When does an employment contract need to be signed as a deed?
Most employment contracts are signed as simple contracts. For most employees, that is entirely appropriate and legally effective. However, there are circumstances where an employment contract must be executed as a deed and failing to do this can weaken key protections on which the employer wants to rely.
This issue is most often applicable to senior or specialist roles, particularly where intellectual property and post‑termination protections are critical.
Simple contract vs deed: what’s the difference?
A simple contract requires consideration (usually the salary) to be enforceable, whereas a deed does not. Deeds also have stricter execution formalities, including the requirement for a witness signature.
From an employer’s perspective, the most important practical difference is that certain legal rights can only be granted validly by deed. If the contract is not executed correctly, those rights may not exist at all.
The key trigger: powers of attorney
The most common reason an employment contract needs to be signed as a deed is the inclusion of a power of attorney clause.
Powers of attorney are often included in employment contracts to allow an employer to sign documents on an employee’s behalf, typically to effect the transfer of intellectual property created during employment or after termination. As a matter of law, a power of attorney must be granted by deed to be valid.
If a contract contains a power of attorney clause but is signed as a simple contract, that power of attorney is ineffective. In practice, this may only become apparent years down the line - often after termination, when the employer needs to rely on it.
Intellectual property protection and senior roles
The general legal principle is that intellectual property ("IP") created by an employee in the course of their employment will generally vest in the employer automatically. However, this does not provide blanket protection.
Contracts often go further, requiring employees to assign future IP, waive moral rights and execute documents post‑termination to give effect to ownership. A power of attorney is commonly included to enable the employer to complete those steps if the employee is unwilling or unavailable to do so.
Where a business is IP‑heavy or reliant on innovation, the enforceability of these mechanisms can be commercially significant. This is why senior employee contracts and directors’ service agreements are commonly executed as deeds.
A common drafting trap
One issue we regularly see is power of attorney wording appearing in standard employee templates that are otherwise intended to be signed as simple contracts.
In those circumstances, the presence of the clause does not automatically convert the contract into a deed. If the execution formalities are not followed, the power of attorney is ineffective – even if both parties intended it to apply.
This creates a false sense of security for employers, who may assume they have stronger IP protections than they actually do.
Do existing contracts need to be fixed?
Not every contract containing IP provisions needs to be rewritten or re‑executed as a deed. In many cases, existing statutory and contractual IP protections will be sufficient, particularly for junior or non‑technical roles and there is no need to rely on a power of attorney clause.
However, employers should review whether: