It’s true, you know.
The foundation stone of the employer/employee relationship is the employment contract.
So, it’s critical from day one, and becomes even more important if there is a dispute.
It is vital that it is drafted correctly, especially from the employer’s viewpoint.
This extensive article looks at the contract of employment in Irish law and some of the critical issues which arise in the employment relationship.
It will also look at
- terms of employment,
- the express terms you should include
- who is a “deemed employee” and why it matters
- changing a contract of employment,
- termination of the contract,
- minimum notice periods,
- the difference between a contract of service and contract for services,
- issues prior to employing someone
- and more.
The employment contract is the source of much misunderstanding and strife between employers and employees.
Even though legislation has come to play a huge role in the employment relationship the legal relationship between employer and employee is rooted in the law of contact. There is no requirement in law that the employment contract be in writing.
However, there is an obligation on the employer under the Terms of Employment (Information) act, 1994 to give employees a written statement of certain terms of employment (see below).
This legislation does not apply to employees with less than one months’s service or to employees who are expected to work less than 8 hours per week.
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 and
- Henry Denny & Sons (Ireland) limited (t/a Kerry Foods) v Minster for Social Welfare
- 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:
- Whether there is written evidence of terms
- Whether there is control over the worker as to how, what, when, why, and how the worker works
- 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.
Partners are not employed by or with each other but may, as a partnership, have employees.
Ownership of a shareholding in a company does not prevent the owner from being an employee of the company. But a controlling shareholder may have difficulty establishing that he was an employee.
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:
- Advertising the position
- Interviewing for the job
- Conditions precedent.
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.
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.
The Data Protection Commissioner has held that you need written consent to take up references. However there is no general requirement in law that an employer furnish a reference.
There is no reason why a prospective employee should not be asked to undergo a medical prior to a job offer being made even though it is common for employers to only require a medical examination after the offer has been made and accepted.
A pre-contractual closed shop is lawful under the Common law and European law.
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.
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.
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.
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
- The notice period
- The reason(s) for termination.
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.
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:
- Notice can be given at any time including during leave or illness leave but not during maternity leave;
- It must be clear and unambiguous
- It can be in writing or orally (unless it is specified in the contract that it be in writing)
- The Minimum Notice and Terms of Employment Act, 1973 sets out minimum notice periods depending on the length of service
- The minimum period of notice in all cases is one week
- 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.
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.
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 , 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 
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.
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.
Amending the Terms of Employment in Ireland-historically
Terms and conditions of employment-are employers entitled to unilaterally vary such terms and conditions?
In short, the answer is no.
Where an employment contract does not expressly enable the employer to vary the terms of employment, employers may either:
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.
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.
Our contracts typically include the following terms:
- date of employment
- appointment and duties
- job specification
- probationary period
- hours of work
- annual leave
- illness/sick leave
- maternity, paternity, force majeure leave
- 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 how we help employers here.