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changing an employment contract

This extensive look at the contract of employment will look at what employers need to check before offering an employment contract, fixed term contracts, terms of employment, changing a contract of employment, termination of the contract, minimum notice periods, the difference between a contract of service and contract for services, and more.

contract-of-employment

The employment contract is the source of much misunderstanding and strife between employers and employees.

This page looks at some of the things that the employer needs to be careful about prior to granting a contract of employment, the terms of employment, fixed term contracts, changing an employment contract, termination of the employment contract and minimum notice periods, when a contract of employment is necessary, amending a contract of employment, and more.

Prior to Contract

Before entering into a contract of employment there are three areas that an employer needs to consider carefully.
These areas can be broadly categorized as follows:

  1. Advertising the position
  2. Interviewing for the job
  3. Conditions precedent.

Job Advertising

Advertising the job can be fraught with danger for the employer as it is easy to fall foul of employment equality legislation. In addition the wording of the advertisement can be held to form part of the subsequent contract of employment.

Interviewing for the job

Employers need to be careful not to ask questions which fall foul of the Employment Equality Acts, 1998-2004 and avoid asking questions that could be considered discriminatory on the grounds of age, marital status, sex, and the other grounds referred to in employment equality legislation.

Keeping note of the interview is a smart practice as what is said at interview (by both parties) can be held to form part of the subsequent contract.

Conditions precedent

The employer should make a job offer conditional on certain conditions being fulfilled, depending on the position. These conditions may cover Garda vetting, clean driving licence, health to do the job, suitable references, registration with professional bodies, and others-this will depend very much on the nature of the work and position.

The areas of references and medical examinations can cause problems and the key principle always for the employers is that you have the employee’s consent to take up references and medical reports/evidence.

Terms of Employment

The contract of employment in Ireland is made up of both express terms and implied terms with the Terms of Employment (Information) Act, 1994 stipulating that certain basic information must be given to the employee in writing.

This includes the names and addresses of both employer and employee, the place of work, the title of the job, pay, any terms relating to sick pay, periods of notice and many other basic details.

Implied Terms

In every contract of employment, written or otherwise, there are 4 categories of implied terms which fall under the headings of
a) terms implied by custom/practice (depending on the industry)

b) terms implied by statute (right to redundancy, right not to be unfairly dismissed, right to notice, right not to be discriminated against as per Employment Equality Acts, right to breaks, annual leave, holidays as per Organisation of Working Time Act, 1997, protective leave including maternity leave, payment of wages as per Payment of Wages Act 1991, atypical workers such as part timers and fixed term workers protected by the Protection of Employment Acts, health and safety provisions as per Health and Safety at Work Act 2005)

c) terms implied by law (employers duty of care and employees duty of trust and confidence)

d) collective agreements in unionized employment.

Express Terms of Employment

The express terms of employment are those terms clearly agreed between the employer and employee and can be oral or in writing.

employment-contract

Terms of Employment (Information) Acts

The Terms of Employment (Information) Acts 1994-2001 provide that employees must be given a statement, signed by the employer, of certain of their terms and conditions of employment within 2 months of their employment.

What must be included in this statement?

  • The names of the employer and employee
  • The address of the employer
  • The place of work (This can be a thorny issue if you need the employee to move to another location or provide geographical mobility in the course of employment and it has not been provided for in the contract of employment)
  • Hours of work (this needs to be clear about shifts, overtime, work breaks, lay offs, short time, and so forth)
  • The job title or nature of the work for which they are employed (Drafting this too widely can give problems when it comes to redundancy; drafting too narrowly can lead to practical, on the ground difficulties)
  • The date of commencement of employment (when does employment start is an important question as most statutory entitlements will be dependent on the length of service)
  • The duration of the contract and expiry date if the contract is a fixed term/temporary contract
  • The rate of pay or method of calculation (the salary package and the breakdown between basic salary, commission, bonuses, allowances, and so forth should be set out)
  • How often/the intervals at which pay will be paid
  • Terms and conditions re paid leave (what is the position re holidays and is there extra days over and above those set down by statute in the Organization of Working Time Act,1997)
  • Terms and conditions re illness/sickness or injury and pensions (what is the situation re sick pay; there is no general right to be paid while out sick but the contract can provide for it expressly or custom and practice of the industry/job can imply it but this may need to be proven if questioned)
  • The period of notice obliged to be given by both parties
  • If any collective agreement affects the contract
  • Times of breaks/rest periods both daily and weekly
  • The company’s pay reference period.

If the employer fails to provide this statement to the employee a claim can be made to the Rights Commissioner service who may order compensation of up to 4 weeks remuneration and require the employer to give the statement of terms to the employee.

In addition to the above statutory minimum terms and conditions it is prudent and advisable for the employer to include other terms in the contract dealing with

  • Short time/lay offs
  • Illness pay
  • Retirement age
  • Time off work
  • A probationary period (cannot exceed one year)
  • Bullying and harassment procedures
  • Grievance and disciplinary procedures (a specified disciplinary procedure should be in place and a copy of this together with the grievance procedure should be given to the employee along with the contract/letter of offer)
  • Company car
  • Share options
  • Retirement age (should be specified by the employer)
  • Any restrictions re competition and setting up against the employer in the future using trade secrets/contacts. Note that common law implies a duty of loyalty in the employment contract; common law also protects confidential information and trade secrets in the absence of an express or written term in the contract covering this area. However there is no common law barrier to soliciting for business done by the employer once the employee leaves the employment.
  • Email and internet use

In addition to the above, the employer must give new employees, within 28 days of starting employment, a written summary of the procedures to be used should it be necessary to dismiss them.

As an employer you need to be clear what terms and conditions are obligatory in the employment contract as a result of the Terms of Employment (Information) Acts and the additional terms and conditions which might be advisable and prudent for the employer.

Legal advice is recommended as the consequences of a badly drafted contract with an employee will be far more costly than the cost of having a properly drafted contract of employment by a legal professional.

The Fixed Term Contract

Fixed term employees are employed on the same type of contract-either a fixed term contract or a specified purpose contract.

A fixed term contract is one where the end date of the contract is known at the outset whereas a specified purpose contract is one which terminates on the occurrence of a specific event or cessation of a specific purpose.

fixed-term-contracts

The Protection of Employees (Fixed-Term work) act, 2003 offers significant protection to fixed term workers and the purpose of this legislation is

  1. to ensure that fixed term workers are no less favourable treatment than their comparable permanent counterparts and
  2. to prevent employers from abusing employees by employing them on a series of successive short fixed term contract.

Prior to this legislation fixed term employees were protected by the Unfair Dismissals Acts and the Employment Equality Acts.

The employment equality acts apply to all employees, regardless of length of service.

A fixed term employee is defined in the Protection of Employees (Fixed-Term work) act, 2003 as:

“fixed-term employee” means a person having a contract of employment entered into directly with an employer where the end of the contract of employment concerned is determined by an objective condition such as arriving at a specific date, completing a specific task or the occurrence of a specific event but does not include—
(a) employees in initial vocational training relationships or apprenticeship schemes, or
(b) employees with a contract of employment which has been concluded within the framework of a specific public or publicly-supported training, integration or vocational retraining programme;

 

However fixed term workers are excluded from the protection of the Unfair Dismissals Acts by virtue of the fact that the contract has come to an end (either by expiry of the term or the arrival of the specific purpose event) but only provided three conditions are met:

  1. The contract was in writing
  2. The contract states that the Unfair Dismissals act will not apply to a dismissal which occurs only as a result of the end of the contract arriving
  3. The contract was signed by both employee and employer.

It is worth noting that the Employment Appeals Tribunal (EAT) are quite strict on these conditions being met in order to avoid an unfair dismissal award being made against the employer.

The above exclusion does not apply to dismissal during the term of the fixed term contract, provided of course the employee has the necessary period of continuous service (1 year).

There is an anti-abuse provision in the Unfair Dismissals (Amendment) Act 1993  also which prevents the employer from giving the employee a series of fixed term contracts.

As an employee can also successfully claim for unfair dismissal if he/she has been employed on more than one fixed term contract and the gap between contracts is less than three months and the last contract was granted in an attempt to avoid liability under the Unfair Dismissals legislation.

Renewal of fixed term contracts

It has been held by the Labour Court that the non renewal of a fixed term contract will not, of itself, give rise to a claim of less favourable treatment under the act.

The Act also provides that where an employer proposes to renew a fixed term contract the employee shall be informed in writing, not later than the date of the renewal, of the objective grounds justifying the renewal of the fixed term contract and the failure to offer a contract of indefinite duration.

See also contract of indefinite duration-are you entitled to one after successive contracts of employment?

Successive fixed term contracts

Generally there is a limit of four years on the length of successive fixed term contracts with the same employer or associated employer.

However there is no limit on the duration of the 1st fixed term contract. This limitation of four years refers to “continuous employment”  in fixed term contracts and this definition has been well tested as to what is considered continuous and otherwise. Section 9 deals with the definition of continuous employment within the context of the fixed term work act.

Learn more about successive fixed term contracts and how the entitlement to a contract of indefinite duration can arise.

Less favourable treatment and objective justification

Where an employee on a fixed term contract is treated less favourably than his permanent counterpart with respect to one term of his contract this can be objectively justified if

  1. It arises from a real need on behalf of the employer
  2. Is appropriate to achieve the objective
  3. Is necessary to achieve the objective.

Otherwise one of the main objectives of the legislation is to ensure that fixed term employees are given parity of treatment in respect of their conditions of employments as comparable permanent employees.

Section 5 of the Act defines what a comparable employee is:

5.—(1) For the purposes of this Part, an employee is a comparable permanent employee in relation to a fixed-term employee if—
(a) the permanent employee and the relevant fixed-term employee are employed by the same employer or associated employers and one of the conditions referred to in subsection (2) is satisfied in respect of those employees,
(b) in case paragraph (a) does not apply (including a case where the relevant fixed-term employee is the sole employee of the employer), the permanent employee is specified in a collective agreement, being an agreement that for the time being has effect in relation to the relevant fixed-term employee, to be a type of employee who is to be regarded for the purposes of this Part as a comparable permanent employee in relation to the relevant fixed-term employee, or
(c) in case neither paragraph (a) nor (b) applies, the employee is employed in the same industry or sector of employment as the relevant fixed-term employee and one of the conditions referred to in subsection (2) is satisfied in respect of those employees,
and references in this Part to a comparable permanent employee in relation to a fixed-term employee shall be read accordingly.
(2) The following are the conditions mentioned in subsection (1)
(a) both of the employees concerned perform the same work under the same or similar conditions or each is interchangeable with the other in relation to the work,
(b) the work performed by one of the employees concerned is of the same or a similar nature to that performed by the other and any differences between the work performed or the conditions under which it is performed by each, either are of small importance in relation to the work as a whole or occur with such irregularity as not to be significant, and
(c) the work performed by the relevant fixed-term employee is equal or greater in value to the work performed by the other employee concerned, having regard to such matters as skill, physical or mental requirements, responsibility and working conditions.

The Labour Court has held that a fixed term employee does not have an automatic right to have the contract renewed on its expiry and that the non renewal of a fixed term contract will not, of itself, constitute less favourable treatment within the meaning of section 6 of the Act.

Other obligations of employers re fixed term employees

Some other obligations of employers include

  • The employee must be notified in writing as soon as possible of the objective condition ending the contract. This may be arriving at a specific date or the occurrence of a specific event.
  • The employer must inform the employee of vacancies and training opportunities to avail of a permanent job should one arise.

Fixed term employees may make a complaint to a Rights Commissioner in the first instance should a breach of their rights occur; the next step would be and appeal to the Labour Court and then to the High Court (but only on a point of law). The time limit is 6 months or 12 months in exceptional circumstances.

Section 13 of the Act prohibits penalization of the employee by the employer for making a complaint.

 Redundancy of fixed term workers

A fixed term employee may be redundant within the meaning of the Redundancy Payments Acts on the expiry and non renewal of his/her fixed term contract.

Changing a Contract of Employment

Changing or varying the terms and conditions of a contract of employment can only be done with the agreement of the parties. It cannot be unilateral.

An employer is leaving him/herself open to a successful claim if he imposes changes to a contractual entitlement unilaterally. It is worth noting that agreement can be express, implied, or by acquiescence.

However an important distinction should be made between a work practice and a contractual provision or term of the contract.

Variation by the parties

Sometimes variation by one of the parties becomes necessary to give the contract commercial efficacy. If a term is so obvious that common sense would dictate that it must be included in the contract the Courts will imply it into the contract.

hanging-contract-of-employment

Variation by Trade Unions or a 3rd Party

What about variation of the terms of employment through the trade union negotiating on behalf of the employee? Generally employees will accept changes negotiated on their behalf by their trade union.

However a trade union cannot bind those members who have made it clear that they will not be bound by the changes-see Goulding Chemicals Ltd v Bolger [1977], Irish Supreme Court.

Take a more detailed look at the legality of trade union negotiated variations of contracts.

Custom and Practice

Some contracts of employment will have terms of employment implied into them by custom and practice of the employment or industry.

For this to happen the custom must be

“so notorious, well known and acquiesced in that the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties” O’Reilly v Irish Press [1937]

Contractual Right to Vary

Many employment contracts will contain a term reserving the right to the employer to vary or alter the terms and/or conditions of the contract.

However this does not give the employer the right to make unreasonable changes and courts and tribunals will always look to see if the change was necessary and reasonable.

It is important to note that if an employee does not object to a change and works away under the changed terms he/she may be held to have implicitly agreed to the changed terms and conditions.

On the other hand an employee could argue that he/she was simply being co-operative and this did not imply approval of the change. The best way for an employer to counter this is to bring any proposed change to the attention of the employee; if he/she does not he cannot slip changes in “under the radar” and claim acquiescence by the employee.

It is worth noting also that where an employer is entitled in law to make changes to contracts of employment employees are still entitled to engage in trade disputes to attempt to bring about change. This is the case even in companies where unions are not recognised as the Labour Court can be asked by the union to investigate the dispute.

 Co-Operation and not variation

A distinction must be drawn between an employee co-operating in a change and acquiescing to a contractual variation. Courts will not allow employers to slip in changes unknown to an employee.

Trade Disputes

Even where the employer is legally entitled to take certain action employees may engage in a trade dispute and seek to persuade to bring about the changes they require.

Even in a “non union” employment the Labour Court can investigate a trade dispute where it is not the practice of the employer to negotiate with a trade union.

Collection agreements and contracts of employment? Read about the legality of collective agreements and the tests applied.

Termination of the Employment Contract and Minimum Notice Periods

Providing for termination of the employment contract is an important term of the contract of employment, one which the employer needs to take care over, particularly the notice period.

There are a number of important considerations to think about such as

  1. The notice period
  2. The reason(s) for termination.

Notice period

An agreed notice period is strongly recommended in all contracts of employment. If none is specified then the employer is obliged to give “reasonable” notice. Reasonable notice will vary from contract to contract.

Minimum Notice Periods for termination

The statutory minimum notice periods on termination of employment are as set out in the Minimum Notice and Terms of Employment Acts 1973 to 2001 which are based on years of service of the employee.

Service                                        Notice
13 weeks – 2 years                    1 week
2 – 5 years                                   2 weeks
5 – 10 years                                 4 weeks
10 -15 years                                6 weeks
over 15 years                              8 weeks.

Employees are entitled to the above notice periods or pay in lieu except in cases of dismissal for misconduct where the employer is entitled to terminate the employment immediately without notice.

The employer on the other hand is entitled to at least 1 week’s notice from the employee, but this will depend on the contract.

Note: Both the employer and employee have the right to terminate the contract of employment without notice due to the misconduct of the other party.

Any claims in respect of breaches of the Minimum Notice and Terms of Employment Acts go to the Employments Appeal Tribunal which can award compensation to the employee for not receiving proper notice. (Note that if the employee was sick or on strike during the notice period no compensation is payable)

Reason for termination of the employment contract

Both employer and employee have a broadly similar right under common law to terminate the contract of employment. If notice is not provided for in the contract then “reasonable” notice should be given.

“Reasonable notice”, in the absence of a stipulated period of notice, will be decided by

  • Custom and practice
  • Length of service
  • Age and experience of the employee
  • Job role
  • The particular facts of the case.

It is recommended to the employer that a notice period always be stipulated in the contract.

Giving notice of termination of employment contract

Some important points concerning notice:

  1. Notice can be given at any time including during leave or illness leave but not during maternity leave;
  2. It must be clear and unambiguous
  3. It can be in writing or orally (unless it is specified in the contract that it be in writing)
  4. The Minimum Notice and Terms of Employment Act, 1973 sets out minimum notice periods depending on the length of service
  5. The minimum period of notice in all cases is one week
  6. If an employee is dismissed for misconduct he loses his entitlement to notice under the Minimum Notice and Terms of Employment Act, 1973.

Damages following dismissal

In general punitive damages allowed following a dismissal will be restricted to remuneration to which the employee was entitled and not for any distress caused by the manner in which the dismissal has occurred.

 

Who is an Employee in Irish Law?  Is an Employment Contract Necessary?

It is vitally important for both employers and employees to understand who is considered to be an employee in Irish law versus the worker being an independent contractor.

Clearly an independent contractor will not enjoy the benefits of Irish employment legislation.

 

Contract of service or contract for services?

The vital difference is that an employee works under a contract of service while an independent contractor supplies his/her labour and/or services under a contract for services.

The status of the worker, in a dispute situation, will be determined by legal interpretation and some basic rules. Important decided cases in this area include

  • Ready Mixed Concrete v Minister of Pensions and National Insurance[1968] and
  • Henry Denny & Sons (Ireland) limited (t/a Kerry Foods) v Minster for Social Welfare[1998]
  • Minister for Labour v PMPA Insurance Co. Ltd.

It is worth noting that regardless of the label put on the relationship by the parties the Courts will look at the facts of the situation and decide what type of contract exists. In making it’s decision the Court will be influenced by:

  1. Whether there is written evidence of terms
  2. Whether there is control over the worker as to how, what, when, why, and how the worker works
  3. Whether the employee provides his own labour/skill to the “employer” and cannot assign his duties to another.

The key areas therefore which a Court or tribunal will consider will be the aspect of personal service, the degree of control over the worker, and any written terms of the contract.

A Deemed Employee

A deemed employee situation will arise where a person is working for an employer through another agency or body.

That person will be a deemed employee of the person for whom they are doing the work. This situation will commonly arise where employment agencies place people in a work environment.

The employment agency must be one as defined by the Employment Agency Act, 1971 but this act defines an employment agency very widely. It is important to note though that the notion of a deemed employee only applies in relation to the application of specific statutes which provide for protection for a deemed employee.

However it can be a dangerous situation where a business does not know of their potential liability to a deemed employee until a problem occurs and the deemed employer can be held responsible for a dismissal over which he had no control or knowledge.

You might also be interested in the law surrounding temporary agency workers.

Amending the Terms of Employment in Ireland

Terms and conditions of employment in a recession – are employers entitled to unilaterally vary such terms and conditions? In short, the answer is no. Firstly though, lets take a look at what are the terms and conditions of employment and how they arise.

 

Terms And Conditions of employment

An employee’s terms and conditions of employment may be a mix of those terms that are clearly set out in his/her contract, those implied by custom and practice and the employer’s duty to act reasonably, those which are incorporated through collective agreements and those which derive from statute (such as the right to minimum wage or annual leave) which apply automatically.

Amending terms and conditions of employment-historically

Where an employment contract does not expressly enable the employer to vary the terms of employment, employers may either:

employment-appeals-tribunal

1. Obtain the employee’s express agreement to the change (recommended);
2. Terminate the employee’s employment on due notice and offer re-engagement on new terms (not recommended); or
3. Attempt to impose the change unilaterally (not recommended).

Options 2 and 3 above are not recommended and leave the employer at significant risk to a successful claim for unfair/constructive dismissal/non payment of wages claims.

Unilateral variation of an employee’s terms and conditions of employment to the employee’s detriment may give rise to:

1. A claim of constructive dismissal under the Unfair Dismissal Acts 1977-2007 or at common law;
2. A claim for damages for breach of contract;
3. A claim in respect of an unlawful deduction under the Payment of Wages Act 1991;
4. A “trade dispute” under the Industrial Relations Acts 1946-2004,
5. Industrial relations issues, and
6. Injunctive proceedings to prevent the unilateral variation.

What is contractual, and not merely a work practice, may not be varied unilaterally.

Such variation must be agreed between the parties regardless of whether the term is express or implied.

In practice, whether or not an employee benefit constitutes a term or condition of employment may be somewhat academic if changing it is likely to give rise to industrial relations issues and human resources problems. In Neville v Waters Munster Glass Ltd RP558/2003, the claimant, having refused to accept a reduction in salary and to work a reduced three day week, was consequently made redundant. Although the claimant argued that he had been unfairly dismissed, the tribunal held that a genuine redundancy situation existed.

It is clear from a UK case, GAP Personnel Franchises Ltd v Robinson UK EAT/0342/07, that where employees do not accept a unilateral variation by the employer, especially one that has an immediate impact (e.g. the reduction in pay or benefits), they should make it clear, preferably in writing, that they do not accept the change and are working under protest. Otherwise the employee may eventually be held to have implicitly accepted the change.

Variation of terms and conditions of employment in a recession

With unemployment rising to a rate of 8.3% and FÁS forecasting that this rate will exceed 12% during 2009, resistance to changing terms and conditions is low. There has been no change in the legal requirement to obtain employee consent for such variation, however many employees are accepting paycuts where they are being implemented in a genuine effort to avoid job losses and to try to ensure the employer’s survival.

However, it is significant to note that workers opting to accept a paycut, in order to avoid the threat of job losses, may find themselves being made redundant if the employer is ultimately forced to close down. The statutory redundancy payment is based on the employee’s current wage which will mean a lower statutory severance package than the employee would have received on the previous higher wage.

Amending terms of employment in Practice

In the course of varying terms and conditions employers should:
1. Maintain clear communication with employees;
2. Provide employees with reasonable notice of any variation to terms and conditions;
3. Be able to explain why the change is necessary and inform the employees of the alternative (i.e. a more formal re-structuring and ultimately possible job losses);
4. Consider whether the new terms can be imposed in stages as opposed to implementing all variations at once. This may help to ease the transition and allow employees to plan for the change; and
5. Consider whether an incentive can be suggested to assist employees in accepting the change. This does not necessarily have to be a financial benefit.

Employers’ Obligations and Contracts

Employers need to ensure that they have robust, legally sound contracts of employment in place for all of their staff.

There are 4 main reasons for doing so:
1. it is a legal obligation
2. you will need them for a NERA inspection
3. a well drafted contract will minimize the opportunities open to employees to bring costly and damaging claims against you as an employer
4. it makes good business sense to have clarity between both employer and employee as to their obligations and responsibilities.

We specialize in drafting employment contracts for employers in Ireland.

No matter how small or big your business or school is, we can draft contracts for your particular circumstances.

And we can review and advise on your existing contracts and ensure that you will have nothing to worry about should you be chosen for a NERA inspection.

We can provide you with a fast, no obligation quotation-contact us now and minimize the chances of costly employment related claims and grab some peace of mind to allow you concentrated on running your business or school.

Our contracts typically include the following terms:

  • date of employment
  • appointment and duties
  • job specification
  • location
  • probationary period
  • hours of work
  • breaks
  • wages
  • annual leave
  • pension
  • retirement
  • absence
  • illness/sick leave
  • maternity, paternity, force majeure leave
  • confidentiality
  • grievance, bullying, harassment, dignity at work, disciplinary
  • internet and email
  • data protection
  • termination-notice and pay on termination
  • health and safety
  • short time and layoffs
  • changes to the terms of employment.

However each employer’s situation is different and each employee is different.

So every contract we draft is an individual contract as opposed to a one size fits all affair. Learn more about our employment law/HR services here.

By Terry Gorry Google+