All about employment contracts

What is an employment contract?

When someone is offered a job and he accepts that job, he enters into a contract of employment with his employer. The employment contract contains all of the terms which both the employer and the employee are required to observe during the course of the employment, and is legally binding.

Determining whether an employment contract exists

“Employment contract” is a modern term for what in previous times would have been referred to as a “contract of service”. In order to establish whether a contract of employment exists between two people it is often necessary to resort to the old test of determining whether there is a “contract of service” under which the one party pledges personal service to his employer (or in archaic legal parlance ‘master’) or a “contract for services” under which one party agrees to perform services for another but as an independent contractor.

What are the legal requirements?

Contrary to popular belief there is no legal requirement for an employment contract to be in writing. It is possible for an employment contract to be concluded orally between the employer and employee, or through an exchange of emails or letters.

However, legislation does require every employer to give an employee a written statement of the major terms which are included within his contract of employment within 2 months of commencing a job. The information which must be included in this written statement is:

• The employer and employee’s names;
• The job title or a brief job description;
• The date at which employment began;
• The date at which the employment will end (if the employment contract is not permanent)
• The employee’s hours of work;
• The employee’s rate of pay & holiday entitlement;
• The notice period which the employer or employee must give in order to end the employment contract;
• Information about grievance and disciplinary procedures, or details on where to find this information

What terms does my employment contract contain?

Unless legislation explicitly states otherwise, employment contracts are treated in the same way as other types of contractual arrangement and both parties are able to agree whatever terms best suit their mutual purpose (this is referred to as the doctrine of “freedom of contract”).

Very often terms and conditions will be included in the employment contract even though they are not in writing or are not stated in the contractual document. This might include company policies, agreements which have been negotiated with a trade union or terms contained in the company handbook. It is important to note that any of the information which is legally required in the statement of employment (see above) cannot be incorporated into the employment contract by reference to an external document.

There are a number of terms which are automatically implied into an employment contract. Some of these terms are employed by common law and custom and practice, and it is possible for the parties to “contract out” of these terms by explicitly stating in the contractual document that they shall not apply. However, in this day and age there are also a large number of terms which are implied into employment contracts by statute, and very often it is not possible to contract out of these provisions.

Breach of contract

As with any type of contract, it is possible for any party who has suffered as a result of the breach of an employment contract to take legal action against the other party to the contract in order to obtain compensation or (more rarely) to force that other party to abide by a term of the contract. Both employers and employees may take action to claim that an employment contract has been breached, and whilst they may issue proceedings in the employment tribunal if the employment contract has already come to an end, if employment remains ongoing, any claim for breach will have to be heard in the County Court.