Dear Contractor Doctor
I’ve been contracting for my former employer for several years. When I changed from being an employee to becoming a contractor, we never got round to signing a contract – there was always something else that came up and got in the way.
In recent months, it has taken longer to get paid and the workload has been getting unreasonably heavy. So, I’m thinking of just quitting, walking out and finding a new contract with another client.
Do I need to give notice if there is no written contract?
Contractor Doctor says:
“Although it is essential to look at a situation and gather all the hard facts first, the answer to the question of whether the contractor can just quit on one day’s notice – or no notice at all - may well be ‘no’,” explains Roger Sinclair of contractor legal specialist Egos.
Just because there is no signed agreement does not mean that there is no contract in place. Under UK contract law, most contracts do not have to be in writing or signed.
Was there something in writing that was unsigned?
“First, whilst it appears that nothing was signed, was there ever anything put in writing about the engagement that wasn’t signed?” ask Sinclair. “If there was, and if the parties acted in accordance with that, then it may well be that whatever was in that document, even if only a draft, will govern the relationship, even though not signed, to the extent that neither party has expressly disputed it. If such a document exists, is there anything in there about notice?
“And even if there is no document, there are clearly still mutual expectations and obligations – one party works, and the other pays for the work. That looks to me like a contract, as it seems unlikely that either party is doing it purely for fun, or out of goodwill. So there are obligations – now, how far do those obligations extend? How does one party end them?”
No written contract does not mean no rights to terminate
According to Sinclair, it has been established that there is likely to be a contract: “The question is then, does this contract contain any provision for termination? For the purpose of this article, we assume that the possibility was never actually discussed, and so there is no basis for saying that there might have been any express term agreed relating to termination.”
Sinclair outlines the possibilities and potential problems that he sees:
- Freedom for either party to walk away at any time without notice; problem: if one party wanted out, the other might need a little time to make alternative arrangements
- A right for either party to give a fixed period of notice to terminate; problem: clearly no fixed period was agreed
- A right for either party to give the other ‘reasonable’ notice to terminate
- No rights to terminate, both parties are locked in forever – problem: Sinclair believes that it would need very clear wording for that to be the legal position – and there is no wording at all.
Implied terms in contracts
There are generally two possible bases which might justify implying a term into a contract, assuming it does not contradict something already established as agreed to be an express term.
Sinclair explains: “One is that the term has to be implied if the contract is to ‘work’. So if the worker is a driver, it would be likely to be an implied term under this principle that he must have and keep a driving licence. I can’t see that principle helping here, I don’t see it as necessary to have an implied term relating to termination for this contract to ‘work’.
“The other is that the term to be implied is obvious; it’s often called the ‘officious bystander’ principle. Imagine a third party standing on the sidelines, listening in, when the two parties are discussing what work is to be done and the basis on which it is to be paid.
“Imagine that third party interjecting ‘shouldn’t you have a provision for being able to terminate?’ – is it likely that both parties would have replied ‘of course, that’s obvious’? If so, then this principle may be a basis for implying a term to the effect that either party could terminate.
Even without a written contract that includes an express notice provision, there is likely to be an implied contractual term that the contractor could terminate on reasonable notice
Roger Sinclair, Egos
“Now imagine that third party interjecting ‘can either party walk away at any time?’ – is it likely that both parties would have replied ‘of course’? Or perhaps it is more likely that they would each have replied ‘well, I’d need a little time to make alternative arrangements’?
“I have to say that, on the limited facts before me at this point, the latter seems more likely to me, particularly against the background of a relationship that seems to have lasted for some years."
An implied termination clause most likely exists
Sinclair continues: “So, even without a written contract that includes an express notice provision, there is likely to be an implied contractual term that the contractor could terminate on reasonable notice.”
But what is ‘reasonable notice’, and would a single day be deemed to be reasonable? “A starting point for what reasonable notice might be could be to look at the invoicing and payment cycle,” highlights Sinclair.
“But that is only a starting point, and it would be necessary to look at the full facts including what the contractor actually does, and how that is related to the company the contractor is working for.”
What factors influence an implied notice period
In addition to the invoicing cycle, another key factor when determining an implied notice period could be the importance of the position to the client: “How key is the position, and how easily replaceable is the contractor?” asks Sinclair.
It may be reasonable to expect that an IT contractor with highly specialised skills fulfilling a mission critical role on a project for a major bank spanning several years should provide two months notice. This would enable the client to have a reasonable chance to find a replacement, or for the contractor to fulfil their element of the project.
In contrast, in the case of a helpdesk technician on a contract alongside fifty other workers hired on a contract basis, a period of one week’s notice might seem reasonable, if their skills are readily and immediately available.
Employment law for contractors who are, in fact, disguised employees
Sinclair flags one other point that may be relevant to the contractor and the notice period required in this context: “The contractor says that he was previously an employee of his current client.
“What we don’t know are the reasons and arrangements for this transfer of employment status. If the contractor is still performing the same duties in the same location for the same employer, then it may be difficult for the contractor and client to prove that the contractor is genuinely self-employed.
“If the contractor is in fact an employee, then termination is covered by employment law. Which provides that if there is no express provision for notice to terminate, then the notice required from employee to employer is one week, assuming the employee has been employed by that employer for more than one month.”
Sinclair concludes: “The bottom line is that most contractors should not expect to be able to legitimately walk away from a contract without notice, even if there is no written contract. A contractor in this situation needs to look at the facts, seek advice and take an informed decision. And, generally, to act reasonably!”