HR MANAGEMENT - Contract Of Employment

CONTRACT OF EMPLOYMENT

By Faudzil Harun

What is Contract of Employment?   
                                     
The most defined contract of employment or contract of service are :



Section 2 of Employment Act, 1955
A contract of service is “Any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee.”

Section 3 of Occupational Safety and Health Act, 1994
A contract of service is “Any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee includes an apprenticeship contract;.”

Section 2 of Industrial Relations Act, 1967      
A contract of employment is “Any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as a workman and that other agrees to serve his employer as a workman.”


Conditions to Determine a Contract of Employment

While the definition of a contract of employment looks innocent enough, it is
not that straight forward to identify a contract of employment in cases where
there are doubts. The conditions to determine a contract of employment were
clearly enunciated by McKenna J in Ready Mixed Concrete (South East) Ltd. V Minister of Pensions and Social Insurance, (1968 2QB 497) when he said 

“A contract of service/employment exists if the following conditions are fulfilled :-

1. The servant agrees that in consideration of a wage or other remuneration,
    he will provide his own and skill in the performance of the contract.       

2. There must be a wage or other remuneration otherwise there will be no 
    consideration, and without consideration, there will not be a contract of
    any kind.

3. The servant must be obliged to provide his own work and skill. If the 
    servant is free to do his job in any way he pleases or is able to delegate
    his work to be performed by another, then that is not a contract of service.”
    (Braddell v Baker 1911 104 L.T.R. 673)


Contract of Employment

Under The Employment Act, 1955          

Part 2 (Contract of Service) under the Employment Act, 1955 read as follows :

Section 6 – Saving of existing contracts

Every agreement lawfully entered into between an employer and an employee before the coming into force of this Act shall if it is still legally binding upon the parties continue in force for such period as may be specified in the agreement and the parties thereto shall be subject to, and shall be entitled to the benefits of, this Act.

Section 7 – More favourable conditions of service under the Act to prevail

Subject to section 7A, any term or condition of a contract of service or of an agreement, whether such contract or agreement was entered into before or after the coming into force of this Act, which provides a term or condition of service which is less favorable to an employee than a term or condition of service prescribed by this Act or any regulations, order or other subsidiary legislation whatsoever made there under shall be void and of no effect to that extent and the more favorable provisions of this Act or any regulations, order or other subsidiary legislation whatsoever made there under shall be substituted therefore.

Section 7A – Validity of any term or condition of service which is more favourable

Subject to any express prohibition under this Act or any regulations, order or other subsidiary legislation whatsoever made there under, nothing in section 7 shall be construed as preventing an employer and an employee from agreeing to any term or condition of service under which an employee is employed, or shall render invalid any term or condition of service stipulated in any collective agreement or in any award of the Industrial Court, which is more favorable to the employee than the provisions of this Act or any regulations, order, or other subsidiary legislation whatsoever made there under.

Section 7B – Removal of doubt in respect of matters not provided for by or under this Act

For the removal of doubt it is hereby declared that if no provision is made in respect of any matter under this Act or any subsidiary legislation made there under, or if no regulations, order or other subsidiary legislation has been made on any matter in respect of which regulations, or an order or other subsidiary legislation may be made under this Act, it shall not be construed as preventing such matter from being provided for in a contract of service, or from being negotiated upon between an employer and an employee.

Section 8 – Contracts of service not to restrict rights of employees to join, participate in or organize trade unions
Nothing in any contract of service shall in any manner restrict the right of any

employee who is a party to such contract :

(a) to join a registered trade union;

(b) to participate in the activities of a registered trade union, whether as an 

     officer of such union or otherwise; or

(c) to associate with any other persons for the purpose of organising a trade 

     union in accordance with the Trade Unions Act 1959.

Section 10 – Contracts to be in writing and to include provision for termination
(1) A contract of service for a specified period of time exceeding one month 

     or for the performance of a specified piece of work, where the time 

     reasonably required for the completion of the work exceeds or may exceed 

     one month, shall be in writing.

(2) In every written contract of service a clause shall be included setting out 

     the manner in which such contract may be terminated by either party in 

     accordance with this Part.

  

Section 11 – Provision as to termination of contracts
(1) A contract of service for a specified period of time or for the performance 

     of a specified piece of work shall, unless otherwise terminated in 

     accordance with this Part, terminate when the period of time for which 

     such contract was made has expired or when the piece of work specified 

     in such contract has been completed.

(2) A contract of service for an unspecified period of time shall continue in 

     force until terminated in accordance with this Part.

Section 12 – Notice of termination of contract

(1) Either party to a contract of service may at any time give to the other 

     party notice of his intention to terminate such contract of service.

(2) The length of such notice shall be the same for both employer and 

     employee and shall be determined by a provision made in writing for such 

     notice in the terms of the contract of service, or, in the absence of such 

     provision in writing, shall not be less than -

     (a) four weeks' notice if the employee has been so employed for less than 

          two years on the date on which the notice is given;

    
     (b) six weeks' notice if he has been so employed for two years or more but 

          less than five years on such date;

     (c) eight weeks' notice if he has been so employed for five years or more 

          on such date;

     Provided that this section shall not be taken to prevent either party from 

     waiving his right to a notice under this subsection.

(3) Notwithstanding anything contained in subsection (2), where the 

     termination of service of the employee is attributable wholly or mainly to 

     the fact that-

     (a) the employer has ceased, or intends to cease to carry on the business 

          for the purposes of which the employee was employed;

     (b) the employer has ceased or intends to cease to carry on the business 

          in the place at which the employee was contracted to work;

     (c) the requirements of that business for the employee to carry out work 

          of a particular kind have ceased or diminished or are expected to cease 

          or diminish;

     (d) the requirements of that business for the employee to carry out work 

          of a particular kind in the place at which he was contracted to work 

          have ceased or diminished or are expected to cease or diminish;

     e) the employee has refused to accept his transfer to any other place of
         employment, unless his contract of service requires him to accept such 

         transfer; or  

     (f) a change has occurred in the ownership of the business for the purpose 

         of which an employee is employed or of a pat of such business, 

         regardless of whether the change occurs by virtue of a sale or other 

         disposition or by operation of law, the employee shall be entitled to, 

         and the employer shall give to the employee, notice of termination of 

         service, and the length of such notice shall be not less that provided 

         under subsection (2)(a), (b) or (c), as the case may be, regardless of 

         anything to the contrary contained in the contract of service.

(4) Such notice shall be written and may be given at any time, and the day on 

     which the notice is given shall be included in the period of the notice.

Section 13 – Termination of contract without notice

(1) Either party to a contract of service may terminate such contract of service 

     without notice or, if notice has already been given in accordance with 

     section 12, without waiting for the expiry of that notice, by paying to the 

     other party an indemnity of a sum equal to the amount of wages which 

     would have accrued to the employee during the term of such notice or 

     during the unexpired term of such notice.

(2) Either party to a contract of service may terminate such contract of service 

     without notice in the event of any willful breach by the other party of a 

     condition of the contract of service.

Section 14 – Termination of contract for special reasons

(1) An employer may, on the grounds of misconduct inconsistent with the 

     fulfillment of the express or implied conditions of his service, after due 

     inquiry-
      

     (a) dismiss without notice the employee;
     (b) downgrade the employee; or
     (c) impose any other lesser punishment as he deems just and fit, and 

          where a punishment of suspension without wages is imposed, it shall 

          not exceed a period of two weeks.

(2) For the purposes of an inquiry under subsection (1), the employer may 

     suspend the employee from work for a period not exceeding two weeks 

     but shall pay him not less than half of his wages for such period:

     
     Provided that if the inquiry does not disclose any misconduct on the part 

     of the employee the employer shall forthwith restore to the employee the 

     full amount of wages so withheld.

(3) An employee may terminate his contract of service with his employer 

     without notice where he or his dependent are immediately threatened by 

     danger to the person by violence or disease such as such employee did not 

     by his contract of service undertake to run.

Section 15 – When contract is deemed to be broken by employer and employee

(1) An employer shall be deemed to have broken his contract of service with 

     the employer if he fails to pay wages in accordance with Part III.

(2) An employee shall be deemed to have broken his contract of service with 

     the employer if he has been continuously absent from work for more than 

     two consecutive working days without prior leave from his employer, 

     unless he has a reasonable excuse for such absence and has informed or 

     attempted to inform his employer of such excuse prior to or at the earliest 

     opportunity during such absence.

Section 16 – Employees or estates to be provided with minimum number of days’ work in each month

(1) Where an employee is employed in any agricultural undertaking on an 

     estate on a contract of service under which he earns wages calculated by 

     reference to the number of days' work performed in each month of his 

     service, his employer shall be bound either to provide him with work 

     suitable to his capacity or not less than twenty-four days, in each month 

     during the whole of which he is so employed, or if the employer is unable 

     or fails to provide work on twenty-four days in each month whereon the 

     employee is willing and fit to work, the employer shall nevertheless be 

     bound to pay to the employee in respect of each of such days wages at 

     the same rate as if such employee had performed a day's work;

     Provided that any dispute as to whether an employee was willing or fit to 

     work shall be referred to the Director General for his decision:

     Provided further that in computing twenty-four days for the purposes of 

     this subsection account shall not be taken of more than six days in any 

     week.

(2) A contract of service shall be deemed to be broken by an employer if he 

     fails to provide work or pay wages in accordance with subsection (1).

Section 17A – Apprenticeship contracts excluded from sections 10 to 16

Sections 10 to 16 shall not apply to apprenticeship contracts which are in a form approved by and of which a copy has been filed with the Director General.