Employment contract

Employment contract

A contract of employment is a category of contract used in labour law to attribute right and responsibilities between parties to a bargain. On the one end stands an "employee" who is "employed" by an "employer". It has arisen out of the old master-servant law, used before the 20th century. Put generally, the contract of employment denotes a relationship of economic dependence and social subordination. In the words of the influential labour lawyer Sir Otto Kahn-Freund,

"the relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by the indispensable figment of the legal mind known as the 'contract of employment'. The main object of labour law has been, and I venture to say will always be a countervailing force to counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship.


A contract of employment is usually defined to mean the same as a "contract of service". A contract of service has historically been distinguished from a "contract for services", the expression altered to imply the dividing line between a person who is "employed" and someone who is "self employed". The purpose of the dividing line is to attribute rights to some kinds of people who work from others. This could be the right to a minimum wage, holiday pay, sick leave, fair dismissal, a written statement of the contract, the right to organise in a union, and so on. The assumption is that genuinely self employed people should be able to look after their own affairs, and therefore work they do for others should not carry with it an obligation to look after these rights.

In Roman law the equivalent dichotomy was that between locatio conductio operarum and locatio conductio operis (lit. hire of services and of service).

The terminology is complicated by the use of many other sorts of contracts involving one person doing work for another. Instead of being considered an "employee", the individual could be considered a "worker" (which could mean less employment legislation protection) or as having an "employment relationship" (which could mean protection somewhere in between) or a "professional" or a "dependent entrepreneur", and so on. Different countries will take more or less sophisticated, or complicated approaches to the question.

Terms and conditions of employment

The focus of most employment contracts is wages for work. Essential terms might be notice periods in the event of dismissal, holiday pay rights, the place of work and pension schemes. Many jurisdictions require these factors to be set out in a written contract. In terms of pay, the employee may be compensated through wages, a salary, or by commission. In addition to monetary compensation, the employment contract often specifies a fringe benefit package, including a retirement plan, employee stock options, holiday entitlement, required hours of work, and (especially in the US) health insurance benefits.

Normally, such contracts provide for termination of employment, by either party, and include associated matters such as notice period, compensation arrangements and, sometimes, garden leave.

Some employers use non-disclosure and non-compete clauses to protect their trade secrets from being dispersed when employees leave. Depending on where people live, the laws regarding enforceability of these clauses vary widely.

UK law holds that employment contracts have implied terms (assumed, unspoken, essential terms ), as well as explicit terms (typically those in writing). Legal precedent provides for example that there is an implied contractual term of trust and confidence, meaning each party to the contract is expected to behave in a manner allowing the other to maintain trust and confidence in the other.

See also



  • Mark Freedland, The Personal Employment Contract (2003) Oxford University Press, ISBN 0199249261

External links

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