Employment Contract Law: Legislative History and Key Terms

Introduction to Contract Law and Legislative Precedent

A contract is a legally enforceable agreement that occurs between two parties in exchange for goods and services, or in exchange for money. However, a contract is considerably more complex under the law because a number of elements must be present before it becomes enforceable. These elements are:

To develop a greater understanding of employment contracts, this paper discusses the legislative precedents of employment and contract law.

The modern employment contract is primarily the product of a series of laws that emerged several centuries ago, including the Ordinance of Labourers 1349, the Statute of Labourers 1351, and the Truck Acts. However, it was in the nineteenth century that the employment contract was firmly established under the Master and Servant Act 1823. Employment contract law attributes rights and responsibilities between two parties — employees and employers — and provides a framework for bargaining. The precedent of the employment contract arose out of the master-servant relationship of the nineteenth century (Oxford Learning, 2011).

The precedent of contract and employment law evolved under common law, formed over hundreds of years on the basis of judicial decisions. The case of Yewen v. Noakes (1880) provides an early understanding of the employment relationship, revealing the master-servant dynamic: the judge held that a servant is an individual subject to the command of his master, who may direct the servant's work as he wishes. However, the master-servant relationship is no longer considered particularly relevant under modern employment law (Oxford Learning, 2011). The Employment Rights Act 1996 defines an employee as an individual who agrees to carry out work under a contract of employment.

Employee status under an employment contract is central to understanding its various forms. Employment contracts can be categorised as either:

Forms of Employment Contract

A worker employed by an organisation works under a contract of service, as opposed to a self-employed worker operating under a contract for service. A worker is classified as employed when engaged under a contract of service, and consequently enjoys valuable statutory benefits such as:

By contrast, a self-employed person is not entitled to these provisions. Nevertheless, difficulties can arise in distinguishing between self-employed and fully employed workers in practice (Oxford Learning, 2011).

Various pieces of legislation and statutory acts inform the terms of employment contracts. The Employment Rights Act 1996 describes an employee as an individual who agrees to carry out work under a contract of employment. The National Minimum Wage Act 1998 establishes that an employee has the right to a minimum wage (at the time of writing, £6.31 per hour). Under the Pensions Act 2004, workers have the right to a pension. Additionally, under the Health and Safety at Work Act 1974, employers are required to provide a safe working environment that promotes the health and safety of their workers (Oxford Learning, 2011).

Relevant Legislation and Contract Terms

Various contract terms may arise under a self-employed contract. The following legal tests have been used to draw a distinction between fully employed and self-employed contracts.

Under the control test, the case of Narich Ltd v. Commissioner of Payroll Tax (1884) examined a lecturer working with Weight Watchers whose employment contract stated he was self-employed, despite the organisation controlling all of his working activities in a manner similar to that of an employed person (Oxford Learning, 2011, p. 13). However, the control test has become outdated due to successive changes in employment practices.