Practice Management - 11 Forms of Appointment

11.             Forms of Appointment

·       Legal characteristics of a contract – agreement, intention, consideration

Types of Standard forms of appointment

·       RIBA Standard Agreement 2012

·       Concise Agreement 2012

·       Domestic Project Agreement 2012

·       Sub-consultants Agreement 2012

RIBA Standard form of Appointment SFA 12

Made up of:

·       A memorandum of agreements  - signing block

·       A set of schedules including schedule of services following the RIBA Plan of work, fee schedule and project data (project specific information such as the level of insurance)

·       A set of notes on how to complete the appointment

·       Terms and conditions of the appointment

Clauses:

1.     Definitions, interpretation

2.     Obligations and authority of the Architect

3.     Obligations and authority of the client

4.     Assignment and sub-contracting

5.     Fees and expenses

6.     Copyright and use of information

7.     Liability and insurance

8.     Suspension or termination

9.     Dispute Resolution

10.  Consumers right to cancel

Important clauses:

2.1 Duty of care – architect must apply reasonable skill care and diligence in performing service

5.8 Fee adjustment – provision for adjustment of basic fee to compensate for loss and expense caused by material change or variation of service.

5.9  Additional fees – additional fees and other costs to be paid if architect incurs extra work

5.14 Payment Notice -  The architect is to give payment notice at the intervals specified in the schedule of Fees and Expenses

5.15 Pay less notice – IF the client intends to pay less than the invoice they must issue notification not later than 5 days from the final date for payment.

6.1/2 Copyright – The architect owns all intellectual property rights

6.3 Use of Information – the client may not use the material other than for the purpose for which it was prepared

7.1/2 Time and liability limits – liability shall not exceed the limits set out in the project data calculated from date of last service

7.3 Net contribution – Architect liability limited by the responsibility of others

7.4 Professional Indemity Insurance – Requirements to maintain

8.1 Suspension – client can suspend with 7 days notice

9.1 Dispute Resolution – covers the options available for settling disputes by negotiation, mediation, adjudication, legal proceedings or arbitration as set out in the project data

9.2 Adjudication – statutory right where the Housing Grants, Construction and Regeneration Act 1996 applies.  Architect must make residential client aware of this clause and their right to opt out of this.

9.3 Arbitration – Can be selected in the project data (perhaps for reasons of privacy)

Fee setting

·       Should set out clearly a list of basic services and list of potential additional services (ideally based on the RIBA Standard Conditions of Appointment 2010 Schedule booklet, along with a mechanism for calculating additional fees

Risks of Bespoke Agreements

·       Choice to use them in a matter of professional principle, commercial judgement and negotiation skills. 

·       Contracts drawn up by clients are most likely to protect themselves by transferring risk in some way. Before entering into an appointment agreement of a bespoke nature, we must carefully examine the document to understand the obligations and liabilities we are signing up to.

·       Need to obtain legal advice and consult PII broker, which costs time and money

·       Need to check terms that we are signing up for a duty of care, not fitness for purpose

·       An important matter to check is the liability we are exposing ourselves to.  In the RIBA Standard for of Agreement specifically states that the maximum liability does not exceed the amount of PII insurance that has been agreed to.  The link between liability and PII cover is often left exposed in bespoke agreements.

·       Need to check terms for collateral warranties

·       Payment provisions

·       Copyright

·       Termination

·       Disputes

·       Construction act should apply as long as it is not a consumer client

Risk of no professional services contract in writing

·       In response to your request for a summary of the implication of not having a professional services contract for………….., I have prepared the short practise note below:

·       It is essential that any appointment between our Practice and the client is recorded in writing, even at the earliest stage of a commission.  Furthermore, is it a requirement of both the RIBA and ARB code of conduct that agreements are recorded in this way.

·       Further to this professional obligation, the benefit of a formal appointment it can be used as a tool to clearly set out, in detail, our fees, our services, and the terms and conditions of the appointment.  The success of a commission relies on a clear and unambiguous agreement regarding the scope of work, agreement on terms for payment and the way of dealing with changes in scope and variations and provisions for limitations of liability and options for dispute resolution. 

·       If no written agreement is in place, the practise will be relying solely on the good faith between the client and us. Although an overview of the key terms may have been agreed in principle through a letter of intent or email exchange, we can expect there to be terms that have not been accounted for in this document leaving open the possibility for ambiguity or personal interpretation. 

·       Furthermore, in the absence of the use of a formal agreement (for example, the RIBA Standard Agreement, or an alternative bespoke agreement drafted with legal advice) it is difficult to know in advice what interpretation a court would give to any oral / letter of intent if a dispute was to arise.  This would leave our architecture firm open to the risk of the inability to claim for fees, and/or a risk of prosecution if we do not have a clear understanding of our duties and liabilities before work commences.

Therefore it is vital that a formal agreement is made with the client formalising the following terms:

·       Scope of work

·       Who will be responsible for what

·       Extent to which any of the architectural services will be sub-contracted

·       Agree on terms for payment and the way of dealing with changes in scope / variations.  Procedures for calculation and payment of fees and expenses

·       Sets out expectations for project delivery

·       Addresses limitations of liability and insurance requirements. Needed for PI insurance

·       Provisions for protection of copyright and confidential information

·       Provisions for suspension and determination

·       Set outs options for dispute resolution

Written appointment terms provide vitally important benefits and protection to both us (the architects) and the client against ambiguity and misinterpretation of our duties and responsibilities to eachother

Risk of the use of Letter of intent

·       A letter of intent covers a broad range of agreements between parties, with varying degrees of formality. 

·       Although often considered a mechanism for getting the ball rolling by outlining the initial works and key terms (for example, perhaps fee and timing), a letter of intent typically lacks the weighting of a properly settled contract with agreed appointment terms. 

·       Depending on the content of the letter of intent it is difficult to know in advance what interpretation a court would give to such a document if a dispute based solely on a letter of intent was to arise. 

·       Therefore, the primary disadvantage over a formal appointment contract is their unpredictability and if used when time is of the issue, should always be followed up with a formal appointment contract.

·       ARB Code of Conduct Standard 4 – Competent management of your business, address the need for a formal services agreement.

·       RIBA Code of Professional conduct Guidance note 4 addresses the importance of formal agreement.

·       EXAMPLE: may be that a client is desperate for the architect to preform a feasibility study on a site which is going to auction in a weeks time.  In this case, due to time restraints, a letter of intent might be sent to the client to outline the fee structure and the time structure for the first stage of the works with a view to agree a formal architectural appointment at a later date.  This is in the understanding that the urgency to start the feasibility study outweighs the risk of losing the job and project to both client and architect

Professional code of conduct, which deals with this issue.

Furthermore, both the ARB and RIBA Code of conduct require architects to have a written appointment with a client in place. 

ARB

The Architects Registration Board (ARB) Code of Conduct comprise of 12 standards of professional conduct and practice of those registered as Architects.  Standard 4 deals with the competent management of your business, with standard 4.4 requiring that before undertaking any professional work an architect must actually enter into a written agreement with their client.

RIBA

Note 4 of the RIBA Code of Professional Conduct requires an obligation of members to provide to their client at the outset of any project, their terms and conditions of appointment.  Guidance note 4.2 provides a list of the terms that the appointment should include.

Guidance note 4.4 – When accepting an appointment, members should not undertake to provide services that they know, or ought to know, are beyond their competence or resources

Failure to comply with these codes may result in disciplinary action by the ARB and will be taken into account if in the event of coming before the Board’s of Professional Conduct Committee

Letter explaining how you wish to proceed towards an appointment

Dear Client,

Project Name

I write to formalise our recent discussions regarding your potential villa project in Tanzania.  You have asked us to perform some preliminary services in connection with this project to which this letter confirms the terms of our initial appointment.

You have explained your strategic brief objectives and asked us to

1.     carry out some feasibility studies for the project

2.     Prepare the Design Brief on your behalf

Performance of our services will be charged on a time basis.  Time-based services will be charged at the following rates:

Architect: £60 an hour

Technician: £50 an hour

In addition we shall invoice you for our expenses, including printing and travelling costs and any disbursements made on your behalf.  Accounts will be submitted monthly.

We will perform the service in accordance with the RIBA Standard Conditions of Appointment for an Architect 2012 of which a copy is enclosed.  We shall of course review progress with you regularly and advise you of the options for development.

We envisage that this preliminary appointment will continue for approximately eight weeks.  During this period we can discuss the further services required to complete the project and the detailed terms of our agreement.  When the agreement has been entered into, this preliminary appointment will be subsumed into it.

I confirm that I gave you a copy of our brochure giving background information about our practice. Other information can be found at our website.

I am enclosing, for your information, a copy of A Clients Guide to Engaging an Architect that includes a brief outline of some relevant legislation and A Clients Guide to duties under CDM, which I hope you will find helpful.

If you agree that this is a correct summary. Please sign the enclosed copy of this letter and return to use.  We shall then be in a position to start work.  We look forward to working with you on this project.

If it becomes necessary to vary the Service we can discuss how this might be arranged.

Kind regards,

Practice Management - 10 Employment Law

10.         Employment Law

Employment legislation has two functions

a)     To support the employment relationship with the contractual terms

b)     To provide an umbrella of statutory rights that operate both within / outside the contract

Know your professional + legislative obligations with regards to employing staff

Professional Obligations:

RIBA Code of professional Conduct Principle 3 – Relationships

RIBA Code of professional conduct Guidance Note 8 – Employment and Equal Opportunities

·       8.6 – members employing students must provide them with written contract, nominate an employment mentor, provide breath of experience, permit attendance at courses.

RIBA Code of Professional Conduct – Principle 3.3 Members are expected to comply with good employment practice set out in the RIBA Employment Policy which includes:

·       Promote best practice:

·       Be aware of and abide by the employment legislation and RIBA code of conduct

·       Adopt and monitor an employment policy

·       Provide employees with a written contract

·       Ensure all students know their rights and are offered opportunities for training and experience equally in the workplace

·       Review training needs or opportunities in the practice to ensure that all staff are given opportunity to develop their skills

·       Promote a health work like balance.  If overtime is excessive investigate different working methods to reduce this without detriment to the practice

·       Promote diversity at all levels

·       Promote CPD

Key Legislation:

Employment Act 2008

·       Dispute Resolution

·       National minimum wage

Employment Rights Act 1996

·       ERA section 1 (2) states that the main terms of the contract must be in writing and provided to the employee within eight weeks of the start of their employment – this is called a written statement of particulars” and confirms the main expressed terms of the employment contract

·       Split into parts. Part 5 – unfair dismissal, Part 4 – Dismissal notice, Part 4+6+7 – Paid time off, Part 8 – Types of Leave ie. Maternity, Part 10 Unfair dismissal, Part 11 redundency

·       Fair reason for dismissal covered by s98 of the Employment rights Act

Health and Safety at Work Act 1974

·       Obligation of employer to ensure health, safety and welfare of employees through guidance, approved codes of practice and regulations

Protection from Harassment Act 1997

Working Time Regulations 1998 – regulate hours of work, rest, holiday

European Working Time Directive – Restricts house of work

Equality Act 2010 – Protects people from discrimination in the workplace and wider society

Common Law – Contract Law

Zero Hour Contracts – Prevailing view is that these should be made illegal

TUPE - Transfer of Undertakings (protection of employment) regulations 2006. 

·       TUPE rules apply to organisations of all sizes and protect employees rights when the organisation or services they work for transfer to a new employer.

·       When TUPE applies, the employees of the outgoing employer automatically become employees of the incoming employer and should continue to have the same terms and conditions of employment with the incoming employer

Types of Employment Contract

A contract exists is there is Mutuality of Obligation

·       Contract of services – Employee (protected under the Employment Protection Act 1996)

·       Contract for Services – Independent Contractor (only law of Commercial contract applies) but still protected under H&S legislation and Equality Act

·       Employment status determines your level of protection under the employment legislation

·       NB: After four renewals of a fixed term contract the employee can apply for full-time status.  The employer needs to use Objective Justification is this is not given

As a minimum the written employment agreement should clearly express the terms and benefits including:

Minimum statutory requirements:

·       Normal hours of work

·       Holiday and leave entitlements

·       Amount and frequency of pay

·       Terms associated with sickness and sick pay

·       Length of notice period

·       Job title and description

·       Duration of employment

·       Disciplinary rules.

·       Obligations associated with the Pensions Schemes Act

An employment tribunal can award two to four weeks pay as a penalty for failure to provide these written particulars.

More clauses to be considered

·       Imposing a probation period

·       Restrictions on accepting other work during employment

·       Requirements to work overtime and undertake other duties

·       Confidentiality terms, making clear the types of information which may be treated as confidential to the practice.

·       Obligations for the employee to comply with confidentiality obligations own by the employer to the client (under RIBA SFA/99)

·       Intellectual property terms

·       Restrictive coventants

·       Working time regulations 1998 regulates hours of work, rest breaks, holidays and is closely associated with Health and Safety duties.

·       Basic rights are to not work more than 48 hours a week on average in total

·       11 hours of rest between working days

·       Employer has a statutory obligation to mitigate issues associated with the health and safety of its employees

Implement Standards through practice policy:

Project management Policy

·       Accurate resource forecasting and planning

·       Accurate time keeping

Handbook:

·       Handbooks can incorporate some contractual terms of a contract of employment or can contain pure polies

·       Ensure that all employees have access to a copy of the handbook and it is best practice to consult with affected staff before introducing new or changed policies.

Some of the essential things to include in handbook:

·       Disciplinary and grievance procedure

·       Family friendly policies ie. Maternity, emergency parental leave

·       Holiday leave and pay

·       Equal opportunities

·       Pay and benefits

·       Establish, implement and review proper health and safety statements and practices

Optional extras

·       Organisation chart

·       Internet + email policy

·       Training

·       Performance management + appraisals

·       Harassment and bullying

When producing a policy handbook its Important to consider current employment legislation for example the Equality Act and Protection from Harassment Act and how it affects the companies policies and procedures.

·       Use a format that is easy to update – available on intranet perhaps

·       Consult managers and staff when drafting new policies and procedures

·       Get content checked from legal perspective

Practice questions:

Key risks associated with not having an employment contract in place

As one of the biggest assets to an architectural practice is its employees, the importance of a written agreement expressing the terms of the practices relationship with their works should not be underestimated.  Although a mere offer and acceptance of employment (in what ever form) is all that is needed to create a contractual obligation, without a written contract, signed to signify acceptance of the terms of employment, both the employee and employer has no certainty as to the employment terms. 

Under section 1 of the Employment Rights Act 1996, the employer must provide the employee with written particulars of the contractual terms no later than two months after commencement of employment.  However it is best practice for a formal contract covering all the terms at the outset.

As a minimum the written employment agreement should clearly express the terms and benefits including:

Minimum statutory requirements:

·       Normal hours of work

·       Holiday and leave entitlements

·       Amount and frequency of pay

·       Terms associated with sickness and sick pay

·       Length of notice period

·       Job title and description

·       Duration of employment

·       Disciplinary rules.

·       Obligations associated with the Pensions Schemes Act

An employment tribunal can award two to four weeks pay as a penalty for failure to provide these written particulars.

More clauses to be considered

·       Imposing a probation period

·       Restrictions on accepting other work during employment

·       Requirements to work overtime and undertake other duties

·       Confidentiality terms, making clear the types of information which may be treated as confidential to the practice.

·       Obligations for the employee to comply with confidentiality obligations own by the employer to the client (under RIBA SFA/99)

·       Intellectual property terms

·       Restrictive covenants

·       Working time regulations 1998 regulates hours of work, rest breaks, holidays and is closely associated with Health and Safety duties.

·       Basic rights are to not work more than 48 hours a week on average in total

·       11 hours of rest between working days

·       Employer has a statutory obligation to mitigate issues associated with the health and safety of its employees

How would you ensure that employment issues are avoided in the future?

·       Provide employees with a contract of employment at the outset, expressing the terms and conditions of employment

·       A written contract could have provided certainty as to the employment relationship and could satisfy Section 1 of the ERA statement of terms

·       A probationary period could have provided a valid period in which to monitor performance, and a contractually agreed short notice period during probation

·       Use of gardening leave clause could give breathing space to mitigate risk of stealing clients

·       Clear remuneration package drafted to prevent uncertainty as to the bonus agreement

·       Clear drafting as to the notice period prevents arguments to the length of notice.

·       Implement a resourcing forecast / plan to allow for organisation of staff resources in effective way.  Identify where if there is a demand to increase resources through recruitment or where resources can be reorganised to better meet the needs of the current projects.