination restrictions unenforceable. This can be a highly significant commercial consequence, particularly where the departing employee is a key person with valuable client relationships or access to sensitive business information.