Expert Answers to Common Legal Questions for Small Business Owners: Marketing Laws, Holiday Pay, and Contract Breaches

Welcome to our weekly legal newsletter! This week, we covered important topics such as marketing and advertising laws, holiday pay for casual workers, and what to do if a service provider breaches a contract. If you found this information helpful, don't forget to follow us for more legal insights.

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1. What do we need to think about when wanting to use words such as “the best” or the “fastest growing” in our marketing and advertising?

Not many small business owners realise that there are actually quite a lot of laws around marketing and advertising.

The Advertising Standards Authority regulates non-broadcast marketing with the CAP Code and there is a general obligation in the Consumer Protection from Unfair Trading Regulations to not be misleading in any way in our marketing to consumers. The Misleading Marketing Regulations introduced a general prohibition on advertising that misleads traders.

With expressions such as “the best” or “the fastest growing”, we need to consider whether they are (i) “meer puffery”, where the average consumer would know that this is an exaggeration and not a genuine claim or (ii) claims that a consumer would be likely to believe as true.

If the consumer would be likely to believe the claim, then there needs to be objective grounds for the claim and objective evidence to back that up.

If a complaint was to be made about such advertising – and this would typically be by your competitors – the ASA would investigate and make a ruling on your advertising. They can instruct you to remove and cease to use such advertising going forwards and will name and shame you on their website. They can also report you to Trading Standards who can take you to court where you could be given an unlimited fine.

The least risky thing to do if you do want to make claims such as “the best” or “the fastest growing”, if it's not possible to provide an objective justification for this wider claim, is to narrow down your claim as much as possible, so that an objective justification is possible.

Rather than saying “we are the fastest growing legal consultancy”, you could say “we are the fastest growing legal consultancy in England helping sole traders within the coaching profession”. Keep all of your documentary evidence objectively substantiating the claim to hand in case of any challenge.

2. What do I write in my contract for casual workers about holiday pay?

Workers (even casual workers who only work sporadic shifts) are entitled to 5.6 weeks' paid holiday each year.

For workers on atypical work patterns, it is difficult to calculate holidays. The relevant regulations do not set out any method of calculating how many days or hours constitute a week's leave in such circumstances, and none is suggested in any reported case law.

It is difficult in any meaningful way to set out in the contract the holiday entitlement for a casual worker or employee, especially as the "percentage method" of calculating holiday as 12.07% of hours workers is no longer fit for purpose after the case of Brazel in 2022.

Attempting to include detailed calculations in a contractual document can potentially lead to problems, because of frequent case law developments on calculating holiday pay. 

So you may therefore prefer to set out some of the detail in a non-contractual holiday policy, or simply refer to the formula in the Working Time Regulations 1998 as a means of calculation. 

Although this carries a risk of a technical breach of the requirements to set out holiday entitlement in the employment contract, there are no reported cases on the interpretation of the level of detail required on holidays.

So you may want to say in your contract “You are entitled to the equivalent of 5.6 weeks' paid holiday per holiday year (which is the minimum required entitlement for any worker). This includes public holidays in England and Wales. Your holiday entitlement will be calculated in accordance with the formula in the Working Time Regulations 1998 and with the latest UK government guidance on how to calculate holiday entitlement for casual workers.”

3. If you have paid up front for a full year of professional services in advance (in this instance it is bookkeeping, management reports etc) and the company has failed to provide what they said they would and what they have charged for, what should/could I do to try and get some recompense?

The first thing to do is dig out the contract. What did the service provider say in the contract about what they would provide? Is it there in black-and-white as to how they have failed to provide the service that they said they would? Or was it a case of emails back-and-forth and phone conversations? The latter is going to be so much harder to prove a breach and to obtain your refund.

This is why it is so important to have a clear scope of services upfront – both for the supplier and for the client – so that there is no misunderstanding as to what was contracted to be provided.

If it is clear that the supplier was contracted to provide you with certain services and they have failed to do so, then you should look at the termination clauses of the agreement.

Most supplier contracts will have termination clauses that say that if the contract is breached, you must notify them of the breach and give them a period of time to remedy that breach, such as 14 or 21 days as specified in the contract.

If the contract does say this, you will need to follow the contract terms and serve notice on the supplier to let them know that they have breached the contract and how they have breached 

the contract and give them the requisite time to remedy. If the supplier doesn’t remedy the breach within the requisite period of time, you can terminate the contract and bring a claim for breach of contract. 

Some contracts may also say that the client can terminate for persistent breach, although this is unlikely where you have not negotiated the supplier contract. In this case, you would not need to provide a period of remedy for the supplier and could terminate in accordance with that clause for the ongoing breaches.

Remember to look at the notice provision very carefully and follow it to the letter. For example if the contract states that the notice has to be served by registered post to the registered office, then you must do so, in order for the service of notice to be effective.

Unfortunately the supplier has the upper hand, with the 12 months payment in advance already in their pocket, so it may be that they will tough it out and you would need to bring a court claim against them to get any refund.

Whether the court would rule in your favour or not would depend on how clear it is as to what services were contracted to be provided and whether the supplier failed to provide them.

But in the first instance, it would certainly be worth a letter (after they have failed to remedy the breach or after you have terminated for persistent breach) stating the exact breaches, the exact amount of the refund that you require and the exact date by which the requested refund must be paid or you will take legal action. If they fail to reply to this letter and provide a refund, a solicitors letter restating the same may bear more weight. But ultimately, the supplier can refuse to pay up unless you take them to court, persuade the court of the breach and obtain an order for the supplier to pay you back. 

You would need to consider whether it is worth the cost and effort to obtain a solicitors letter and take the matter to court, in light of the amount of the refund that you feel you are due. 

And that's it for this week's newsletter!

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