CHAPTER 2

THE LAW AND PRACTICE RELATING TO

CONTRACTS OF EMPLOYMENT
What is contract of employment?
Contract of employment / employment contract / contract of service

An agreement which legally binding one party (an employer) who provide
paid work and the other party (the employee) carries out work as agreed.
s2 Employment Act 1955 defines a contract of service as any agreement,
oral or writing, implied or express, where a person is engaged as an
employee and serves his employer.

 What if the contract exist between employer and other than employee

CONTRACT OF SERVICE CONTRACT FOR SERVICE

A worker who is employed under a A person who is hired under a
contract of service is an employee contract for service is not an
and employee and

Is protected by arrange of Is not protected under an

employment laws employment laws except..
Remarks 1
Does it really matter for employer to identify employees either
under contract of service or contract for service?
How to settle disputes over argument an employee is under
contract of service or contract for service?
In determining the employment status of a worker, the courts have
developed a number of tests to assist in the decision-making process.
A combination of factors will be examined and several questions
asked.
(MaintextPg27)
Tests to determine whether a worker is an employee or
not
The Control Test is the most commonly applied test.
Questions asked by the courts include:
How much control is imposed by the employer on the
worker?
Who provides the tools, raw materials and equipment
needed to do the work?
How is payment made?
Are contributions made to statutory funds such as
EPF&SOCSO?
Is there a written contract ,and if so, what are its terms?
Is the worker required to comply with organizational rules?
WRITTEN AND ORAL CONTRACTS
A contract of employment does not have to be in writing.
Such contract can be implied by the fact that the worker is working for the
employer.
However, both parties will have difficult time proving to the Court what the
agreed terms are.
Does oral contract legally binding employer and employee?
Which of the following is / are the source(s) of a written employment
contract?
1. Offer letter
2. Appointment Letter
3. Company Policy
4. Company Handbook
5. Collective Agreement
THE NATURE OF EMPLOYER EMPLOYEE
RELATIONSHIP
 TYPES OF TERMS IN AN EMPLOYMENT CONTRACT

1.Express Terms 2.Implied Terms

Are those agreed to by the two parties to the Some terms, however, are implied. These
contract. terms maybe so obvious that the parties do not
see any necessity for putting them in writing.
Express terms are put in writing in a letter of
appointment to avoid disputes and
misunderstanding. Employees implied duties
1.Obedience
What ever express terms in an employees contract 2.Duty of Care
of employment must comply with the relevant 3.Acting in good faith
employment laws.
Disobedience
Examples of common express terms:
Willful refusal to obey a lawful and reasonable
1.Job title
2.Remuneration and benefits order.
3.Working hours What is a lawful order ?
4.Probationary period 1.Legal
5.Notice prior to termination 2.Not immoral
6.Retirement age 3.Not exposing employee to danger
7.Transfer / mobility 4.Within the scope of employees contract
 Employers implied duties
Pay the agreed wages
Provide safe working environment
Mutual trust and confidence
Remark 2
Can the terms and conditions of an employment contract be changed?
What is the meaning of legally binding contract?
Can an implied term be in written form?
CHANGING THE TERMS OF A CONTRACT
A contract of service and the terms of the agreement can only be changed
with the agreement of both parties, the employer as well as the employee.
A unilateral change to any fundamental term of the contract would be a
breach of contract, which would allow the aggrieved party to seek a remedy
at court
In practice, only changes that an employer wishes to make which are to the
detriment of the employee need the latters consent.
If, on the other hand, an employer chooses to raise his employees wages, or
make some other beneficial change in the terms of the contract, acceptance
of this change without comment would imply that the employee agrees to the
change
When employees belong to a trade union, negotiations will be held with the
union before the employer makes any changes to terms of the contract. The
union, on behalf of all the workers eligible to join the union, will decide
whether to accept the changes or not.
Where an organization is not unionized, an employer wishing to make
changes to terms and conditions of service must get the express agreement of
each and every employee before implementing any change.
TYPES/ DURATION OF EMPLOYMENT
CONTRACT
Contract of service means any agreement, whether oral or
in writing and whether express or implied, whereby one
person agrees to employ another as an employee and that
other agrees to serve his employer as an employee and
includes an apprenticeship contract
 EMPLOYMENT ACT 1955
Contracts of Service;-
a) s6 EA 1955
Every agreement lawfully entered between and employer and employee shall be
binding upon parties
b) s7 EA 1955
Any term of a contract or service, which is less favorable to an employee, shall
be void and a more favorable provision of this Acts hall be substituted therefor.
c) s7A EA 1955
Nothing in this provision shall prevent the employer or employee from agreeing
to a more favorable term towards the employee.
d) s8 EA 1955
No term in any contract of service may restrict any right of an employee to;-
i)Join a trade union
ii)Participate in trade union activities
iii)To associate with any persons with regards to a trade union
 e) s10 EA1955
All contracts of service shall be in writing if specified period is more than a month. It shall also include
a termination clause by either party.
f) s18 EA 1955
A contract of service shall state the wage period and it shall be paid not later than the 7th day of the
following month
A contract of service maybe oral or in writing, but under Rule5 (b) and 8 Employment Regulations
1957 the following terms must be given to an employee in writing on or before the commencement
of his employment;
i.name of employee/NRIC
Ii. occupation or appointment
iii. wage rates(excluding allowances)
iv. allowances payable and rates
v. rates for overtime work
vi. other benefits
vii. agreed normal hours of work per day
viii. agreed period of notice of termination of employment or wages lieu
ix. annual leave
x. wage period
Remark 3
Termination Of Contracts [S. 11(1)]
A contract of service for a specified period of time or for the performance of a
specified piece of work shall, unless otherwise terminated in accordance with this
Part, terminate when the period of time for which such contract was made has
expired or when the piece of work specified in such contract has been completed.

Termination Of Contracts [S. 11(2)]

A contract of service for an unspecified period of time shall continue in force until
terminated in accordance with this Part
Notice of Termination [S.12 (1)]
Either party to a contract of service may at any time give to the other party notice of
his intention to terminate such contract of service.
Notice of Termination [S.12 (2)]
The length of such notice shall be the same for both employer and employee and
shall be determined by a provision made in writing for such notice in the terms of
the contract of service
Notice of Termination [S.12(2)]
IF the contract is silent, notice period shall be:
Remark 5
i._______notice if less than 2 years of service; or
ii.______ notice if employed for 2 years or more but not more than 5 years of
service; or
iii.______notice if more than 5 years of service.

Notice of Termination [S.12(4)]

Such notice shall be written and maybe given at anytime, and the day on which the
notice is given shall be included in the period of the notice.
Indemnity in Lieu of Notice [S.13]
Without proper notice, employee owe employer an indemnity and vise versa.
The indemnity is equal to the wages that would have been paid during notice
period.
Termination of Contract for Special Reasons [S.14]
An employer may, on the grounds of misconduct inconsistent with the
fulfilment of the express or implied conditions of his service, after due
inquiry-
(a)dismiss without notice the employee;.

Breach of Contract [S.15]

Employer fails to pay wages in accordance with Employment Act.
Employee has continuously absent from work for more than two
consecutive working days without prior leave from employer, unless she has
reasonable excuse and has informed or attempted to inform his absent.