It’s a familiar scenario: after a promotion, an employee is sent a new contract to sign. It includes some new benefits, but also there are some post termination restrictions in there. The employee looks it over, perhaps, then tucks it away at the back of a drawer to deal with later, or with no intention of ever signing it. Fast forward a few years – that employee has left his job, and is working for a new employer. Can his old employer enforce those post termination restrictions, even though the employee never expressly agreed to be bound by them?
The question of whether a contract of employment which is unsigned is nonetheless effective is one that is often asked and it is therefore very helpful to have some guidance from the Chancery Division of the High Court. Often much emphasis is placed on the obligation for an employer to provide a written statement of main particulars of employment within eight weeks from the start of the employment. Failure to do so gives the employee the right to complain to an employment tribunal and to ask the tribunal itself to specify the written particulars. If combined with another or other claim(s) there may also be a right to compensation. However, what is generally far more important for an employer is whether it can rely on the terms of a contract which has been issued to an employee but which has not been signed
According to Mr Justice Hildyard in FW Farnsworth Ltd & Anor v Lacy & Ors the employee may be bound by the terms in the contract.
Paul Lacy and Maria Yuste worked for FW Farnsworth Limited and Northern Foods Limited. It was alleged that during the course of their employment they passed confidential information to a competitor, Pooles of Wigan Limited. Additional defendants, Neil Court-Johnston, Bobella Limited and Joanne Kenedy (sic) were alleged to have participated in the conspiracy.
In 2009 Mr Lacy was issued with a contract which contained restrictive covenants which, for example, prevented him from working for a rival business or soliciting defined customers for a period of six months following the termination of his employment. He had also been issued with a contract in 2003 which did not contain any such restrictions. The key question was whether he was employed under the 2003 contract or the 2009 contract. He had started work in 2000 and signed the 2003 contract when it was issued to him. In 2009 he progressed to the position of Site Technical Manager. Some time after this appointment, in September 2009, he was issued with the 2009 contract which he neither signed nor returned.
The employer maintained that he had impliedly accepted the terms of the 2009 contract because he applied for and received additional benefits which were only available under the 2009 contract, specifically a move to a defined contribution pension scheme and medical benefits for him and his family. In response Mr Lacy maintained that neither of the matters were so unequivocally referable to the 2009 contract as to imply that he was bound by its terms.
The court referred to guidance available in 2004 case Solectron Scotland Ltd v Roper and others  IRLR 4:
The fundamental question is this: is the employee’s conduct, by continuing to work, only referable to his having accepted the new terms imposed by the employer? That may sometimes be the case. For example, if an employer varies the contractual terms by, for example, changing the wage or perhaps altering job duties and the employees go along with that without protest, then in those circumstances it may be possible to infer that they have by their conduct after a period of time accepted the change in terms and conditions. If they reject the change they must either refuse to implement it or make it plain that by acceding to it, they are doing so without prejudice to their contractual rights. But sometimes the alleged variation does not require any response from the employee at all. In such a case if the employee does nothing, his conduct is entirely consistent with the original contract continuing; it is not only referable to his having accepted the new terms. Accordingly, he cannot be taken to have accepted the variation by conduct.
Incidentally, this confirms an important qualification to the assertion, often made by employers and even employment lawyers, that an employee is deemed to accept the terms of a contract merely by continuing to work.
According to Mr Justice Hildyard "the person who alleges inferred or implied acceptance must show that the benefit being invoked, being the act relied on as giving rise to the iinference of acceptance, was only (my emphasis) available pursuant to the contract in question, and that the invocation of that right was in unequivocal terms, such as to be referable only to acceptance of that contract".
In this case Mr Lacy had made an application to join a private medical insurance scheme referred to in the contract; that positive step was sufficient evidence to confirm that he accepted all the terms of the new contract, including the restrictive covenants.
Had he not availed himself of those enhanced benefits, the outcome might have been different. The case is a stark reminder that it is dangerous to make assumptions about whether or not contractual terms apply to an ongoing employment relationship. What of the employer that insists on employees signing contracts of employment on the basis of requiring employees to compley with lawful instructions? In this case the 2009 contract contained terms which were both advantageous and disadvantageous to Mr Lacy. Demanding that he should sign the contract might in those circumstances have led to a claim for constructive unfair dismissal. As ever, my advice is to obtain competent legal advice at the earliest opportunity.