Is a Code of Conduct Legally Binding in England?

As a business owner, you may decide to create a code of conduct (‘code’) for your business. Codes of conduct usually reflect a company’s code, ethics, and the standards it expects of its employees and the business itself. A code is usually seen as a governing document that sets a higher standard for business practices. However, in some cases, you may want to make your code legally binding. This article will explain when and how a code of conduct can be legally binding. It will also offer advice if you want to use a code for your business.

What is a Code of Conduct?

A code of conduct is a series of business ethics, responsibilities, roles, and standards which your business has agreed to. Codes of conduct are a good way of setting expectations for your employees. An effective code will be a good source of information for people within your business. 

What Should You Include in a Code of Conduct?

Codes of conduct can cover varied points. For example, you can use it to express how your company will: 

• conduct its business; 
• conduct investigations; and 
• enforce its rules. 

Further, you can focus on the expectations that you set for your employees by having codes on: 

• workplace behaviour; 
• harassment; 
• computer usage; 
• poor conduct; and 
• gift giving and receiving. 

Importantly, it is up to you how you decide to draft your code of conduct. This could be a published document that does not go into elaborate detail on the meaning of the code. Alternatively, you can have a lengthy document that highlights in detail the meaning of each individual code.

How are Codes of Conduct Used?

Codes of conduct are typically good corporate governance practice and are used as self-regulatory tools. Usually, codes of conduct are not used as legal instruments. 

For example, if you are running a charitable business and publish a code of conduct, it will not be legally binding on you or your employees. However, you will be legally bound if you receive a donation where the legal document specifies that the donated money will be used in compliance with the code. The effect of a legally binding document is that you can sue employees violating your code for breach of contract.

How Can I Include a Code of Conduct Within a Contract?

Including a code of conduct within a contract makes it legally binding. You can do this by simply stating it within the contract’s terms. If you choose to do this, you must also ensure you have a valid legal contract. For a contract to be valid, it needs to have:

• an offer;
• a reciprocal acceptance of the offer;
• consideration; and
• an intention to be legally bound by the agreement.

Making sure that you have a valid contract is important if you want to make your code legally binding. Alternatively, if you make an agreement within a deed, you will not have to meet all of the four requirements described above. A deed is a specific type of legal instrument.

What Happens if Your Employees Violate Your Code of Conduct?

If one of your employees violates one of your own code of conduct rules, you will usually have the ability to decide their punishment yourself. This can range from a fine to removal from their position altogether. Ultimately, it is up to you how you wish to govern your company. 

However, if the code of conduct is within a legal instrument and both parties have agreed to it freely, you can take legal action to compensate for the violation. If you have agreed to a code of conduct commitment with one of your clients or customers, they could sue you if your business fails to comply with those standards. As a result, you should ensure you are aware of the implications of using a code of conduct agreement before you draft one for your company.

Key Takeaways

A code of conduct is a document that outlines the commitments, standards, and obligations within your business. Business owners usually use it to guide employees on proper conduct, reminding company members of their obligations. Generally, a code of conduct is not legally binding, and you can use it as guidance within your corporate governance. However, you can make a code of conduct legally binding if you assimilate it into one of your contracts. It is important to remember that the code of conduct must be within a valid contract to legally bind the parties to the contract. 

If you have any questions about codes of conduct, our experienced commercial lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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