no 19 law of employment - final

8/2/2019 No 19 Law of Employment - Final

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Contract of employment An employment exists where an individual works under a contract of employment, sometimes called a'contract of service' . Such individuals are employees and are taxable under Schedule E, and employers mustoperate PAYE.

What is a contract of employment?A contract of employment exists where:

A worker accepts the offer of employment of an employer;The worker is paid for the louage of his work.There is a legal subordination in the employment relations.

What should a contract of employment contain?-The rights and obligations that bind a worker and an employer.-The terms of the contract can be expressed and implied.-Expressed terms refer to: (conditions which employees are entitled under: the law, individualagreement and collective agreement)-Implied terms refer to: (What is obvious in the contractual agreement and which have notbeen spelled out mutual respect, confidence, a valid driving licence for a driver, the customsand practice of the company etc).

Formation of contract of employment and its content

As the relationship between employer and employee is contractual all the essential elements to create a valid contract must

be satisfied ( such as offer, acceptance, intention to create legal relations and consideration.)

Section 1 of Employment Protection act 1978 provides that an employer must provide employees within two months of

their commencement in employment, a written statement 9contract of employment) containing the following information.

(i) names of the employer and employee

(ii) the date on which the employment began, taking into account any employment with a previous employer

which counts towards that period, (this is important for the employee to calculate his entitlement to many of

the statutory rights)(iii) scale or rate of pay or method of calculating it, e.g. rates for piecework or overtime.

(iv) Intervals of pay weekly, monthly etc.(v) Hours of work.(vi) Holidays and holiday pay.

(vii) Sick pay/leave.

(viii) Pension and pension schemes and whether a contracting out in respect of the State Pension Scheme is in force.

(ix) Job title or brief description of work.

(x) Place or places of work.

(xi) Any collective agreement affecting the employment.

(xii) Length of notice required by employer or employee to terminate a contract

(xiii) Details of any disciplinary or grievance procedure, specifying the person to whom the employee can apply ifhe has a grievance generally or is satisfied with any disciplinary decision relating to him and any further steps

which follow from his application e.g. an appeal procedure if the employee is not satisfied.

Should a contract of employment be in writing? - The contract may be in writing or oral.

Can there be variation in a contract of employment?

A contract can be varied if:

The changes do not affect the root of the contract i.e: change in job content, alteration of hours of work.

The changes are agreed on an individual basis or through collective agreement.

The changes are not contrary to the law.

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What should be done before varying a clause of a contract?

There should be consultation and agreement with the worker concerned or with his or herrepresentative. Where the variation has been agreed, the worker should be notified, preferably in

writing, within a reasonable delay.

What happens if there is unilateral change of the contract of employment by the employer?

This can be interpreted as a breach of contract tantamounting to constructive termination of employment.

What remedies for the employee? The employee can refer his case to the Ministry of labour & IR .

The case can be referred to the Industrial Court to claim wages in lieu of notice and severance

allowance at punitive rate.

The employee can elect to work under protest for some time and reserve his right to make a

claim to the Industrial court.

Contract of Service & Contract for ServiceWhy it is important to distinguish between contracts of serviceand contracts for services

An employee is under a contract OF service whereas a contractor is under a contract FOR service. An employeeon a contract of service is a person who places their labour at the disposal of another and there is the master/servant relationship. By contrast, an independent contractor with a contract for service undertakes to dospecific tasks and then leaves. The independent contractor operates an independent business but agrees toundertake a task for another. To be able to distinguish between the two concepts there is a series of tests.

Employees are people working under a contract of service. Those who work under a contract for services areindependent contractors. They are not employees, but are self-employed. It is essential to distinguish the twocategories clearly, because important legal consequences follow from the placing of a person in one or other ofthe categories. For example although employees are protected by various common law and statutory rights inrelation to their employment, no such wide scale protection is offered to the self employed. Also ultimateliability for breach of contract or liability in tort depends on the persons status as an employee or selfemployed. In the example above in the first instance the mechanics employers, the garage, are responsible forthe consequence of his actions whilst acting in their employment; whereas in the second case, the mechanicalone is responsible for any liabilities that arise from his work. Employees are also taxed under the pay as youearn scheme which is not available to the self employed.

The differences between an independent contractor and an employee are marked. The definition of anemployee is that the employee is under a contract of service whereas an independent contractor is under acontract for services.A chauffeur is usually under a contract of service, as the chauffeur usually works as the sole driver for aspecific person or company. By contrast, a taxi driver is self-employed, as he spends his time picking up fares.

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Why to distinguish? The distinction is important for the following reasons:( i ) E n t i tl e me n t t o e mp l o yme n t p r o t e c t io nThe Employment Rights Act 1996 (ERA) provides employees with statutory protection rights (e.g. minimumperiods of notice, remedies for unfair dismissal and statutory redundancy payments).( i i) I mp l i e d t er ms i n th e c on t ra c tAt common law certain terms are implied into every contract of employment but not into other kinds of

relationship regarding duties of employer and employee.

( i i i ) Soc i a l se cu r i t y con t r i bu t i on sNational Insurance contributions varies according to the status of being an employee or self-employed.

( i v ) Taxa t i onFor taxation purposes income are classified under different schedules depending upon the sources. Thusemployers will deduct income tax (PAYE) from the income derived by employees. Self employed are taxedunder trading income and may be subject to VAT.

( v ) V i ca r i ou s l i a b i l i t y Employers are vicariously liable for the wrongs done by their employees, committede in the course

of employment but not for those of independent contractors.

an employers duty of care towards employees is much greater than the duty to self-employed.

( v i ) R i gh t s in c a se o f I n so l v e n cyOnly employees are given preferential rights to what they are owed on the insolvency of the employer.

(vii) Common law dutiesAn employer has duties under common law such providing a safe place of work.

How to distinguish between contracts of service and contracts for servicesGiven the importance of the distinction the courts have developed a variety of test for distinguishing theemployee from the self-employed.

(i) The control test

The first test to be applied by the courts was known as the control test and depended upon the degree to whichthe person who is using the others services actually controls; not only what they do, but how they do it (inWalkerv Crystal Palace Football Club (1910) a professional football player was held to be an employee of hisclub). The main shortcoming in the control test was its lack of subtlety. Highly skilled professionals, such assurgeons, by necessity have a high level of control over how they perform their day-to-day work, which meantthat, under the control test, they were deemed to be self-employed rather than employees. Consequently, theywere personally liable for any negligence in their performance, rather than the Health Authority, which usedtheir services.

(ii) The integration test

The integration test shifted the emphasis from the degree of control exercised of an individual to the extent towhich the individual was integrated into the business of their employer (in Whittakerv Minister of Pensions &National Insurance(1967) a circus trapeze artist who was required to do other general tasks in relation to theoperation of the circus was held to be an employee). However, even the integration test was not withoutproblems, with some employers attempting to give the impression of using a self-employed work-force whilsteffectively still controlling what that work-force did.

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(iii) The multiple, or economic reality test

The economic reality test was first established in Ready Mixed Concrete (South East) Ltdv Minister of Pensionsand National Insurance(1968). In that case, rather than relying on one single factor the court held that therewere three conditions supporting the existence of a contract of employment: the employee agrees to provide his own work and skill in return for a wage,

the employees agrees, either expressly or impliedly, that they will be subject to a degree of control,exercisable by the employer, the other provisions of the contract are consistent with its being a contract of employment.

In deciding whether or not there is contract of employment the courts tend to focus on such issues as whetherwages are paid regularly or by way of a single lump sum; whether the person receives holiday pay; and on whopays the due national insurance and income tax. However, there can be no definitive list of tests as the wholepoint of the multiple test is that it examines all aspects of the situation in order to reach a determination. Forexample in Nethermore (ST Neots) v Gardiner & Taverna (1984), a group of home workers, i.e. people whocarried out paid work in their own homes, were held to be employees on the grounds that they were subject toan irreducible minimum obligation to work for their employer.

Other relevant factors are: Control Provision of his own equipment Whether he hires his own helpers Degree of financial risk undertakes Degree of responsibility he bears for investment and management The extent to which he has an opportunity of profiting from sound management in the

performance of his task Whether there is a regular method of payment Whether the person works regular hours Whether there is mutuality of obligations

Employment contractAlthough a contract of employment need not be in writing, the employer must provide the employee withparticulars of the main terms of the contract in writing as required by the Employment Rights Act 1996. Suchexpress terms are agreed upon by the employer and employee on entering into the contract of employment.However in the absence of stated terms the law will impose duties on both employer and employee. Suchimplied terms have to be read subject to any express terms to the contrary. Although where the implied term isnecessary to give efficacy to the contract, the implied term will take precedence over the express term(Johnstonev Bloomsbury Health Authority(1991)).

Duties of the employer(i) To provide workThe employer normally will be expected to provide work for the employee and where the employee is skilledand needs practice to maintain those skills, there may be an obligation to provide a reasonable amount of work(LangstonvAmalgamated Union of Engineering Workers(1974)). No breach of this implied duty will occur solong as the employee continues to be paid even though there may be no work available.

(i i) To pay wageNormally the rate of pay is expressly stated in the contract of employment. However, in the absence of anexpress provision, the law will impose the duty to pay a reasonable remuneration for the work done. Following

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from (i) above, an employer must pay employees their wages even if there is no work available, although anexpress term to the contrary may be included in the contract of employment. Where workers, in the pursuit ofan industrial dispute, offer only part performance by working to rule or adopting a go-slow policy, the employercan refuse to accept such part performance and can refuse to make any payment for work done.

Any complaint about wage deduction may be made to the Industrial Tribunal within 3 months. In Orman VSaville Sportwear Ltd, whether wage should be paid in the absence from work because of illness was discussed

and since the contract was silent on this point, the employee was bound to get his wages as the employer couldnot prove that there is a contrary intention.

(i i i) To indemnify the employeeWhere the employee in the course of his or her employment incurs any legal liability or necessary expenses onbehalf of the employer, the employee is entitled to be indemnified or reimbursed.

(iv) Mutual respectThe employment relationship is assumed to be based on mutuality of respect, trust and confidence and theemployer must not act in a way calculated to damage such mutuality. This is a reciprocal relationship, but it isclear that employers cannot treat their employees in an abusive manner (Isle of Wight Tourist Board v

Coombes(1976)) and must be prepared to address any grievances they might have (WA Goold (Pearmak) LtdvMcConnell & Another(1995)).

(v) To provide a safe system of workAt common law the employer is required to take reasonable care for the health and safety of his employees.Failure to comply will render the employer liable for an action in negligence. The duty extends to the provisionof competent fellow employees, safe plant and equipment, a safe place of work and a safe system of work. Ifthe employer has taken all reasonable steps to comply with the duty of care then they will not be liable for anyinjury sustained (LatimervAEC Ltd(1953)).

Employees Duty(a) Duty to obey lawful and reasonable orders

An employee must obey the orders of his employee so long as it is within the scope of his contract ofemployment. The orders must be lawful.

Case: Papper v webbFacts A gardener refused to plant the plants where instructed by the employer

Held: He was in breach of the duty of obedience and this, coupled with the fact that he was rude and surly,justified summary dismissal.

Moreover an employee cannot perform a dangerous work unless it was stated in his contract of employment.

Case: Offarman Bank V ChakarianFacts: C who had escaped death imposed by the Turks refused to work in Constantinople where he could bearrested and executed

Held: He was justified.

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An employee must perform his duties in a reasonable manner. He should interpret rules imposed by theemployer as a guide -line and he should not defeat the smooth running of the employees business.Case: secretary of State for Employment v ASLEFFacts: Railway workers worked to rule i.e. obeyed the British Rail rule to the letter. This resulted inconsiderable delays in the train service.

Held There was an implied term that each employee in obeying instructions would not do so in a whollyunreasonable way, which had the effect of disrupting the service, he was there to provide.

(b) Personal serviceRelationship between employer and employee is strictly a personal one. An employee without the permission ofthe employer cannot delegate his duties to someone else.

(c) Good fa i thThe employee should do his work in good faith. The employee cannot use the employers property as his own,and must account to his employer for any money or property, which he receives in the course of hisemployment.

An employee must not disclose trade secrets to a third party nor misuse confidential information he hasacquired in the course of his employment.

The breach of good faith may arise in the following circumstances:

Taking bribes as in the case of Boston Deep Sea-fishing v Ansell.Facts: A, who was managing director of the plaintiff company, accepted commissions from suppliers on orderswhich he placed with them for goods supplied to the company. He was dismissed and the company sued him torecover from him the commissions.Held; the company was justified in dismissing A and he must account to it for the commissions.

Diverting customers of his employer from the employers business Inventions by an employee during working hours Case British Syphon Co v Homewood.

Case Brit ish Syphon Co v HomewoodFacts: D was employed as a technical adviser and was asked to design a soda siphon, which he did, but hepatented the siphon in his own name.

Held: The patent right belonged to the employer.This duty almost goes without saying, as an example of the general duty of good faith, but it covers thesituation where an employee has received money or gifts from customers or clients.

Case Bo s t on D e e p S e a F i s h i n g I c e C o v An se l l (1888)Facts: The defendant, who was managing director of the plaintiff company, accepted commissions fromsuppliers on order which he placed with them for goods supplied to the company. He was dismissed and thecompany sued to recover from him the commissions

Held: the company was justified in dismissing the plaintiff and he must account it for the commissions(d) t o a c t f a i t h fu l l yThis is the fundamental duty and it covers such aspects of confidentially, i.e. not passing on information derivedfrom ones employment to outsiders and not competing with the employer either directly or indirectly.

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The courts are reluctant to accept that what workers do in their spare time should be of any concern to theiremployer (Nova Plastics Ltdv Froggett(1982)). However, sometimes an employers interests may be harmedby an employees spare-time work if this involved direct competition with the employers business (Hivac LtdvPark Royal Scientifi c Instruments Ltd(1946)).

C a se : H i v a c L t d v Pa r k Ro y a l S c i e n t i fi c I n s t r u me n t s L t dFacts: In their spare time certain of the plaintiffs employees worked for the defendant company, whichdirectly competed with the plaintiff.

Held: even though the employees had not passed on any confidential information they were still in breach oftheir duty of fidelity to the plaintiffs.

The duties are extrapolated to a large extent from the law of agency, and may be subdivided into a number ofmore specific duties.

An employee may not do anything while still employed, which is in breach of the duty to act faithfully. However,it is perfectly lawful for ex-employees to canvass customers of their former employer after leaving service.Moreover, they are entitled to make use of any knowledge and skills acquired while in the former employers

business, apart from such information which can be classified as a trade secret.

(e) Reasonable careAn employee should do his duty with reasonable care. If he fails, the employee should indemnify the employerfor any loss.

Should an employee not exercise the level of skill and care that may reasonably be expected, then they will notonly be liable to dismissal, but they may also lose the protection of the employers duty to indemnify them forlosses, and be made personally liable for claims for compensation. The classic case in this instance is ListervRomford Ice and Cold Storage Ltd(1957) in which an employee lorry driver, rather than his employer, was heldliable to compensate a fellow worker, due to his gross negligence in driving his lorry, which was held to breachhis implied duty of skill and care.

Collective implied termsIn the process of collective bargaining, representatives of an employer or employers association cometogether with representatives of a trade union or trade unions to formulate agreed rules; first, toregulate relations between themselves, and, second , to regulate the terms and conditions ofemployment of workers in the particular industry. Agreements between unions and employer are notusually legally binding. However both employers and employees do in fact observe the agreed termswhich become terms agreed between the individual employer and the individual employee. To beimplied the term must normally:(a) be a custom which is reasonable, certain and notorious

(b) be known to the employee(c) be a collective, negotiated agreement.

Statutory implied terms(a) Wages: The Wages Act 1986 provides that wages can be paid direct into a bank account (of

employees choice) or similar account or by some other non-cash means. Deductions are notallowed from wages except where authorised by:- Statute- Contract- Agreement

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(b) Maternity rights1. Paid time off for ante natal careA woman has a right to paid time off in order to attend an ante-natal appointment advised by her doctor,

midwife or health visitor. There is no qualifying period of service for this right.

2. Protection against dismissal connected with pregnancy

The Employment Rights Act provides that dismissal is automatically unfair if the principal reason for it is:pregnancy or any other reason connected with her pregnancy ; childbirth or any reasonconnected with it, when it is during the maternity leave period; taking up maternity leavebenefits; or where dismissal is during the four weeks after the maternity leave period and thewoman was covered by a medical certificate at the time.

3. Maternity LeaveThe Employment Rights Act entitles :--Women to 14 weeks leave regardless of length of service or number of hours worked-Women who qualified by having two years continuous service can return to their former position after taking

up to 40 weeks of leave.4. Statutory Maternity Pay (SMP)

Woman who have at least 26 weeks of continuous employment by the 15th week before the expected week ofchildbirth are entitled to SMP for a period of 18 weeks.(c) Time off rights

1. Paid time off-Officials of recognised trade unions are entitled to paid time off for two purposes: to carry out their duties and

to receive relevant training-employees given notice of dismissal for redundancy may have time off to look for work or to arrange training

for other work.2. Unpaid time off-members of recognised trade unions are entitled to unpaid time off during working hours for trade union

activities e.g. to attend conference etc.-employees carrying out public duties e.g. magistrates(d) Health and SafetyAs well as a common law duty of care, the employer has statutory duties under the Factories Act 1961 and the

health and Safety at Work Act 1974 (HASAWA) to provide safe working premises etc.

1. The HASAWAIn UK the HASAWA provides for the introduction of a system of approved codes of practice, prepared inconsultation with industry so that an employee, whatever his employment, should find that his work iscovered by an appropriate code of practice.

- Employers duties all systems (work practices) must be safe the work environment must be safe and healthy (well lit, warm, ventilated and

Hygienic) all plant and equipment must be kept up to the necessary standard

In addition, information, instruction, training and supervision should be directedtowards safe working practices and the safety policies should be clearly communicatedto all staff.

- Employees dutiesto take reasonable care of himself/herself and othersto allow the employer to carry out his duties (e.g. enforcing safety rules)not to interfere intentionally with any machinery or equipment

2. Factories Act 1961

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The occupier of a factory has an absolute duty to fence securely all prime movers (machines which providepower), all transmission machinery and every dangerous part of any machinery

(a) It is no defence to show that there is no practicable means of fencing the machine. If it cannot be usedwhen adequately fenced then it should not be used at all.

(b) The fencing should be substantial and kept in position at all times when the machine is in motion, althoughnot when it is being examined of fabricated.

(c) only the dangerous parts need to be fenced

Equal PayThe concept of equal pay not only covers remuneration but also other areas of employment such as pensionsand perks (benefits). The concept of like work means doing the same job for the same rate of pay. In BritishCoal Corporation v Smith it was held that there was a five point test:

Was the difference in pay genuinely due to a material factor other than sex? Was that factor tainted with sex? If so in what way? If the difference was genuinely discriminatory then the employers would have failed in their defence. If the factor is indirectly discriminatory, then the objection can be justified irrespective of sex.

If the work is rated as equivalent then the woman is entitled to the same rate of pay as a man eventhough she may be doing a different job. It is the equivalence that is important. The Equal Pay(Amendment) Rules 1983 ensure that there is equality of pay between men and women. This inessence means equal pay for equal value.

Work of Equal Value means that a woman can now compare herself with a man doing a completely different jobbut which is of equal value; in terms of the demands made on her (for instance, under such headings as effort,skill and decision.), Hayward v Cammell Laird Shipbuilders Ltd.

The defence of justif ication under the Disabil ity Discrimination Act 1995The Disability Discrimination Act (DDA) 1995 which is modelled on the Sex Discrimination Act (SDA) 1975 andthe Race Relations Act (RDA) 1976, creates a right not to be discriminated against on grounds of disability inemployment or in the provision of goods, facilities and services. Section 1 defines disability for the purposes of

the Act as a physical or mental impairment which has a substantial and long-term effect on his ability to carryout normal day-to day activities. The Disability Discrimination (Meaning of Disability) Regulations 1996 providefurther clarification in this area.

Discrimination at work1. Direct: when an interested group is treated less favourably than other (e.g. woman)2. Indirect: when requirements or conditions are imposed, with which a substantial proportion of theinterested group would not comply, to their detriment

Types of Discrimination

Sex discrimination Ethnic Minorities Other disadvantaged groupe.g. disabled persons, personsconvicted for criminal offences

Sex discrimination Act 1975 Race Relations Act 1976The Disabled Persons mployment)Act 1944

and andEqual Pay Act 1970 Rehabilitation of Offender Act 1974

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Sex Discrimination against womenThe Sex Discrimination Act 1975 prohibits discrimination on the ground of gender against any employeemale or female. A person discriminates against a woman in any circumstances if :(a) on the ground of her sex he treats her less favourably than he treats or would treat a man, or(b) he applies to her a requirement or condition which applies equally to man but which cannot be complied bywomen

Discrimination is allowable where sex is a genuine occupational qualification. Example: the essential nature ofthe job calls for a man for reasons of physiology, or, in a dramatic performance or other entertainment forreasons of authenticity, so that the essential nature of the job would be materially different if carried out by aman.

Race Relations Act 1976Discrimination on the ground of race is prohibited . There are exceptions where race is a genuine occupational

qualification(a) authenticity in entertainment, art or photography(b) maintaining ethnic authenticity in a bar or restaurant such as Chinese waiters in Chinese restaurant.

Equal Pay Act 1970EPA is intended to prevent discrimination as regards terms and conditions of employment (pay, overtime,bonuses, sick leave) between men and women.

The Disabled Persons (Employment) Act 1944The Act established a Quota System, whereby any employer of more than 20 people must employ at least 3%of registered disabled persons, unless he has a permit to engage an able bodied person instead.

The Rehabil itation of Offender Act 1974 A conviction for criminal offences is spent after a period of time. After this period, an offender isrehabilitated and is not obliged to disclose the nature of his offence or details of his conviction. Failure todisclose is not justifiable for non-engagement (dismissal).

The DDA 1995 applies to employers who employ 15 or more people (s.7). It seeks to protect the disabledemployee in all aspects of the employment relationship; from the recruitment and selection process, through tothe terms of employment, training and promotion, to dismissal (s.4). As with all discrimination claims, acomplaint may be made to an employment tribunal within six months of the alleged act of discrimination.

Section 5 defines discrimination for the purposes of the Act but confines its effects to acts of directdiscrimination as opposed to indirect discrimination. In effect the disabled employee has to show that they have

been treated less favourably on grounds relating to their disability.

A further difference from the SDA 1975 and the RRA 1976, is that the DDA 1995 provides the employer with ajustification defence. In effect s.5 allows the employer to justify less favourable treatment on grounds that areboth material to the circumstances of the particular case and substantial (s.5(3)).

Section 6 of the Act places a further duty on the employer to make adjustments to premises to ensure that thedisabled person is not placed at a substantial disadvantage in comparison with persons who are not disabled.Once again, however, s.5(4) allows the employer to justify any failure to make such adjustments as may be

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required. The test of whether the employer must make adjustments is one of reasonableness which permitsconsideration of the cost and nature of the adjustments as well as the practicability of making them.

Termination of contract of employmentThere are several ways in which a contract of employment may be terminated:(a) Mutual Agreement: e.g. early retirement(b) Performance: e.g. in a contract for a fixed period or for a specific task.(c) Frustration: Frustration occurs when further performance of the contract becomes impossible

but neither party is to be blamed for this happening. A contract may be frustrated :(i) by the personal incapacity of the parties(ii) by non-occurrence of an event on which the contract was based(iii) by a change in law which makes the contract illegal or impossible to perform(iv) by the destruction of the subject matter of the contract.(d) Notice: In general, apart from the above methods of termination, a contract of employment may

be brought to an end only when proper notice has been given. The period of notice is subject to the ERA which

lays down minimum periods of notice: an employee continuously employed for 4 weeks or more but less than two years: at least one weeksnotice an employee continuously employed for two years or more but less than twelve years; not less thanone week for every complete year of employment an employee continuously employed for twelve years or more: not less than 12 weeks notice

the minimum notice that an e mp l o y e e must give is only one week(e) Termination by dismissal (breach)- Dismissal at common law

As the contract of employment is merely a form of simple contract it is enforceable inaccordance with its terms. If the terms are broken, damages for breach can be claimed.

So dismissal merely means that the employer is breaking the contract and the employee is left

with just his contractual remedies. At common law, the motive for dismissal is irrelevant - an employee can bedismissed for any reason provided notice is given or damages in lieu of notice are paid.Summary Dismissal : At Common law either party may lawfully terminate the contractsummarily, i.e. without giving notice, if the other party has committed a serious breach of contract. The judgeshave tended to view any suggestion of dishonesty or disobedience on the employees part particularly strictly.Statutory control of dismissal: The common law position was inadequate to giveemployees protection against the employers breach of the contract of employment. Legislation was introducedfrom 1965 onwards to give employees greater protection and rights.The position now is that a dismissed employee has three possible courses of action1. At common law the employee may claim for wrongful dismissal2. The employee may have a claim for unfair dismissal ( a statutory claim)3. Some dismissals may give rise to another statutory claim, for a redundancy payment.Wrongful dismissalThere are two conditions to be fulfilled for a successful action for wrongful dismissal: first, that the employerterminated the contract without notice or with inadequate notice, and secondly that the employer was notjustified in doing so.Minimum notice periods are prescribed by the ERA, but even if the employer terminates the contract with nonotice or with inadequate notice, the employee will not be able to claim wrongful dismissal if the employer isjustified in thus summarily dismissing him or her.J u s t i fi e d su mm a r y d i sm i s s a lAn employer is entitled to dismiss an employee summarily if the employee has committed an act of grossmisconduct, for e.g.:(a) Willful disobedience of a lawful order

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Laws v London Chronicle(b) Misconduct, in connection with the business or outside it if it is sufficiently grave.(c) Dishonesty, where the employee is in a position of particular trust(d) Incompetence or neglect, in so far as the employee lacks or fails to use skill which he professes to have(e) Gross negligence, depending on the nature of the job(f) immorality, only if it is likely to affect performance of duties or the reputation of the business(g) Drunkenness, only if repeated or if it occurs in aggravated circumstances such as when driving a vehicle or

a train. The grounds upon which dismissal may be fairThe grounds on which dismissal is capable of being fair are set out in s.98 Employment Rights Act (ERA) 1996.The Act places the burden of proof on the employer to show that the grounds for dismissal are fair. There arefive categories as follows:

(i) Lack of capability or qualificationsCapability is defined in s.98 in terms of skill aptitude, health or any other physical or mental quality, andqualifications relate to any degree, diploma, or other academic, technical or professional qualification relevantto the position which the employee held. However, even in this situation, the employer must show that not onlywas the employee incompetent but that it was reasonable to dismiss them.

(i i) MisconductTo warrant instant dismissal the employees conduct must be more than merely trivial and must be of sufficientseriousness to merit the description gross misconduct. Examples of such conduct might involve assault,drunkenness, dishonesty or a failure to follow instructions, or safety procedures, or persistent lateness.

(i i i) RedundancyThis is, prima facie, a fair reason for dismissal as long as the employer has acted reasonably in introducing theredundancy programme.

(iv) In situations where continued employment would constitute a breach of a statutory provisionIf the continued employment of the person dismissed would be a breach of some statutory provision then thedismissal of the employee is again, prima facie, fair. For example, if a person is employed as a driver and isbanned from driving then they may be fairly dismissed.

(v) Some other substantial reasonThe above particular situations are not conclusive and are supported by this general provision which allows theemployer to dismiss the employee for some other substantial reason. As a consequence, it is not possible toprovide an exhaustive list of all grounds for fair dismissal. Examples that have been held to be substantialreasons have included; conflicts of personalities, failure to disclose material facts, refusal to accept necessarychanges in terms of employment, and legitimate commercial reasons.

It has to be emphasised that the above reasons are not sufficient in themselves to justify dismissal and underall instances the employer must act as would be expected of a reasonable employer. In determining whetherthe employer has acted reasonably, the Employment Tribunal will consider whether, in the circumstancesincluding the size and administrative resources of the employers undertaking, the employer acted reasonablyor unreasonably in treating the reason given as sufficient reason for dismissing the employee. (s.98(4) ERA1996). In this case the burden of proof is neutral.

Reasonable employers should follow the ACAS Code of Practice on Disciplinary Practice and Procedures inEmployment in relation to the way they discipline and dismiss their employees. Thus it would usually be

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inappropriate to dismiss someone for lack of capability without providing them with the opportunity to improvetheir skills. Nor would redundancy, per se, provide a justification for fair dismissal, unless the employer hadintroduced and operated a proper redundancy scheme, which included preferably objective criteria for decidingwho should be made redundant, and provided for the consideration of redeployment rather than redundancy.

The grounds upon which dismissal wil l be automatically unfairThe following are situations where dismissal is automatically unfair:

(i) Dismissal for trade union reasonsThis applies where an employee has been dismissed for actual, or proposed, membership of a trade union, or isdismissed for taking part in trade union activities. It applies equally where an individual has refused to join atrade union. Dismissal of individuals involved in a strike, lock out, or other industrial action is not unfair as longas all of those engaged in the action are dismissed. The employer cannot select which individuals to dismissfrom the general body of strikers.

(i i) Dismissal on grounds of pregnancy or childbirthSection 99 ERA 1996 provides that dismissal is automatically unfair where the principal reason for the dismissalis related to the employees pregnancy or other reasons connected to her pregnancy; or following her maternityleave period, for childbirth or any reason connected with childbirth.

(i i i) Dismissal in relation to health and safety issuesSection 100 ERA 1996 provides that employees have a right not to be dismissed for carrying out any health andsafety related activities for which they have been appointed by their employer; or for bringing to the employersattention any reasonable concern related to health and safety matters. Nor can they be dismissed for leavingtheir place of work in the face of a reasonably held belief that they faced serious danger.

(iv) Dismissal for making a protected disclosureThis is covered by s.103A ERA and protects whistle blowing employees who have reported their employer forengaging in certain reprehensible activity. Such protected activity is set out in s.43 ERA and covers criminalactivity, breach of legal obligations, breach of health and safety provisions, and activity damaging to theenvironment.

(v) Dismissal for asserting a statutory rightSection 104 ERA provides that a dismissal is automatically unfair where the principal reason for it is victimisationof the employee for having taken action against the employer to enforce their statutory rights. Rights under theWorking Time Regulations 1998 and the National Minimum Wage Act 1998 are specifically covered in ss.101(A)and 104(A) ERA.

The meaning and effect of constructive dismissal.Normally employees who resign deprive themselves of the right to make a claim for redundancy or otherpayments. However s.136 ERA covers situations where the employee terminates the contract with, or without,

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notice in circumstances which are such that he or she is entitled to terminate it without notice by reason of theemployers conduct.

This provision relates to what is known as constructive dismissal which covers the situation where anemployer has made the situation of the employee such that the employee has no other action than toresign. In other words the unreasonable actions of the employer force the employee to resign. In sucha situation the employee is entitled to make a claim for unfair dismissal no matter the fact that theyactually resigned.

Case:Simmondsv Dowty Seals Ltd(1978)Facts: Simmonds had been employed to work on the night shift. When his employer attempted to force him towork on the day shift he resigned.Held: It was held that he could treat himself as constructively dismissed because the employes conduct had

amounted to an attempt to unilaterally change an express term of his contract

An employee may also be able to claim constructive dismissal where the employer is in breach of animplied term in the contract of employment (Gardner Ltdv Beresford(1978)).

Case: W o o d s v W M C a r S e r v i ce s ( P e te r b o ro u g h ) (1982) it was further held that there is a generalimplied contractual duty that employers will not, without reasonable or proper cause, conduct themselves in amanner that is likely to destroy the relationship of trust and confidence between employer and employee and

that such obligation is independent of and in addition to the express terms of the contract.

The action of the employer, however, must go to the root of the employment contract if it is to allowthe employee to resign. In other words it must be a breach of some significance.

Case: Western Excavating Ltdv Sharp(1978),Facts: Sharp was dismissed for taking time off from work without permission. On appeal to an internaldisciplinary hearing, he was reinstated but was suspended for five days without pay. He agreed to accept thisdecision but asked his employer for an advance on his holiday pay as he was short of money: this was refused.He then asked for a loan of 40: that was also refused. Consequently Sharp decided to resign in order to getaccess to his holiday pay. Sharp instituted a claim for unfair dismissal on the basis that he had been forced toresign because of his employers unreasonable conduct. The employment tribunal found in Sharps favour on

the grounds that his employers conduct had been so unreasonable that Sharp could not be expected tocontinue working there.

Held: on appeal the Court of Appeal held that before a valid constructive dismissal can take place theemployers conduct must amount to a breach of contract which is such that it entitles the employee to resign.

However, in British Aircraft Corporationv Austin(1978) a failure to investigate a health and safety complaintwas held to be conduct amounting to a breach of contract on the part of the employer which was sufficient toentitle the employee to treat the contract as terminated.

If the employee does not resign in the event of a breach by the employer, the employee will be deemedto have accepted the breach and waived any rights. However, they do need not resign immediately andmay, legitimately, wait until they have found another job (Cox Toner (International) Ltd v Crook

(1981)).

Finally, the movement of an employer to some new distant location will normally give rise toredundancy claims for those employees who do not wish to move ( OBrien v Associated Fire Alarms Ltd(1969)). However, the compulsory move of employees may well give rise to a claim for unfair dismissaland the employee may be able to resign and claim constructive dismissal. Such a claim could not arisewhere the employees contract contained an express mobility clause.

In order to claim compensation for either redundancy or unfair dismissal, an employee is required, as aprecondition of a successful claim, to show that he or she has been dismissed. The same definition ofdismissal applies to both rights.

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The following questions must be answered to prove constructive dismissal:1) Has the employer broken or shown the intention to break a term of the contract of employment?2) If yes, is the term which has been or will be broken an essential and fundamental term of the contract?3) If yes, has the employee resigned with or without notice in response to the breach within reasonable

time?

In general, the repudiatory conduct by the employer has traditionally included two well established types ofconduct:

a) Where the employer unilaterally breaks an essential obligation owed by him to his employee,e.g., refusal to pay wages.

b) An employee may insist that an employer cannot enforce him to perform an act which he is notcontractually obliged to do.

Moreover, from the basis of cases, the following situation may lead to constructive dismissal:1) Undermining the authority of a senior staff over subordinates.2) Use of foul language by employer.3) Failing to properly investigate allegation of sexual harassment or treating the complaint with sufficient

seriousness.

Remedies for Unfair dismissalIn relation to a successful claim for unfair dismissal, the Employment Tribunal may award any one of thefollowing remedies;(i) reinstatement,(ii) re-engagement or(iii) compensation.

Reinstatement is where the dismissed employee is treated as not having been dismissed in the first place.

Re-engagement means that the dismissed employee is re-employed under a new contract of employment.

The calculation of a basic award of compensation is based on the age of the employee and the length ofcontinuous service up to a maximum of 8,100.The calculation of a basicaward of compensation is calculated in the same way as for redundancy paymentsand is subject to the same maximum level of paymentThis is calculated according to a formula based on the age of the employee, rate of remuneration and length ofservice. For each year of service the employee is entitled to 05, 1 or 15 weeks pay, depending on the age ofthe employee at the date of dismissal (1821, 2240, 4164), subject to a maximum of 20 years service and amaximum weekly pay of 270. The maximum available payment therefore is 8,100.A compensatory award of up to 55,000 may be made at the discretion of the tribunal and an additional awardmay be made where the employer ignores an order for re-employment or re-engagement, or the reason fordismissal was unlawful discrimination.

An additionalaward of up to 14,040 may be made where the employer ignores an order for re-employment or

re-engagement, or the reason for dismissal was unlawful discrimination.

Wrongful dismissalGenerally the only effective remedy for the common law action of wrongful dismissal is the award of damagesrepresenting the loss of earnings sustained by the dismissed employee. The employee will none the less beexpected to mitigate their loss by accepting suitable alternative employment. It is possible, in very limitedcircumstances, for the dismissed employee to seek an injunction to prevent the dismissal (see Ridgev Baldwin(1964) and Iraniv South West Hampshire Health Authority(1985)).

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contracts in restraint of trade with particular emphasis on how such contracts apply toemployment contracts.A contract in restraint of trade is an agreement whereby one of the parties restricts their future freedom toengage in their trade, business, or profession. The general rule is that such agreements are normally void.However, they may be valid if it can be shown that they meet all of the following three requirements: the person imposing the restriction must have a legitimate interest to protect;

the restriction must be reasonable as between the parties; and the restriction must not be contrary to the public interest.

Re s t r a i n ts o n e m p l o y e e sWith specific regard to employees, employers cannot protect themselves against competition from an ex-employee, except where they have a legitimate interest to protect. The only legitimate interests recognised bythe law are trade secrets and trade connection.Even in protecting those interests, the restraint must be of a reasonable nature. What constitutes reasonable inthis context depends on the circumstances of the case.

In Lamson Pneumatic Tube Cov Phillips(1904), the claimants manufactured specialised equipment for use inshops. The defendants contract of employment stated that, on ceasing to work for the claimants, he would not

engage in a similar business, for a period of five years, anywhere in the Eastern hemisphere. It was held thatsuch a restriction was reasonable, bearing in mind the nature of the claimants business.

This has to be compared with Empire Meat Co Ltdv Patrick(1939), where Patrick had been employed asmanager of the companys butchers business in Mill Road, Cambridge. The company sought to enforce thedefendants promise that he would not establish a rival business within five miles of their shop. In this situation,it was held that the restraint was too wide and could not be enforced.

The longer the period of time covered by the restraint the more likely it is to be struck down, but, in FitchvDewes(1921), it was held that a life long restriction placed on a solicitor was valid.In Gilford Motor Company Ltdv Horne(1933), the court ignored the separate personality of a company in orderto enforce a legitimate restraint that had been placed on a former employee not to approach previouscustomers of his employers.

Contracts in restraint of trade also occur in relation to the following circumstances.Restraints on vendors of businessThe interest to be protected in this category is the goodwill of the business, that is, its trading reputation andprofitability. Restrictions may legitimately be placed on previous owners to prevent them from competing, in thefuture, with the new owners (Nordenfeltv Maxim Nordenfelt Guns and Ammunition Co(1894)).Restraints on distributorsThis category of restraint of trade is usually concerned with solusagreements under which one party agrees torestrict themselves exclusively to buying and selling the other partys product for a given period (Esso

Petroleumv Harpers Garage(1968)).

Exclusive service contractsThis category relates to contracts that are specifically structured to exploit one of the parties by controlling andlimiting their output, rather than assisting them (Schroeder Music Publishing Cov Macauley(1974)).

Redundancy Pay

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How it operates including the way in which redundancy payments are calculated.There are two major purposes behind the law relating to redundancy. The first purpose is to encourageemployers to consider alternatives to dismissing their employees, and the second is to ensure that whereemployees have been dismissed on the grounds of redundancy that they should have at least a minimum levelof payment to tide them over until hopefully they can regain employment. The law relating to redundancy is

currently to be found in the Employment Rights Act 1996 (ERA). The determination of redundancy depends onthe qualifying rules stated in that Act, and in order to be awarded redundancy payment individuals must followthe procedures stated therein.

C l a i m f a

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Y E S N O

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Y E S

I s t h e r e

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w r o n g f u l

d i s m i s s a l

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C l a i m f a i l

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Redundancy is defined in s.139(1) of the ERA as being: dismissal attributable wholly or mainly to:

(a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes ofwhich the employee was employed by him, or has ceased, or intends to cease to carry on that business in theplace where the employee was so employed, or

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(b) the fact that the requirements of that business for employees to carry out work of a particular kind, or foremployees to carry out work of a particular kind in the place where they were so employed, have ceased ordiminished or are expected to cease or diminish.

It should be noted that even where a dismissal clearly falls within the above categories, an individual will not beable to claim redundancy payments unless they meet the qualification requirements, the most important of

which relates to length of service. In order to qualify for redundancy payments an employee must have beencontinuously employed by the same employer or associated company for a period of two years. (The decision toreduce the length of service in relation to a claim for unfair dismissal to one year has not been extended toredundancy claims (Rv Sec State for Employment ex p Seymour- Smith(2000)).

Redundancy as a consequence of cessation of business is relatively straightforward and unproblematic althoughit should be noted that it applies to temporary as well as permanent cessation as seen in Gemmellv DarngavilBrickworks Ltd(1967).

At the outset of redundancy proceedings the onus is placed on the employee to show that they have beendismissed which they do by demonstrating that they are covered by s.136 of ERA which provides four types ofdismissal. These are:

(i) the contract of employment is terminated by the employer with or without notice;(ii) a fixed-term contract has expired and has not been renewed;(iii) the employee terminates the contract with or without notice in circumstances which are such that he or sheis entitled to terminate it without notice by reason of the employers conduct;(iv) the contract is terminated by the death of the employer, or the dissolution or liquidation of the firm.

Normally employees who resign are not entitled to claim redundancy but type (iii) above provides for what isknown as constructive dismissal in recognition of the situation where the unreasonable action of the employerhas been tantamount to forcing the employee to resign. It is of course possible for the employee to behave inan unreasonable manner, and where they have refused to take up suitable alternative employment offered tothem by their employer they cannot claim redundancy. The difficulty arises in deciding what constitutes suitablealternative employment and can really only be decided on the facts of each case.

Once dismissal has been established a presumption in favour of redundancy operates and the onus shifts to theemployer to show that redundancy was not the reason for the dismissal.

Employees who have been dismissed by way of redundancy are entitled to claim a redundancy payment fromtheir former employer. Under the ERA the actual figures are calculated on the basis of the persons age, lengthof continuous service and weekly rate of pay subject to statutory maxima. Thus employees between the ages of18 and 21 are entitled to 1/2 weeks pay for each year of service, those between 22 and 40 are entitled to 1weeks pay for every year of service, and those between 41 and 65 are entitled to 11/2 weeks pay for everyyear of service.

The maximum number of years service that can be claimed is 20 and as the maximum level of pay that can beclaimed is 270, the maximum total that can be claimed is 8,100 (i.e. 15 x 20 x 270).

Disputes in relation to redundancy claims are heard before an employment tribunal and on appeal go to theEmployment Appeal Tribunal.There is also a statutory requirement for an employer to consult a recognised trade union or elected employeesrepresentatives in good time to consider ways in which any redundancies can be avoided

Conclusion CalculationUnder the Employment Rights Act (ERA) 1996 the actual figures are calculated on the basis of the persons age,length of continuous service and weekly rate of pay subject to statutory maxima. Thus employees between theages of 18 and 21 are entitled to 1/2 weeks pay for each year of service, those between 22 and 40 are entitled

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to 1 weeks pay for every year of service, and those between 41 and 65 are entitled to 11/2weeks pay for everyyear of service.The maximum number of years service that can be claimed is 20 and as the maximum level of pay that can beclaimed is 270, the maximum total that can be claimed is 8,100, (i.e. 15 x 20 x 270).

What defences an employer has to civi l claims made by an injured party as a result of anemployees malpractice.An employer has to provide and maintain: safe premises; a safe place of work; safe plant and competentworkers. Any employer may be liable for malpractices if he breaches any Acts of Parliament or Regulations.There is no doubt that an employer is vulnerable if he is not up to-date with the legislation. If it can be provedthat an employer does not have a safe system of work then he will be liable. However, if an employer has givenadequate induction into the work place and shown there to be a safe system of work and has done everythingpossible to ensure that it is a safe system then he may not be liable. In Paris v Stepney Borough Council if theemployer had given the claimant who could see only through one eye a pair of goggles and the employee hadnot worn them, they may not have been liable. However, they had not provided the claimant with goggles andso they were liable.

An employer may escape liability if there is found to be contributory negligence by the worker. The Law Reform(Contributory Negligence) Act 1945 states that if a person sustains an injury partly as a result of his own fault

the injured party will have their damages reduced but this may not negate damages altogether. The amount ofreduction is at the courts discretion. This is a defence in negligence, breach of statutory duty and any actionsbrought under the Fatal Accident Acts.

Volenti non fit injuria to the willing no harm is done; an example of this is the playing of a game of rugbywhere there is a trespass to the person when a person is tackled. Thus the players enter the game willinglyknowing that they are to be assaulted. However, lines have to be drawn between what is a willingly acceptedrisk and an assault. Smith v Baker & Sons where an employer successfully pleaded volentias the employeeknew the risk he was running when stones were lifted overhead. By contrast, in Bowater v Rowley RegisCorporation where an employee was ordered to take out a horse that was known to be unsafe and the claimantwas injured, it was held that the defendant was liable and the defence ofvolenticould not be pleaded.

The employer may be able to plead that the employee had gone off on a frolic of his own. This means that theemployee has done something that is so far removed from that which he should have been doing that if there isinjury either to himself or a third party he will be unable to claim damages.

Thus in Rose v Plenty a driver of a milk float against instructions gave lifts to children who helped on the milkround. One was injured and it was held the employer was liable as the driver was in the ordinary course ofbusiness. This may be contrasted with Beard v London General Omnibus Co. In this case a conductor at his owninsistence backed up a bus andinjured the claimant but it was held that the defendant, LGO, was not liable as the conductor was acting on afrolic of his own and not in the course of his employment.

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no 19 law of employment - final

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