Look before you leap
9 September 2002
Joining a competitor? The potential consequences of insurance brokers soliciting their former clients
12 July 2013
8 August 2013
15 April 2013
30 January 2013
25 March 2013
After several rounds of redundancy, recruitment in many industries is now a buyers' market. It may be tempting to leap at the first job offer, but in doing so you may be running significant reputational risk and you may compromise your CV for the future. If you are to be a Companies Act director or partner in a law firm, you may also be personally liable for wrongdoing.
Although disasters such as BCCI and Enron are rare, their impact on an employee's reputation may be long lasting. While it is possible to bring a claim for stigma damages if your employer has behaved in a manner that damages your future employment prospects, such claims are very difficult to win. You will need evidence that prospective employers failed to give you a job because of the identity of your former employer. This evidence is very hard to come by, as potential employers tend to be reticent about their reasons for rejecting candidates.
It is therefore crucial to do your homework on your potential employer. You should ask: what are its plans over the next five years? Who are its competitors? What is its reputation in the market place? Is it likely to be taken over or merge with another company? If so, what protection will you have against being sacked? If you are being asked to develop or expand a department, will you be given the resources and authority to do it? If you are being recruited to bring about change, has everyone bought into the proposed change? Will the boss who recruited you be there in 12 months? Or will someone new be brought in? If you are to be a director, will you be covered by directors' and officers' liability insurance? Will such insurance cover claims by shareholders? Will you be covered by insurance if you are a non-executive director? If you are to be a director, will you when necessary have the right to take independent legal advice at the company's expense?
You should speak to current and former employees to get a rounded picture. And you should decide how long are you likely to want to stay with this particular employer.
Once you have done your homework and accepted the job, you will need to do a sanity check on your draft contract, which could cost just over £750. More complex negotiations will require more time and generally cost around £2,000-£5,000. But just as you would not buy a house without inspecting it for subsidence, it is wise to ensure your contract has as few holes as possible.
Do not be afraid to negotiate - employees often take fright at contract stage and think that negotiation will upset the employer. In many ways, job interviews are no different to first dates. Playing hard to get is unlikely to lead to the offer being withdrawn. If it does, then the employer was not wholehearted in its desire to recruit you.
It is crucial to read your contract. A large number of employees never do so. If you do not, you may find that the promises made at interview have not been translated into the fine print. There are particular points to watch. If you are likely to be vulnerable in, say, the first two years, ask whether you can have a liquidated damages clause - an agreed sum that will be paid to you if you are dismissed in breach of contract, unless it is for 'cause', such as gross misconduct.
Check your notice period. Does it suit you? Is there a clause entitling the employer to pay you in lieu of notice? If so, does it provide just for salary to be paid or does it cover benefits as well? You should think about whether such a clause is appropriate at all, as it will mean that any payment in lieu of notice will be taxed in full. If there is no such clause, usually up to £30,000 can be paid on termination without deduction of tax or National Insurance.
Check any post-termination restrictions, such as non-compete and non-solicitation clauses. If they are unenforcable, there may be an argument for not tampering with them. If they are borderline, you may wish to negotiate them down or entirely out.
If bonuses are discretionary, what criteria will be applied to decide whether you will receive a bonus? Can any targets be specified in advance?
What, if any, guaranteed payments or bonuses are you being promised? What happens if you resign or are dismissed before the day on which they would be paid out? Will they still be paid? If so, when? Will payment depend on the reason for your departure? Will payments be pro rated to the date of the termination of your employment?
Meriel Schindler is head of employment at Withers