Modern Employment Contracts as Legal Instruments - Essay Example

Modern Employment Contracts as Legal Instruments Student’s Name: Instructor’s Name: Course Code and Name: University: Date of Submission: Modern Employment Contracts as Legal Instruments Introduction Employment contracts are, principally, legal documents that fall within the domain of the Law of Contract (International Labour Conference 2006, 8). Consequently, such documents must adhere to the requirements of every contract (Nyamboga & Kiplang’at 2008, p. 82). Needless to say therefore, that an employment contract must of essence posses all the essentials of any other ordinary contract, albeit with certain modifications (Hodgin 2006, p. 32). Such essentials of a valid contract include offer, acceptance, consideration, the intention to be legally bound and the contractual capacity (Padhi 2008, p. 341). In an employment scenario, the offer comes from the employer who offers the employment opportunity to the potential employee(s) (Ogola 2005, p. 74). It therefore follows that acceptance of the offer for employment is made by the employee(s) (ibid). In an employer-employee relationship, the consideration is the payment to be made to the employee by the employer either in the form of salaries or wages (Jackson 2005, p. 144). The intention to be legally bound in an employer-employee relationship is best captured by the fact that any disputes that arise from such relationships are usually referred to courts of law or quasi-judicial tribunals such as the Industrial Courts (Chandra 2003, p. 10). Lastly, the parties to contracts of employment must have the requisite contractual capacity in order for the contract to be legally effective (Padhi 2008, p. 244). This is a very crucial element in employer-employee relations hence its regulation has not been the exclusive preserve of the Law of Contract. The regulation of this aspect of the contract of employment has also been in the domain of the human rights law (Hodgin 2005, p. 29). This paper seeks to critically asses whether employment contracts, being legal documents, continue to perpetuate the master-servant relationship as was the nature of employment relations before. Employment Various definitions may have been advanced to define the term employment. However, one of the simplest definitions ever advanced is that employment is the condition in which a person has paid jobs (ILO 1997, p. 2). An individual is said to be employed if they, while not owning the means of production, however posses the necessary skills that are needed by another person for the performance of a particular job (Sansbury 2004, p. 94). The individual with the skills then avails the said skills to the person who needs them for pay. The parties to an employment relationship are the employer and employee (Bullon 2003, p. 434). In order that an employment relationship be deemed as being into place, it is of importance that the law establishes whether one is an employee or not. Against this background therefore, there have been put into place certain tests that are used to determine whether a person who performs a job is actually an employee or not. It is only when the tests establish that one is indeed an employee that an employment relationship would be held to be into place, otherwise there would be none. There are four main tests that have been utilized towards this end. These tests are generally not exclusive and are more often than not used jointly. These are; Tests of Employee Status a) The Control Test This test is founded upon the principle that in circumstances where the master either controls or when they have the right to control not only that which the worker does, but also the manner in which the worker does the work, then an employment relationship is said to ensue under such circumstances (Net Industries Ltd 2011, p. 2). This position was dealt with at length in the 1993 case of Hall v Lorimer.1 Presently, there are a number of levels of control that need to be in place in order the employment relationship to be found to be in existence. These include the fact that the employer should have the power of selection of the worker, the employer should also have the right to control the method used by the worker to do the job and finally, the must have the right of either the suspension or dismissal of the worker (ibid). On these bases therefore an employment contract is only in place if the three levels of control are in place. Under this principle, an employee is distinguished from independent contractor in that independent contractors are hired to achieve certain ends but are not under the direction of the employing authority. As a result, the independent contractors have a complete discretion on how they are to effect the work they set to perform (ibid). Thus, independent contractors, while being workers, do not qualify to become employees as the level of control between them and the employers is really thin. Consequently, the nature of their work relationship is far removed from that of master and servant relationship that a contract of employment produces. b) The integration test Under this test of employee status, an employment relationship is only held to be in place in such circumstances where the person under consideration is fully integrated into the employer’s organisation (Amerasinghe 2009, p. 36). Consequently under this test, a person is only to be considered to be an employee if they are part and parcel of the employer’s organisation. Such a person must thus have been employed as part of the business of the employer and their work should be performed as an integral part of the employer’s business, lest there would be no contract of service. Instead, there would probably be a contract for service (ibid). Following against this argument, a person who performs some work for business purposes but the person who performs the work does not form the requisite integral part of the business and is instead an accessory to the business, then the person in question would not be an employee. Consequently, such a relationship would be outside the scope of an employment contract, and by extension, the master and servant relationship. c) The Economic Reality Test Within the purview of this test, an employment contract is established only when certain ingredients are in place. These ingredients include; firstly that the worker agrees to avails their work and skill in the performance of some service to the employer in return for some consideration which may be a salary or wages. Secondly, the worker must have agreed either expressly or impliedly that they would be under a sufficient degree of control of the master in the course of the performance of the duties they are called to perform. Lastly, the provisions of the contract need to be consistent with the usual contracts of service as determined in the case of Ready Mixed Concrete South East Ltd v Ministry of Pension and National Assurance.2 d) Self Description Test The use of this test has remained somewhat controversial because the requirements that need to be fulfilled for it to be established are blurred. Generally, it establishes an employment relationship based on the kind of labeling that the parties have given to themselves. As a result therefore, the lack of consistency in its determination may be misleading as parties may describe their relati0onships as being contracts of employment or otherwise even in those instances where none exists. The corollary therefore is that a master and servant relationship label may be ascribed even in circumstances where the same could not arise if the other tests are used (Padhi 2008, p. 2008). Master-Servant Relationship in Employment Relations In order for this paper to be able to provide the necessary critical assessment that is required, it is imperative that the meanings of these two related words are established. A master refers to a male person who exercises authority over a worker(s) (Bullon 2003, p. 1012). On the other hand, a servant is any employed person who is controlled by another person, known as the master (Bullon 2003, p. 1497). Drawing from this, a master-servant relationship is the type of relationship in which the master has authority over the servant in determining such matters as the time, manner as well as the place for the delivery of the services (Garner 2004, p. 997). The defining criterion of a master and servant relationship is the issue of control of the servant by the employer. This has been given a boost through the various judicial decisions that have severally and variously buttressed this assertion. For instance, in the 1983 case of Narich Pty Ltd v Commissioner of Pay-roll Tax3 otherwise also known as the “weight watchers” case, the importance of control was illustrated by the court. Lord Brandon, in the course of his judgment, restated that control is the most important, and more often than not, is the decisive criterion for determining the existence or absence of an employment status. Given this kind of understanding, the question that one is wont to ask is on how exactly the employment contract draws similarities with a master and servant relationship. There are various confluence points between these two relationships. Principally for example, a master and servant relationship raises the corresponding legal concept (and relationship) of principal and agent (Garner 2004, p. 997); which relations has equally far-reaching consequences. The principal-agent relationship arises from that of master and servant out of the fact of the control element that is common between the two relationships. Legally, a principal is a person who gives authority to another person, known as the agent to act on his behalf (Garner 2004, p. 1230). Conversely, the person who acts on behalf of the principal upon the necessary authorization is the agent (Thys 2004, p. 47). The relationship between a principal and agent is commonly referred to as an agency relationship (Ogola 2005, p. 164). Such a relationship is best described as the kind of legal relationship which arises whenever an agent is appointed or becomes entitled to act on behalf of the principal during transactions with any third party (Kadlecova & Svobodova 2009, p. 1). Agency relationships may generally be founded through three kinds of authorities (Ogola 2005, 171). These are the agency by express authority, agency by implied authority, as well as that by apparent authority. In an employment relationship, agency by express authority arises where the employer, in their capacity as the master who controls the employee, expressly gives the employee the authority to act on their behalf. Similarly, in the case of implied authority, the employee has the authority to act on behalf of the employer in such circumstances such as where the conduct may be inferred. Like in the two forms of authority, an employment relationship oftentimes make the employee be in a position where they appear to have the authority and right to act for their employers (Bizzarro, Pasquini, Tiraboschi & Venturi, p. 17). Other than the giving rise of agency relationships, the master and servant relationships are equally important in imposing other rights and obligations. Although the rights and their corresponding obligations may vary depending on the nature and type of job, there are however a number of them that remain uniform, hence do cut across. For example, the most common obligations that the employer is bound to discharge in an employment relationship include the following; firstly, is the duty to create the contract of employment, acquaint the employee with the terms and conditions of the job, reporting the duty to the concerned authorities in the public administration, assigning duty to the employee and the putting into place of the requisite safety precautions at the work place etc (Kadlecova & Svobodova 2009, p. 2). On the other hand, the employee also has certain obligations which they need to discharge; which obligations are the corresponding rights of the employer. The main duties of the employee include the duty; to cooperate with the employer in order to create the necessary employment relationship, to perform the work in line with the instructions of the employer (master), observe the necessary regulations, perform the tasks as per the instructions of the superiors and the to perform the assigned tasks with the due regard (Kadlecova & Svobodova 2009, p. 3). Vicarious Liability Besides the above, the role of a contract of employment is also seen as enhancing the master and servant relationship through the legal principle of vicarious liability. Vicarious liability is the type of liability that arises in such circumstances such as when a supervisory person becomes liable for all those actionable conducts of their subordinates or associates by virtue of the relationship that exists between them (Garner 2004, p. 934). Under the principles of this form of liability, the employer becomes liable for the liability of their employees that accrue tortuously (ibid). It is however to be noted that the employer’s liability for the tortuous wrongs of the employee(s) is not blanket in nature. This is because the employer (in their capacity as the master) is only to be liable for those conducts of their employees which arise when the employees are in the course of their lawful duties (Rogers 2002, p. 289). The corollary of this is that if the employees’ conducts are those that arise outside the scope of their lawful employment, then in such circumstances the employer would not be liable vicariously (Rogers 2002, p. 290). The question that may be appropriate at this stage is on how to determine the exact limits which determine the scope of employment of the employee during which their tortuous wrongs are to be ascribed to their employer. It has been ascertained that what determines whether the employer becomes liable for their employee’s wrongful conduct is not on the wrong committed by the servant but rather, the act the employee is involved in at the material time of the commission of the wrong in question as determined in Kirby v NCB.4 It has been accepted that the act would be within the scope of the employment where it has been either expressly or impliedly authorized by the employer (Rogers 2002, p. 712). Besides, an employee’s wrongs may also be ascribed to the employer if the act is sufficiently connected with the employment to the point that it is regarded as an unauthorized mode for the doing of that which is authorized,5 or if the act is incidental to those activities that the servant is employed to do. In a nutshell, it is accepted that the employer, as the master of their employee servant, must be found liable in all such situations where the tortuous wrong committed by the servant involves a risk that is sufficiently inherent in, or characteristic of the employer’s business so much such that it would only be just to make the master employer bear the loss. This assertion finds judicial backings in Lister v Hesley Hall6 and Ira S. Bushy & Sons v United States.7 As can be seen, the employment contract, in its capacity of master and servant relationship treats the master as being the brain behind the actions of the employee which are committed in the lawful cause of the employee’s duties. As a consequence, the employer is made to become personally liable for the actions of the employee through the principle of vicarious liability. However, the circumstances under which the employer may be able to escape liability are seemingly very few and far in between. Towards this end, it has been established that even in circumstances where the employer has prohibited the employee from acting in certain ways they might still incur liability vicariously. This is especially in the circumstances where it has been established that if the employer’s prohibition was simply one that concerned only the mode of performance of the employment, then the employer would not escape liability as was held in the case of Plumb v Cobden Flour Mills Ltd.8 However, where the prohibition is such as it restricts that which the employee is supposed to do, then in such circumstances, the employer would be protected from incurring liability vicariously. This was the decision in the case of Kooragang Investments Pty Ltd v Richardson and Wrench Ltd.9 Conclusion The employment relationship obtains through a legally binding agreement, a contract, between the two parties who are otherwise known as an employer and employee. The existence of such a relationship is both a question of fact and law. Once in a while, the line between employment (contract of service) and contract for services may be blurred. However, that notwithstanding, it must be appreciated that the establishment an employment relationship between the parties, then certain rights and obligations do ensue; which rights and obligations have very far reaching consequences. One of the most important of the consequences of an employment contract is the resultant relationship of master and servant. The master and servant relationship arises, primarily, out of the right of the employer to control the employee in the course of the performance of their duties. The implications of master and servant relationship are best presented through the principle of vicarious liability. Through this principle, the employer, as the master of the servant employee is generally taken to be liable for the tortuous wrongs that the employee commits within the scope of their employment. However, notwithstanding the fact of this general rule, the employer may not be held liable for certain wrongs committed by the employee in the course of their duties. Such exceptions include those wrongs where the employee, though being in the course of their employment, commits wrongs while on a frolic of their own. Besides, in such circumstances where the employee commits wrongs which arise from their negligent or willful wrongs. Bibliography 1) Articles/Books and Reports Amerasinghe, Franklyn, ‘The Current Status and Evolution of Industrial Relations in Sri Lanka’ (2009) International Labour Organization and Cornell University ILR School Bullon, Stephen (ed). Longman Dictionary of Contemporary English. New Edition. London: Pearson Education Limited (2003) 686 Chandra, Suresh RKS. The Employment Relationship (Scope) in Sri Lanka. Available at http://www.ilo.org/public/english/dialogue/ifpdial/downloads/wpnr/srilanka.pdf Chiara Bizzarro, Flavia Pasquini, Michele Tiraboschi & Davide Venturi. Certification of labour contracts: a legal instrument for labour market regulation in Italy (no date) 17. Available at www.adapt.it/acm-on-line/Home/documento2371.html Garner, Bryan A. Black’s Law Dictionary. 8th Edition. St. Paul Minnesota: Thompson West (2004) 1233 Hodgin, R. W. Law of Contract of East Africa. Nairobi: Kenya Literature Bureau (2005) 32 ILO, ‘Employment Relationship’, (2006). International Labour Conference. Available at http://www.ilo.org/public/english/standards/relm/ilc/ilc91/pdf/rep-v.pdf International Labour Organisation. R188 Private Employment Agencies Recommendation, 1997. Available at http://www.ciett.org/fileadmin/templates/ciett/docs/Text_ILO_Recommendation_N__188_on_Private_Employment_Agencie.pdf Jackson, Tudor. The Law of Kenya. 3rd edition. Nairobi: Kenya Literature Bureau (2005) 144 Nyamboga C. M. & Kiplang’at J. N. Conflict Resolution at the Work Place: The Role of Information and Knowledge Management. Nairobi: Kenya Library Association Ogola, John Joseph. Business Law. Nairobi: Focus Publications Ltd (2005) 74 Padhi, P. K. Labour and Industrial Laws. New Delhi: Prentice Hall of India (2008) 341 Rogers, W. V. H. Winfield and Jolowicz on Tort. 16th edition. London: Sweet and Maxwell (2002) 712 Sansbury, George Ernest ‘Employment Relationship and Integrated Theory.’ School of Business, Faculty of Law and Management, La Trobe University of Australia. Available at http://www.lib.latrobe.edu.au/thesis/uploads/approved/adt-LTU20060427.125729/public/01front.pdf Tereza, Kadlecová JUDr and Eva Svobodová JUDr, ‘The Rights and Duties of the Employer and the Employees in the Czech Republic’, Weinhold Legal. Available at http://www.legal500.com/assets/images/stories/firmdevs/wein13416/rightsduties_of_empoyeremployees_in_cr.pdf Thys, Willy (editor), ‘10 Trade Union Actions to strengthen the status of workers in the informal economy’, (2004) World Confederation of Labour. Trierstraat, Brussels. Available at http://socialalert.org/pdf/Manual%20Inf%20ec_ENG.pdf 2) Case Law Hall v Lorimer 66TC 349 Ira S. Bushy & Sons v United States (1998) 398 F. 2d 167 Kirby v NCB 1958 SC 514 at p. 533 Kooragang Investments Pty Ltd v Richardson and Wrench Ltd [1982] AC 462 Lister v Hesley Hall [2002] 1 AC 215 Narich Pty Ltd v Commissioner of Pay-roll Tax [1984] ICR 286 Plumb v Cobden Flour Mills Ltd [1914] AC 62 at 67 Ready Mixed Concrete South East Ltd v Ministry of Pension and National Assurance [1967] 2QB 497 3) Legislations None 4) Other Sources Net Industries. Master and Servant - Duties of Master and Servant, Compensation. 2011. Available at http://law.jrank.org/pages/8477/Master-Servant.html Read More