Terms of employment contract

Table of contents.

Overview , A more detailed overview , Some sources of contractual terms , The statutory particulars , Incorporation of terms from collective agreements , Implied terms , Problem question , True/false questions.

This page was last updated on 29 Sept 97.

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Mail Paul Todd

SLAPNT@cf.ac.uk

Overview.

When we think of labour law we probably think primarily of the employment protection legislation, such as redundancy and unfair dismissal. The legality of strikes and other industrial action would also generally be regarded as central to the subject, as would possibly the legislation on sex and race discrimination, but the contract of employment may not immediately spring to mind in this regard.

Moreover, although it is rare (but not unheard-of) for the parties to an employment contract to sue directly on it, the contract of employment can be relevant to:

1. Whether there is a dismissal at all (especially where a constructive dismissal is claimed).
2. Whether, assuming there is a dismissal, it is by reason of redundancy (for example, where an employee has been dismissed for refusing to move workplaces, and the issue is one of geographical mobility, although there is authority that this is not a contractual test).
3. Whether a dismissal is unfair (for example, if the issue is whether a particular disciplinary rule is in force).
3. Compensation for unfair dismissal, or a week's pay for redundancy or basic award purposes. See, e.g., Gascol Conversions Ltd. v. Mercer [1974] ICR 420.
4. Whether industrial action is tortious (since even where interference with a commercial contract is claimed, breach of the employment contract is likely to provide the unlawful means necessary where the interference is indirect).

The law of contract (apart from the employment contract) is also relevant to labour law: for example, it defines the basic relationship between a trade union and its members.

A more detailed overview.

Thus, the contract of employment remains central to the subject. Wrongful dismissal is a straightforward action for breach of contract, and employees can be sued directly on the contract, for example when equitable remedies are sought against them, for example to restrain them from working for a competitor.

It is otherwise rare for an employer to sue an employee directly for breach of an employment contract (but see N.C.B. v. Galley [1958] 1 W.L.R. 16), except where the employment relationship has ended. But employees still sue employers, e.g., for wages or bonuses, as in Robertson v. Jackson v. British Gas Corporation, Rigby v. Ferodo and Ticehurst v British Telecom [1992] ICR 383 (CA), or otherwise, as in Cresswell v. Board of Inland Revenue).

But quite apart from that, the contract of employment can determine whether there is a dismissal at all, particularly where a constructive dismissal is claimed, or where the issue is geographical mobility. The definition of place of work for redundancy purposes is also probably contractual (but see Bass Leisure, suggesting a factual test). Otherwise, substantive redundancy and unfair dismissal are relatively independent of the employment contract, but the contract remains relevant to the remedies, in calculating the weekly wage, for example determining whether overtime is to be taken into account, for a redundancy payment or basic or special award in an unfair dismissal claim. It is probably also true to say that the principles for the compensatory award for unfair dismissal, originally based on the Norton Tool case, were developed with a contractual analogy in mind (indeed, what was to be expected, given that virtually no guidance was given by the legislation?).

The contract is also relevant to industrial conflict, since the tort actions upon which that area of law is still largely based usually depend on a breach or other interference with contract.

It is not always easy, however, to determine the terms of the contract.

Some sources of contractual terms.

It is relatively rare for there to be a single, unequivocal source of terms of an employment contract, and even if there were at the start of the employment relationship, the dynamic nature of the employment relationship, coupled with the intention of one or both parties to alter the terms, means that this is very unlikely to remain the case.

Likely sources of terms include:

1. The statutory statement of terms issued by the employer.
2. Incorporation of terms from collective agreements.
3. Implied terms.

The statutory particulars.

The employer is obliged to provide a statement of terms under the Employment Rights Act 1996, s.1. These will normally be provided only after the contract has been concluded, and generally cannot alter the terms of an already-agreed contract. Indeed, they are often isssued by employers in an attempt to vary existing contracts and/or impose contractual terms.

There are really only three ways in which the statutory particulars can actually be the contract:

1. The parties expressly agree that they will be (see, e.g., Gascol Conversions Ltd. v. Mercer [1974] ICR 420, where the employee signed and returned them as his contract of employment.

2. The conduct of parties may lead to an inference of acceptance of the statutory terms.

3. The employee (or indeed, the employer) could, in appropriate circumstances, be estopped from denying that these are the terms that govern the contract.

The effect of 2 and 3 is probably identical in practice. But whether an estoppel works depends on the type of term: see Jones v. Associated Tunnelling Co. Ltd. [1981] IRLR 477.

It is also worth observing that the statutory particulars are at least strong evidence as to the terms of the employment contract, and in the absence of evidence to the contrary, will be conclusive as to the terms of the contract: Camden Exhibition and Display, Ltd. v. Lynott [1966] 1 Q.B. 555 (CA).

Incorporation of terms from collective agreements.

Issues raised include:

(a) On what basis are terms from collective agreements incorporated? What about non-union members?
(b) How are the terms interpreted? Remember that most collective agreements are not legally enforceable, and that the status and content of collective agreements can vary over time. See further Robertson v. British Gas Corporation and Marley v Forward Trust Ltd. [1986] ICR 891, [1986] IRLR 369. Detailed principles of interpretation are discussed in Hooper v. BRB [1988] IRLR 517.
(c) Which agreement? There may be national and local agreements (see, e.g., Gascol Conversions Ltd. v. Mercer [1974] ICR 420).
(d) Which terms are appropriate for incorporation? Procedural terms, for example, may not fit well in an individual employment contract.

Implied terms.

The main issues about implication of terms are:

(a) On what basis are terms implied generally into contracts, and specifically into employment contracts?
(b) The relationship between express and implied terms. Can an express term be qualified by an implied term, or does the existence of the implied term negate the implication?
(c) Where there is no express term, it will be necessary to imply one (for example, as to geographical mobility.
(d) Particular terms, which are generally implied into employment contracts.

References on implied terms, with hyperlinks to the main cases.

Geographical mobility.

Geographical mobility terms can of course be express, but they are also often implied. If the contract does not require the employee to move, that will be conclusive that there is a dismissal, if the employee refuses to move, and also that the dismissal is by reason of redundancy. If the contract does require the employee to move, that is conclusive that there is no dismissal if the employee resigns, but if there is a clear dismissal, it may still be a dismissal for redundancy - see Bass Leisure v. Thomas [1994] I.R.L.R. 104 (E.A.T.).

Relationship between geographical mobility and redundancy.

There are two separate questions:

1. Is there a dismissal?

2. If so, is it for reasons of redundancy?

So:

1. If the employee resigns, the contractual terms are conclusive on whether there is a constructive dismissal (Western Excavating (E.C.C) Ltd. v. Sharp [1978] I.R.L.R. 27- the leading (CA) case on the meaning of constructive dismissal). Moreover, any dismissal will almost certainly be for redundancy.

2. If there is a clear dismissal, and no work (or reduction of work) in the contractual area, then the dismissal is by reason of redundancy.

3. But if there is a dismissal, and there is work within the contractual but not the factual work area, Bass Leisure v. Thomas [1994] I.R.L.R. 104 suggests that the contract may not be conclusive, and that the dismissal may still be by reason of redundancy.

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See also the references on geographical mobility, with hyperlinks to the main cases.

A problem question.

This is a problem question on employment contract terms, which is based (rather loosely) on my own contract of employment. All names are mythical (as far as I know!):

Twenty years ago, Omega began her employment as a lecturer at University College, Gloucester. Her contract required her to carry out any duties connected with teaching, research and administration, reasonably assigned to her by her Head of Department. Her pay was determined on a nationally agreed scale, and she was entitled to 30 days' holiday a year. The staff handbook, which was incorporated into her employment contract, set out a grievance procedure including provision for collective grievances and a final appeal to ACAS, and stated that "employees are encouraged to engage in outside work which increases the prestige of the College". Her notice period was three months, and there was no good cause clause.

Five years ago, University College, Gloucester merged with the South Western Institute of Cybernetics to form the new University of Gloucester. The legislation setting up the new university also transferred all existing employment contracts unchanged.

The employment contracts of the two constituent institutions were entirely different, and additionally, there was no consistency between employees who were originally employed at different times, even within each of the institutions. In an attempt by the personnel management to achieve consistency, two years ago, Omega was issued with new statutory particulars, which stated that she was required to perform any duties assigned to her by her Head of Department, that she was entitled to 25 days' holiday a year, and that outside work was to be limited to 22 days per year. The grievance procedure made no provision for collective grievances, and there was no final appeal to ACAS. The employers were only entitled to dismiss her for good cause, and then only on 12 months' notice.

Omega has continued to work without objection for the last two years, and has accepted the 2.5% nationally agreed pay rise. She has never taken more than 2 days' holiday a year, has never engaged in outside work and has never invoked the grievance procedure.

What are the terms of Omega's employment contract?

Some issues that arise from this problem:

1. What are Omega's duties? Are they limited to those connected with teaching, research and administration, reasonably assigned to her by her Head of Department?
2. What is Omega's holiday entitlement?
3. What is the position regarding outside work?
4. What are the terms of Omega's grievance procedure?
5. What is Omega's notice period?
6. Can the employer dismiss Omega only for cause?

Notes:

This is an almost classic problem of the difficulties for employers who want unilaterally to alter an existing contract. In principle, the issue of the statutory particulars without more ought not to be conclusive (but see Gascol Conversions Ltd. v. Mercer [1974] ICR 420), but Omega might be estopped from denying the changed terms. However, the facts may not easily support an estoppel, especially for terms such as the grievance procedure: see, e.g., Jones v. Associated Tunnelling Co. Ltd. [1981] IRLR 477, where different terms were treated differently for these purposes. Omega has however continued to work without objection, and accepted the nationally-agreed pay rise. Can any inference be drawn from this?

What if the facts were changed? In what circumstances, in your view, would Omega be bound by the new terms?

This page was last updated on 26 Oct 96.

Mail Paul Todd

SLAPNT@cf.ac.uk