We can work it out

A contract of employment is an agreement entered into by two parties, giving rise to obligations that are recognised or enforced by the law.

Until one of the parties accepts the offer of a job, there is no contract between them. Once they accept, however, they become bound by the terms of the offer. It is important to note that a contract does not have to be in writing (although it helps to establish what terms had been agreed) for it to be legally binding.

In this article Emma del Torto, a solicitor from Thompsons Employment Rights Unit in Cardiff, looks at the employment contract and answers some frequently asked questions.

Employee or Worker?

There are three different types of employment relationship, an employee, a worker (for instance, someone who works on a casual basis) or someone who is self employed.
Although there is no legal test for establishing whether someone is an employee or a worker, the person is likely to be an employee if the employer:  

If, however, someone else can substitute for the worker, if they determine their own hours, hire their own helpers and pay their tax and national insurance on a self-employed basis, then they are probably not an employee.

All this matters because employees enjoy far more rights than workers or people who are self-employed - for instance, the right to claim unfair dismissal (if they've worked for a year) as well as various maternity and paternity rights and the right to request to work flexibly.

What are express contract terms?

Express contract terms are terms explicitly set out in the employment contract, and as a result, both parties know (hopefully) what they have agreed to.  These terms deal with specific working arrangements including pay, hours, holidays, place of work, provisions for sick pay, pensions and other benefits.

Whate are implied contract terms?

These are terms that the employer and the employee are assumed to have agreed. Terms regarded as so obvious that they need not specifically be included for example the employer's duty to provide a safe working environment and the duty of mutual trust and confidence.

The implied term of trust and respect has proved to be more powerful, in certain circumstances, than an express term of the contract. In United Bank Ltd v Akhtar (1989, IRLR 507), Mr Akhtar claimed constructive dismissal when he was told to move from Leeds to Birmingham to work.

Despite the fact that there was a mobility clause in his contract, the employment appeal tribunal (EAT) found it unreasonable for the employer to expect the employee to move within the six-day time frame. In other words, it said that the implied term of trust and respect overrode the express term of the contract.

What are incorporated terms?

These are terms that are incorporated from other sources, for example from collective agreements or works rules.

These can be expressly incorporated (for example when the individual contract states that certain terms are regulated by a collective agreement); or impliedly incorporated (for example when custom and practice is so well-established that the terms of collective agreements are incorporated into individual contracts).

What are statutory terms?

These are terms that are implied or imposed by statute. Examples of statutory terms are the right to a minimum wage and the right to statutory minimum annual leave.

What is the written statement?

There is no legal requirement for an employer to provide a contract of employment, nor for it to be in writing. Under section 1 of the Employment Rights Act 1996, however, the employer must provide the employee with a written statement within two months of starting work.

This must include information such as the names of the employer and employee, date the employment started, pay, hours, holidays, notice, any sickness pay scheme, any pension scheme, place of work, job title or description of duties, details of any disciplinary and grievance procedure.

As part of the new statutory dispute resolution procedures, a tribunal can award an extra two or four weeks' pay to an employee, if their employer does not give them a written statement or notification of a change of a term or condition of employment.
Any changes to the contract terms must be notified to the employee in writing within one month of the change taking effect. Notification is not the same as a legal variation of a contract (see LELR 93).

When can an employer vary the contract?

An employment contract is a legally binding agreement between two parties. A term of a contract cannot, therefore, be varied unilaterally without giving rise to a breach of contract.

So can an employer withdraw a discretionary benefit from staff, such as the provision of permanent health insurance? The simple answer is yes. It is only if it is explicitly a term of the contract (say, for senior management), that they cannot.

In Wandsworth London Borough Council v D'Silva (1998, IRLR 193) the employer altered a code of practice in relation to sickness. The Court of Appeal found that the code was not part of the contract but was simply meant to lay down good practice for managers. The language of the provisions in question was found not to provide an appropriate foundation on which to base contractual rights.

If an employer tries to vary the contract terms but cannot get agreement from their employees, they can always terminate the contract and offer new contracts with the new terms and conditions.

In Scott v Richardson (EAT April 2005 0074/04), the claimant was dismissed for refusing to accept a variation to their contract. The EAT said that the test was whether the employer reasonably believed that the changes to the contract were advantageous and it was not necessary for the employer to prove such advantages. This case highlights the low threshold that the employer must meet for the 'some other substantial reason' test for dismissal.

Conclusion

In theory, both parties freely enter into a contract of employment that is negotiated by two equal parties. In reality many workers have little choice but to accept the terms on offer, although some highly skilled workers are able to negotiate good terms.

Overall, the development of individual rights through employment contracts is one that is still heavily reliant on the negotiation of terms and conditions, both collectively and individually.