Contract Of Employment Notes

Labour 2 Employment The Contract of THE CONTRACT OF EMPLOYMENT Abbreviations: EE Employee ER Employer COE Contract of Employment EAT Employment Appeal Tribunal ET Employment Tribunal TU Trade Union D&M Deakin & Morris' textbook FT Fixed term (contract) INTRODUCTION * * * * CoE provides a mechanism to show the impact of external sources of governance/regulation on the individual employment r/s. Key issues: how these external forms of regulation are given contractual expression, and how conflicts between sources are dealt with. CONTENT of the CoE: A. Common law 'default' terms: apply in absence of express agreement otherwise. B. Collective agreements: take effect through common law doctrine of incorporation of terms C. Statutory obligations: usually on ER, restraining parties' freedom of contract but not necessarily taking the form of contractual terms directly. Can be seen as restoring contractual reciprocity, equalising bargaining power of the parties. Note that a CoE can be formed purely by conduct - very few requirements of formality see wide definition in ERA s230(2): oral/in writing, expressly/impliedly formed. Common law position is that there is very little regulation of hiring - left to parties' freedom of contract. Allen v Flood, 1898: ER can refuse to employ worker for whatever reasons. But some areas are regulated... Discrimination in hiring on grounds of protected characteristics TU membership and non-membership (TULRCA) Rehabilitation of Offenders Act 1974 protects rehabilitated offenders from being excluded on basis of a pst spent conviction. Asylum and Immigration Act 1996: makes ER liable for hiring one without legal right to work Minor/young person will be bound by CoE only if for his/her benefit - Chaplin v Leslie Frewin, 1966 SOURCES OF CONTRACTUAL TERMS AND CONDITIONS * * * * I) Express terms and managerial prerogative Doesn't define the agreement down to every detail - can't possibly lay out exactly how much work EE must do (and the quality/intensity/speed of work) to earn the specified wages. To be utterly complete would incur too much cost! Managerial prerogative: where problem of incompleteness is solved by granting ER unilateral rights of direction over EE, in return for wages. Hence what EE agrees to do is to serve, not just to provide a particular amount of labour/product ER holds a prerogative power beyond the express terms of the contract - can lay down new norms for work, and change them unilaterally. There is uncertainty over where the express contractual terms end, and managerial prerogative begins. Eg. Some terms like working hours can't be changed unilaterally by ER. Specific obligations usually seen as express terms, to which managerial prerogative does not extend. II) Terms implied at common law 1 Labour 2 The Contract of Employment * Key form is the 'bridging term' which gives effect to the normative contents of collective agreements. Other examples include: reciprocal duty of co-operation, and terms protecting EE's expectation of continuing work and employment. * Obligations tend to be diffuse and open-ended! Hard to make them fit into contractual framework often show distinctive signs of origins in statutory regulation and tort. * Can be said to be legal incidents of the employment r/s - come about not cos of presumed intentions of parties, but by virtue of the nature of the underlying r/s. * Criteria is necessity, not merely reasonableness. * Optional: parties can depart from these implied terms if they want - court can't force them just cos it appears reasonable/equitable to do so. * Still, not that redundant! Common law implied terms are residual, taking up the space that express terms inevitably leave behind. Scope and effect depends on whether there is express term encroaching on that that space yet!RELATIONSHIP BETWEEN IMPLIED AND EXPRESS TERMS Irreducible core: notion that some implied terms cannot be removed by express agreement eg. Courts requiring ER to act reasonably in exercising option to invoke powers contained in express terms Imperial Group Pension Trust Ltd v Imperial Tobacco, 1991: while ER had discretion to agree to increases in pensions, it was not unqualified as ER was obliged to exercise its powers in good faith and avoid arbitrary/capricious results. Hence, express terms can be qualified by implied obligations.Johnstone v Bloomsbury HA, 1992 Leggatt LJ (minority) adopted view that express agreement for EE (junior hospital doctor) to be available for up to 88 hours a week prevailed over any implied term for protection of EE's health and safety! But the other 2 judges preferred view that agreement gave ER option to call on EE to perform, and this option had to be exercised reasonably (implied term > express term) [Deakin & Morris] agrees with the view of the majority. 1. Odd if we were to allow ER's obligation (arising from both implied contractual term and duty of care in tort) to be limited by express contractual term - usually need formal disclaimer/exclusion clause to oust tort duty 2. Express contractual term which seeks to limit ER's tortious duty might be nullified by s2(1) UCTA 1977 anyway. 3. Ambit of express term should arguably be limited by public policy.- cf Malik v BCCI SA, 1997, where Lord Steyn referred to an implied default term of mutual trust confidence, operating in absence of express agreement. D&M thinks if this is a default, it should be a strong default which can only be qualified by a clear and precise express term! III) Regulation by statute and collective bargaining Regulation by statute * Traditionally, courts saw protective legislation as imposing extra-contractual obligations, enforceable through criminal prosecutions and tort. In the past, the contract of employment as we know it today did not yet exist. Claims usually seen as statutory, with scope of remedies defined by individual statutes. Procedurally, ETs could here common law claims for damages for breach of contract since 1994, but County Court/High Court cannot hear statutory claims arising from employment r/s! * However, protective statutory rights can still have indirect effect on terms of the employment contract. Barber v RJB Mining, 1999: statutory working hours limit in the Working Time Regulations 1998 held to give rise to implied contractual obligation on ER to observe the limit, hence EEs could obtain declaration of their rights. * Usually forms floor of rights - minimum standards which cannot be derogated from. Statute precludes any contracting out from the rights in ERA 1996 (s203(1)) and TULRCA 1992 (s288) - voids any contractual provisions insofar as it purports to exclude/limit rights 2 Labour 2 Employment The Contract of Hence, provides platform on which individual agreement/collective bargaining can build on to the benefit of EE. But compared to mainland European systems, way less comprehensive! More piecemeal started off for certain groups of workers who weren't protected by CAs. In 1980s, effectiveness of sector level CAs declined, and deregulatory legislation removed minimum wage controls... Collective bargaining * Incorporation of substantive content of CAs is not compulsory/automatic - depends on whether there is an express/implied 'bridging term' in the CoE. * ER cannot unilaterally alter term of CoE, but can destroy their effect by dismissing EE and offering them new terms - not automatically unfair; ER usually can prove that it was in interests of the business The Written Statement Scope of the written statement * Right to written statement was the first of the modern employment protection rights - Contracts of Employment Act 1963 * Aims: reduce disputes over contractual terms; formalise procedures. * Noteworthy features: i. ERA 1996 s1: ER must issue written statement of certain particulars as a single document: a. Basic information: parties' names, date of commencement of employment b. Other information: scale/rate of remuneration/method of calculation, interval of payment, hours of work, holidays, job title, EE's place of work/ER's name and address. ii. Third category of information can be provided in a separate document: intended period of contract/agreed date for termination, collective agreements which directly affect T&Cs, and conditions governing EE's work abroad, if any. iii. Fourth category can be contained in a written statement/another document which EE has reasonable opportunity to read in the course of employment/reasonably accessible: details on incapacity for work (eg. Sick pay), occupational pension schemes and benefits, notice period iv. Fifth category of disciplinary and grievance procedures must be specified in the written statement - disciplinary rules may be specified in another reasonably accessible document. * Timing: as long as employment continues for at least a month, written statement must be issued within 2 months from date of commencement even if employment terminated during 2nd month. S4: any changes must be notified by ER issuing a further written statement 'at the earliest opportunity', within a month of the change. But note that the CoE is independent of this! Can arise even without writing. * Distinguish between the written contract of employment (which has normative force), and the statement (merely declaratory - legal effect of contract terms derives from their contractual nature, whether by express agreement/incorporation/implication). However, cos of EA 2002 s37, which inserted s7A and 7B into the ERA 1996, ER can just issue a single 'document in writing in the form of a contract of employment or letter of engagement' avoiding unnecessary duplication! * Note the written statement does NOT set a floor of rights - only meant to reflect what parties have agreed on (still possible that in certain areas, no terms were agreed on) * Remedies (ERA s11 and 12): Should ER fail to comply with s1 obligations, EE can make reference to ET under s11, which can amend/substitute particulars as appropriate. But no compensation available! Since 1.10.2004: if EE wins in other statutory proceedings listed in EA 2002 (including discrimination claims, union membership claims etc), can get additional 2-4 weeks' pay for ER's failure to provide written statement/notification of changes - s38 EA 2002 Limited normative effect of the written statement * Courts have interpreted s1 as requiring ERs to notify EEs of particulars which already have independent contractual force. Strictly speaking, the written statement is just evidence of other sources of norms. The rules within s1 and s3 are presumed to be contractual, unless contrary is shown. Hence, they will trigger ER's statutory obligation to give written statement. 3 Labour 2 Employment The Contract of * * *-Hence, conventional understanding is that legislature imposed obligation of notification on ER not requiring courts to interpret these notified procedures as having contractual effect. But practical effect might be to encourage ERs to formalise employment procedures, which may then become contractual terms. The Act does not require contract to contain terms as to holidays/incapacity/pension benefits (see category four above) - seems to defeat purpose of the Act? ER can avoid statutory obligation by declining to agree on terms in the first place. NB: if there are no agreed terms on the matter, ER still has to state this fact of absence! England v British Telecommunications, 1992: Parker LJ confirmed that the Act does not empower/require the ET to impose upon parties terms that that they have not agreed on, hence there may be no terms on pension/sick pay/holiday pay/disciplinary rules if parties agreed that there should be no such rules, or if the matter was not agreed on at all! Morley v Heritage plc, 1993: s1 merely recognises that a contract can include provision for holiday pay, but does not require such a term to be implied by courts/ET. Since the written statement is merely declaratory of contractual terms, it cannot prevail over contractual terms which were expressly/impliedly agreed by parties (including those of CA). Can only be evidence of what parties have agreed - one of the factors to be considered during construction of the agreement. But sometimes can be quite hard to distinguish the CoE from the written statement, esp if the CoE is implied from conduct and comes into being without any writing at all. Cf Gascol Conversions Ltd v Mercer, 1974: ER had sent EEs document purporting to discharge its s1 obligations, but which was titled "contract of employment" and which contradicted with the terms of the CA, which EE signed and returned. Lord Denning held that the document constituted an offer of a new contract, and EE's acceptance amounted to variation of original terms (new contract being made on terms of the written statement). Written terms given precedent over oral terms/terms implied by conduct! BUT problematic: s1 needs a statement of existing contract terms - how can this be an offer of new terms simultaneously? Browne-Wilkinson J in System Floors Ltd v Daniel, 1982, said this means that without acknowledgement by both parties that the statement itself is a contract and that the terms are correct, EE cannot be taken to have agreed to variation! ER will also be in breach of its s1 statutory obligations - EE should be able to deny variation. CURRENT POSITION: ER will not easily be able to present the statement as evidence of terms derogating from those which would otherwise apply. But if statement favours EE, it will be "strong prima facie evidence" of contractual terms - basically weighted in EE's favour!CONSTRUCTION, INCORPORATION AND VARIATION Incorporation Incorporation of terms from collective agreements * "Collective agreement" is defined in TULRCA s178. s179: CA is conclusively presumed NOT to be intended to be legally binding as contract, unless in writing + contains provision stating parties' intention to be legally binding. Ford Motor v AUEFW, 1969: at common law, there is normally no intention to create legal relations. Marley v Forward Trust Group, 1986: but legal status of a CA between parties is IRRELEVANT to the qn of incorporation into indiv CoEs. (note special rules on incorporation of no-strike agreements, under s180 TULRCA) * English labour law hasn't done much in the way of regulating and enforcing CAs. S4 Trade Union Act 1871 denied contractual force to agreement between trade unions (which included employers' associations) Common law denied contractual force to agreements between TU and a single ER, because of uncertainty and absence of intention to create legal relations. 4 Labour 2 Employment The Contract of Today, statutory presumption that CA is NOT intended by parties to be a legally enforceable contract, UNLESS it is in writing and contains a provision that parties intend it to have legal effect (rare!). Still, most CAs, despite being unenforceable at the collective level, are still enforceable as terms of the individual CoE.Conceptual explanations for incorporation of collective agreements 1. AGENCY: TU negotiates with ER, as agent for each indiv union member as principal. Resulting terms form part of CoE without requiring further agreement. Not very convincing! Doesn't explain position of non-members of TU, or EEs who join employment/union after the CA was concluded. Also, unlikely that TU/ER intended that individual EE can unilaterally revoke his authority to the TU to negotiate on his behalf. Further, contract of membership between EE and TU does not authorise TU to act as agent for EE - need something more specific! So generally rejected, unless there is small group of EEs involved - Burton Group v Smith, 1977. Instead of looking for authority in the CA, look for authority in CoE itself... 2. **BRIDGING TERM: bridging term's key function is to identify the external source from which contract terms are drawn. It also determines the appropriate terms for incorporation, and resolves conflicts between sources. Today, express reference to normative effect of CA likely to be found in the written statement - seen as significant evidence that bridging term was previously expressed by parties/tacitly accepted by them. Can also be implied via normal common law tests: (recall common law can imply terms into contracts on basis of business efficacy/necessity) (implied in fact) custom and practice in the plant/establishment. Can even be sector level, as in Howman & Son Ltd v Blyth, 1983, where fact that sick pay was regularly paid in the industry was relevant. Imposed by law as a necessary incident to the contract, without which the contract would be ineffective/absurd futile. Might not require EE to have specific knowledge of CA; not based on parties' tacit consent and understanding, but on need for contract to reflect reality of the relationship. Suggested in Tadd v Eastwood and the Daily Telegraph, 1983. But this would be stepping quite a bit away from the consensual model of contract.Appropriateness of terms for incorporation: major limitation on the normative effect of CAs! Certain terms regulate the employment of only a specific group of EEs Other terms are intended to be part of the 'contractual' part of the CA, governing the r/s between TU and ER, as opposed to the individual T&Cs of Es. Confusion arises where a term which is collective in nature, can also confer rights/impose obligations on an individual EE. Substantive terms giving indivs rights are usually incorporated without much difficulty, whereas procedural terms are largely seen as inappropriate. Taylor v SoS for Scotland, 2000: HOL allowed incorporation of employment opportunities policy, providing for non-discrimination on a number of grounds. British Leyland (UK) Ltd v McQuilken, 1978: CA's provision on redundancy policy was held to be a 'long-term plan' that did not confer rights to indiv EEs. Alexander v Standard Telephones and Cables Ltd (No 2), 1991: last-in, first-out agreement as to redundancy selection was deemed inappropriate for incorporation questionable? Many 'procedural' terms can benefit EEs - blurs the line! Eg. Terms on disciplinary procedures. Compare with provisions on organisational matters, which may not be suitable for incorporation at individual level (see Malone v British Airways, 2011 - CA said terms governing minimum personnel level were purely procedural, and did not confer rights on EEs) Basically turn on their facts! Individual grievance and disciplinary procedures are normally incorporated - Edwards v Chesterfield, 2010. 5 

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