Employment Contracts PDF

# EMPLOYMENT CONTRACTS ## A CONTRACT IS AN ENFORCEABLE PROMISE Any contract requires: - An offer - An acceptance - An intention to be legally bound - Consideration Offer clear, certain, unconditional Acceptance unqualified Intention to be legally bound meeting of minds, commercial vs social...

# EMPLOYMENT CONTRACTS ## A CONTRACT IS AN ENFORCEABLE PROMISE Any contract requires: - An offer - An acceptance - An intention to be legally bound - Consideration Offer clear, certain, unconditional Acceptance unqualified Intention to be legally bound meeting of minds, commercial vs social arrangements Consideration money or monies worth received in return for the promise, need not be adequate, cannot be illegal, must move from the promisee. An illegal contract may not be enforced by the courts, but the Unfair Dismissals Act allows the EAT to decide a claim even where the contract is illegal. The freedom to contract is limited by the reality of the employment relationship i.e. many terms are imposed by law. ## B. FORM OF AN EMPLOYMENT CONTRACT An employment contract is created by express agreement between the employer and employee. This agreement may be made orally, expressed in writing or evidenced by conduct. The **Terms of Employment { Information} Act 1994** determines that within two months of commencing work or upon request, the employer must provide to the employee: - Name of employer and employee - Address of employer - Place of work - Job description - Date of commencement - Date of termination of contract {if fixed Term} - Rate of pay method of calculation - Length of intervals of pay - Hours of work including overtime - Holiday and sick pay schemes - Pensions schemes - Notice period - Collective agreements Any dispute arising under this legislation is determined by the WRC on appeal to the Labour Court. The contract can be confirmed, amended and/or compensation of up to 4 weeks remuneration granted. Since 4 March 2019, you must receive part of this statement, containing certain core terms of employment, within the first 5 days of starting a job. You must receive the remaining terms in writing within 2 months of starting work see Rules below. **Q. What is the legal effect of a statement or notice of terms and conditions of employment?** **A. It is not a contract but it could be a representation.** **Smith v BGC 1970 AllER 154** The Plf was engaged as an employee with the Dfdt company. Dfdt purported to transfer Plf {with his consent] to another company. The notice of terms and conditions implied that the Plf was an employee of BGC. Plf was made redundant and claimed against BGC. BGC stated that Plf was not employed by them but the notice stated otherwise. Crt held that BGC were estopped from denying that they were Smiths employer since; i.) They {and not NCB} had given notice of the redundancy to the Plf, ii.) the Plf believed the notice of terms and conditions was a statement of the legal position and iii.) the Plf acted in reliance on this notice in that he did not partake in the pension scheme of the NCB. ## C. CONTRACT OF SERVICE/ CONTRACT FOR SERVICES Before examining the contract, it is important to distinguish between contracts of employment{i.e. of service} and contracts for services. The division of labour in terms of the categories of employee and independent contractor cannot be regarded as merely an academic exercise in that the legal status of a worker has important practical consequences in a number of areas of the law: - Employment law - Social welfare law - Revenue law - Law of tort - Liquidations (e/es are preferential creditors) - Ownership of intellectual property. For example, most of the rights and duties found in employment statutes specifically arise out of the relationship of employer and employee and do not apply to independent contractors. In the context of social welfare law, employers are obliged to make contributions in respect of insurable persons engaged pursuant to a contract of service. Further, the principles of vicarious liability determine that an employer is liable for the acts of his employees where such acts are carried out in the course of employment: therefore the legal status of a worker can assume great importance where one worker injures another worker in the course of his work. Revenue and Tax law require that income tax be deducted at source from employees whereas an independent contractor may make his own tax returns. An employee is someone who is employed under a contract of service while and independent contractor is employed under a contract for services. | Contract of Service | Contract for Services | |---|---| | Chauffeur | Taxi Driver | | Staff reporter with a newspaper | Freelance journalist | It is difficult to provide one general statement which would serve to conclusively distinguish between a contract of service and a contract for services. Where a dispute arises as to the status of a worker, the courts have sought to determine the issue by reference to a variety of legal tests. ### The Control Test The original test, based on the 19th century relationship of Master and Servant, this test concerns the level of control reserved by an employer over the manner in which the work is to be carried out. In **Roche v- Kelly 1969 IR** the control test was described in the following terms: While many ingredients may be present in the relationship of master and servant, it is undoubtedly true that the principal one, and almost invariably the determining one is the fact of the masters right to direct the servant not merely as to what is to be done but how it is t be done. The fact that the master does not exercise that right, as distinct from possessing it, is of no weight if he has the right. **In McAuliffe v Minister for Social Welfare the High Crt stated that the control test was the correct test in determining which contract exists.** In this case< Mr Plunkett and Mr Weir were engaged by Mr McAuliffe for 6/7 days and 5 days per week respectively to deliver newspapers in the province of Leinster. They were paid monthly against invoices submitted by them to the appellant. They each owned their own car and were responsible for all outgoings including tax, insurance, repairs, fuel and depreciation in respect of them. They could get others to do their deliveries if they were unavailable and they were each responsible for paying the substitute drivers. They were free to carry goods for any other persons and were registered as self employed for the purposes of tax. When Mr McAuliffe terminated their contracts, they sought to sue under the Unfair Dismissals Act 1977-2005 claiming to be employees. Barr J noted that Mr McAuliffe had two options, firstly, to employ an independent haulage company to perform the service for him or secondly he could control the operation himself by providing vehicles and personnel form within his organisation. In this case, the appellant had chosen the first option and so Mr Plunkett and Mr Weir were not employees but rather independent contractors working under a contract of services. **Ready Mixed Concrete Ltd v Minister of Pensions and National Insurance 1968 2 QB 497 Judge McKenna observed: Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All of these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant** ### The Integration Test An employee can satisfy the Integration test EVEN THOUGH they do not satisfy the Control Test. This test provides that a person employed under a contract of employment is usually integrated into the business and their work forms an integral part of it. **Re Sunday Tribune 1984 IR 505** Three journalists sought to prove that they were employees in the winding up of the company {employees as opposed to independent contractors would rank as preferential creditors}. The first claimant was a part time sub editor of the newspaper with two shifts per week. The second claimant was a regular columnist with a fixed fee per week for a weekly column and was required to attend meetings throughout the year. The final claimant was a regular contributor of articles when specifically commissioned to do so for a fixed fee. All the journalists worked for other companies. The High court held that the first and second claimants were employees working under contracts of employment while the third claimant was an independent contractor. Carroll J specifically applied the Integration test when assessing the nature of the contract between the regular columnist and the newspaper: In Mary Hollands case, I am of the opinion that her employment was an integral part of the business of the newspaper. The column was t run for 50 of 52 weeks of the year. She took part in editorial conferences. There was the provision for the equivalent of holiday pay. He case is not dissimilar to that of Beloff Pressdram Ltd. Therefore I am satisfied that she was employed under a contract of service. In the case of the part time sub editor, his employment was held to satisfy the simple test of control by the employer. He worked at specified times under the guidance of the chief sub-editor and to his instructions. The fact that he worked part time did not change the nature of his employment. The third claimant was not regarded as being integral to the newspaper as in the opinion of the judge, she was a freelance contributor who secured commissions in advance but was under no obligation to contribute to the newspaper on a regular basis. **Beloff v Pressdram Ltd 1973 1 AllER 241** This case involved a pltf who was the political correspondent of the Observer newspaper who sued the publishers of Private Eye magazine for infringement of a newspaper article. The question arose as to whether the copyright vested in the observer, which in turn hinged upon the issue of whether the pltf was an employee of the newspaper. The judge came to the conclusion that the pelts job was an integral part of the business of the observer and its organisation and that therefore she was employed under a contract of service. He was influenced by the fact that the pltf attended weekly and ad hoc editorial meetings and also the fact that the newspaper provided the pltf with all the equipment and resources which she deemed necessary to perform her job. ### The Mixed Test In this test, the court examines all aspects of the relationship, not just the control element. For example, who owns the tools, plant and equipment that are used in the performance of the contract? Does the individual who contracts with the employer have an opportunity of profit depending on the efficiency with which he carries out the work? Is there a corresponding risk of loss? The approach of the court in applying this test was first explained by Kenna J in **Ready Mixed Concrete Ltd v Minister for Pensions 1968 QB 497** A former employee of the Ready Mixed group entered into a contract with the company whereby he agreed to collect, carry and deliver concrete as an owner-driver for two years. The arrangement was subject to an extensive written agree which provided inter-alia, that the owner-driver had to make the truck available at all times for collecting, carrying and delivering materials on behalf of the company, had to wear the company uniform, comply with all the companys rules as if he were an employee of the company and maintain the truck as required by the company {albeit at his own expense}. However the contract was not one of personal service in the sense that he was permitted to employ other drivers to drive in his place. Mc Kenna J held that for a contract of service to exist, three conditions must be fulfilled: 1. there must be an obligation on the person to provide his own work and skill in return for a wage or other remuneration 2. there must be a sufficient degree of control by the employer 3. the other provisions in the contract must not be inconsistent with its being a contract of service. The circumstances of the arrangement provided that the owner-driver was not an employee of the company but rather was engaged under a contract of carriage. **Mc Dermott v Loy High Court 1982** In this case the issue to be addressed was whether a person who collected insurance premiums in business on his own account? The evidence was that he worked his own hours, had his own stationary and could employ others, but he was also a member of the insurance company pension fund and trade union and was entitled to holiday pay. Barron J held that he was an independent contractor he moved away from the control test and felt that there were other factors to be looked at: - did he provide his own equipment? - Could he hire assistants? - Did he take any financial risk? - Could he profit himself? - How much was he responsible for management and investment? The leading Irish decision in which this was applied is the judgement of the Supreme Court in **Henry Denny v Minister for Social Welfare 1998 1 IR 34** **Facts:** In 1988 The Respondent, Ms Mahon was placed on a panel from Henry Denny and Co, the appellant company from which food demonstrators were selected from time to time to merchandise products on behalf of the appellant in different shops. Ms. Mahon entered into a written contract with Denny which expired at the end of each year whereupon a new contract would then be entered into. Ms Mahon would be notified three or four days before the date of a proposed in-store demonstration and subject to her availability, it would be agreed that she would demonstrate one of Dennys food products in a particular retail store. The terms upon which Ms Mahon was engaged by Denny were set out ion a yearly basis in a comprehensive written agreement. This agreement expressly stated that Ms Mahon was not an employee of Denny but rather an Independent contractor. It further stated that Ms Mahon was to be responsible for her own tax affairs and her fees were discharged by Denny on a fortnightly basis on the production of completed invoices. **Keane J: It is, accordingly clear that while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for him or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive.** The question of whether a worker is to be regarded as performing services for himself can be determined by answering the following three criteria; - do they provide the necessary premises or equipment or some form of investment? - Do they employ others to assist in the business? - Does a profit derive from the business depending on the efficiency with which it is conducted. ## D. TERMS OF AN EMPLOYMENT CONTRACT Every contract of employment contains terms and they may be express terms or implied terms. ### Express Terms Express terms are those terms that are expressly/ formally referred to in the contract of employment . They might include the following; - Name of employer - Job specification - Date of commencement - Probations period - Hour of work - Expenses - Sick pay - Holiday - Right to search - Lay offs/ short time - Trade union membership - Retirement age - Pension - Grievance procedure - Notice period - Confidentiality clause - Restrictive covenants ### Implied Terms Terms may be implied into the contract by Common law, collective agreement, the Constitution or legislation. #### Common Law - the duty of the employer to indemnify employees re expenses - the duty of employer to provide a safe place of work for the employee - the duty of the employee to serve the employer - the duty of the employee to obey lawful and reasonable instructions of employer #### Fidelity: duty of mutual trust and confidence **Faccienda Chickens v- Fowler 1984 IRLR** A sales manager used his former employers customer lists in establishing a rival business- injunction sought the court held there were three types of information obtained in the course of employment - Trivial in the public domain not confidential - Confidential becomes part of an employees own knowledge an express term in the contract can protect the use of such information - Trade secrets can never be used { e.g. Coca cola] Injunction refused. #### Collective Agreements May incorporate binding terms into individual contracts #### The Constitution Implies a right to associate and a right to dissociate into every employment contract. #### Legislation In Ireland many statutes are implied into every contract of employment. The rights implied from the legislation are only applicable to certain employees depending on their status and sometimes on their length of service. ## DRAFTING EMPLOYMENT CONTRACTS The written contract of employment should outline in clear language the key terms and conditions of employment. Some employers have established union/management agreements that set out the key terms and conditions. In these cases, the offer letter may only contain the name and address of employer and employee, the place of work, the job title, commencement date and salary. A copy of the agreement should be attached to such a letter. The contract ofemeployment should include the following key terms: - Employees Name - Employers Name - Place of work: where there is more than one location, the location at which the employee is entitled to work should be stated. If the employee is required or permitted to work at a number of locations, this should be stated. If the employee is required to work at one fixed location initially, but may be transferred in the future, a statement to this effect should be included e.g.: Your normal place of work will be at ----address. However, from time to time you may be requested to work or attend at other locations. In such event, no additional remuneration shall arise. You may be requested to temporarily work and/or train overseas, in which event the appropriate details will be provided before your departure. - Commencement date: The actual commencement date should be stated in the contract. - Rate of Remuneration: This information should reflect whether the employee is paid hourly, weekly, fortnightly or monthly. Where overtime is included in the salary the contract should advise: This amount will take into account additional hours worked in excess of normal working hours. - Details of items in addition to basis pay should also be outlined e.g. bonuses, commission and how same are calculated. If other benefit such as V.H.I., profit sharing, shares options etc. applies they should be outlined. - It is usual to indicate the manner of payment e.g. by credit transfer on the last Friday of the month. - Hours of work: Details of the hours to be worked must be provided including Information regarding overtime, work on Sat/Sun, evening work, shift work etc. - Pension Schemes: The employer should outline some details or refer the employee to another reference document. ## POSSIBLE ADDITIONAL CONTRACT ITEMS {Remember, an illegal provision in a contract will render it null and void} - An Acceptance Clause: Where the employee indicates by their signature that they agree to accept and be bound by the terms and conditions in the contract. - Probation period: This will usually range between one and three months but may extend for less than one year. After a year in employment the employee will be protected by the Unfair Dismissals legislation. A policy should cover same. - Expenses: The employer may wish to state that reasonable expenses incurred in the course of employment will be reimbursed. - Right to Search: In order to avoid an accusation of trespass or assault, the employer should clearly set out the extent of the search policy and where it is applicable. The employee should sign this. - Trade Union Membership: If a collective agreement exists between the employer and a trade union, requiring that all or a particular category of employee be a member of a particular trade union, this must be clearly stated in the contract of employment. If the employer is to deduct union dues from employees salaries, that should be stated. - Retirement Age: If the employer does not specify a retirement age, the normal retirement age will be taken to be 65 years of age. - Confidentiality/Intellectual property Agreements: it is important to understand the delicate balance to be struck between the protection of Company information and the right of an employee to earn a living. Confidentiality: while the need for confidentiality is implied into the contract of Employment, it is advisable to clearly state that the employee shall not disclose any confidential information about the business, without the express written permission of that employer. Such disclosures include: - Manufacturing process - Product information - New technologies - Copyright/patent protection: where an employer is involved in the development or to Adaptation of material or products, the employer may require the employee to sign a specific statement stating that the inventions are the property of employer and that in the event of the employee leaving the company, all documents etc will be returned to the company. - Restraint of Trade: Generally speaking, attempts to restrict an employee from Competing with an employer following the ending of his employment are difficult To enforce. Legally the employer has to satisfy the court that: - A) the restraint of trade clause was intended to protect a legitimate interest and - B) that the covenant goes no further than is reasonably necessary to protect that interest. - Accordingly, a restraint of trade provision should: - a) define the particular business from which it is intended to restrain the employee from working. - b) Set out reasonable geographic territory over which the restraint is to extend. - c) Set out the shortest necessary period of time for the restraint. - Minimum Notice: While statutory minimums are provided for in the Minimum Notice Terms of Employment Act 1973- 2001, it is open to employers to provide for longer notice periods. Where a longer period is expressed in a contract of employment, it is the expressed term that will apply.