1

CHANAKYA NATIONAL LAW UNIVERSITY

LABOUR LAW
CONCEPT OF CONTRACT OF EMPLOYMENT.

SUBMITTED TO: Dr. S.C.Roy.

SUBMITTED BY: SAADHIKA CHABRA
Roll No. - 820

CONTENTS

ACKNOWLEDGEMENT..03

RESEARCH METHEDOLOGY........04

INTRODUCTION..06

EMPLOYMENT LAW...........07

CONCEPT OF CONTRACT OF EMPLOYMENT......08

ELEMENTS OF CONTRACT..08

CONTRACT OF EMPLOMENT...10

INFORMATION ON EMPLOYMENT STATUS AND CONDITIONS..11

EXPRESS CONTRACTUAL TERMS...12

IMPLIED CONTRACTUAL TERMS13

EMPLOYEES RIGHTS.....16

ILLEGAL CONTRACTS OF EMPLOYMENT.20

CONCLUSION....21

BIBLIOGRAPHY....22

ACKNOWLEDGEMENT

Apart from the efforts of the researcher, the success of any project depends largely on the
encouragement and guidelines of many others. I take this opportunity to express my
gratitude to the people who have been instrumental in the successful completion of this
project.
I would like to show my greatest appreciation to Dr.S.C.Roy Sir, I cant say thank you
enough for his tremendous support and help. I feel motivated and encouraged every time
I attend his lectures. Without his encouragement and guidance this project would not have
materialized.
The guidance and support received from all the members who contributed and who are
contributing to this project, was vital for the success of the project. I am grateful for their
constant support and help.
I am thankful to my librarians, who provided me the books and materials required for the
completion of this project.
I am grateful to all my friends, from whom I got the meticulous comments and
suggestions which proved very beneficiary in the completion of this project.
Finally, I am thankful to all those individuals and institutions that directly and indirectly
provided me the materials which helped me to complete this project.

RESEARCH METHODOLOGY

Aims and Objectives:

The aim of the project is to present a detailed study consent as defence in labour law
through general principles, statutes ,decisions, statutes, amendments, suggestions and
different writings and articles.

Scope and Limitations:

Though this is an immense project and pages can be written over the topic but because of
certain restrictions and limitations I was not able to deal with the topic in great detail.

Sources of Data:
The following secondary sources of data have been used in the project1. Articles
2. Books
3. Websites

INTRODUCTION
Employment has significance both from the individual point of view and from the
individual point of view and from the point of view of the society. An idle-mans brain is
a devil workshop-goes the age old adage. This is indicative of the nature of relationship
that exists between an individual and the work. This also signifies how individuals attach
importance and value to work. From the point of view of an individual, employment
fulfils the need for belongingness; gives a status in the society; confers a definite role to
play in the economic activity of the nation. Apart from providing means to eke out a
living in an honourable way with human dignity, active participation in work life leads to
the unfolding of individual creativity. By being employed, one gets the satisfaction for
contributing his mite to the common wealth through a given organization. Moreover,
people do realize that workplace can provide plenty of oppurtunities and innumerable
avenues for individual growth and development through mobility, both on horizontal and
vertical planes. Mobility helps an individual to rise to the higher levels of perfection and
achievement in ones work life. Mobility on the horizontal plane is often described as
transfer and mobility on the vertical plane as promotion. Employment is one of the
primary ways in which a person identifies himself, and is identified by others. It is not an
uncommon observation that in many social gatherings when one is introduced to another
person, each one of them wants to know how the other person is doing, and in what field.
The exchanging of pleasantries normally follows the pattern of putting questions likeHow do you do? Where are you working? What are you doing? And so on.
A human being must have an occupation if he or she is not to become a nuisance to the
world. From this statement, it is easy to conceptualize the significance of work generation
and employment creation process, from the point view of society. Employment provides
to people, oppurtunities for active participation in work life. Work is an arena in which
the central resources of our society are created. Channelizing the energies of human
resources assets in a planned way towards some constructive activity through work
generation and employment creation process and utilizing these energies for productive
purposes is, perhaps, the first and the foremost item on the agenda of many nations these

6
days. Thus, employment is the most important aspect of cultural life in all human
societies.
EMPLOYMENT LAW
Employment law is a broad area of laws encompassing all employer-employee relations
with two exceptions, namely
(i)

the negotiation process covered by collective bargaining and

(ii)

the statutory processes of dispute resolutions.

Matters pertaining to these two categories of exceptions find their place exclusively under
the purview of the so called labour laws. In general, labour laws in India, are intended to
protect workmen employed at low levels of pay scale or wages.
Contract of employment is popularly known as Letter of Appointment or, simply an
Appointment letter. This is a legal instrument that regulates the relation between the
employer and employee in an employment situation at a workplace. It is important to
note that there is privity of contract fundamentally between the employer and employeeno matter whether the employment is by the employer directly, or through some kind of
employment agency. The Contract of Employment contains some of the important
covenants that determine the working relations and mutual obligations, both of the
employer and employee. In the last century, the privity of employment contract has
gradually eroded. In a Welfare State, Law incorporates some terms and conditions into
employment contract to protect the weaker party from the dominant, particularly by
fixing the maximum hours of work and the minimum amount of wages. Unless the
parties to the contact expressly agree and provide for better terms in their contract, the
minimum standards prescribed by law shall be binding on the parties. By enacting a new
statute, or by amending the existing one, legislatures do introduce many a new terms and
conditions into the contract of employment without the consent of the parties thereto. By
the interpretative process of law, judiciary also attributes many terms and conditions in
the contract of employment, and accordingly, declares those implied terms and conditions
as binding on the parties. Collective Bargaining Agreements arrived at after negotiations
by and between the Workplace Management and representative Trade unions will also
form part and parcel and, in certain circumstances, replace a few or all, the existing terms
and conditions of the employment contract between the employer and the employee.

7
Contact of Employment is a legal instrument that regulates the relations between the
Employer and the Employee in an employment situation at a workplace. It is from this
legal instrument that one will be able to determine whether the employment is wageemployment or of some other category.
CONTRACT OF EMPLOYMNET
Its a legally enforceable agreement, either oral or written, between an employer and an
employee that defines terms and conditions of employment to which both parties must
adhere. Express terms of the contract are agreed between the two parties and include the
organization's normal terms and conditions in addition to those that relate specifically to the
individual. These terms can only be changed by employee agreement, if the contract itself
allows for variation, or by terminating the contract. Terms are also implied in the contract by
custom and practice or by common law.

Elements of a Contract
A contract of employment is simply a contract that applies to the terms of a work
agreement. As such, a contract of employment includes the same elements as any
contract, with the specifics modified to apply to the specific situation. The basic elements
of a contract are the offer, consideration, terms of performance and acceptance. The
contract represents an agreement between the parties involved.

Offer
For a contract of employment, the offer constitutes the offer of a job to a potential
employee or the awarding of a project to an independent contractor. In the case of a job
offer, the job title, location, supervisor's name and similar information comprise the offer.
For projects, the elements are similar except that the contractor may or may not report
directly to a staff member for the company. It is possible that an offer for a project to be
carried out by a contractor would include the understanding that the contractor would
present a finished product to the client for approval.

Consideration
In regular employment contracts, the consideration is the financial aspect of the
agreement. Therefore, for an offer of employment to a potential employee, the
consideration would be the salary and benefits, such as paid vacations, health insurance
and relocation expenses. For contractors, the consideration would be the total amount
awarded for the job, with the terms for payment spelled out: either in a lump sum or
installments.

Performance
In an offer of employment, the performance aspect would be spelled out by the job
description. For contractors, the performance aspect of the contract would be what is
known as a deliverable---the finished product to be presented to the client either in whole
or in stages throughout the life of the project.

Agreement
The final element of a contract is the agreement. In an offer of employment, this may be
executed by an actual signature from the new employee but is often implied when she
shows up for her first day of work. For an independent contractor, the agreement is nearly
always executed by a signature by the contractor and the client on a contract or letter of
agreement.

Expert Insight
For any contract to be valid, all parties must be legally competent to enter into a legally
binding agreement. This generally means that they must be mentally competent and of
legal working age. In the case of a contract of employment, legal residency or eligibility
to work of a potential employee or contractor may also affect the legality of an
agreement. Oral agreements also are binding for both a contract for employment and an
award of a project to a contractor, but such agreements may not be enforceable because

9
of the statute of frauds, which requires certain agreements to be written in order to be
enforceable.
Contract of employment
Although different legal formulations of the concept of worker are possible, labour law in
the EU starts with the employment relationship, which is characterised as a contract of
employment. The contract of employment adopts the criterion of submission or
subordination of the employee to the employers command or control as to the time, place
and manner in which the work is to be done as its essential defining element. Laws
affecting workers usually adopt the contract of employment and subordination as the
criteria defining the objects of their attention. The category most obviously excluded is
that of the self-employed person.
Some EU Directives not only include contracts of employment within their scope but also
other employment relationships. The initiative most clearly directed to the limitations of
the contract of employment was Council Directive 91/533/EEC of 14 October 1991 on an
employers obligation to inform employees of the conditions applicable to the contract or
other employment relationship. This Directive aimed to cover any working relationship
emanating from a contract of employment or any other legal form of recruitment (e.g.
teleworking, training, employment-training, etc), which links a worker to an employer
and which is subject to the legislation in force in a Member State.
Also relevant is the proposal for a Council Directive on a form of proof of an
employment relationship (COM (90) 563 final, Brussels, 8 January 1991). Article 1 of
the Directive defines its scope as follows: This Directive shall apply to every paid
employee having a contract or employment relationship defined by the law in force in a
Member State and/or governed by the law in force in a Member State. The Directive
makes a clear distinction between contractual and other employment relationships and
includes both within the scope of the Directive.
The significance of the Directive is that, by implication, it includes within its scope any
worker who does not have a contract of employment. It also includes those with a

10
relationship of employment. It recognises that work has taken new forms, which may not
fall within the classical legal definition of contracts of employment. Thus, the scope of
EU regulation of the labour market shows some sign of extending beyond contracts of
employment, to cover workers outside the normal confines of employment law.
Information on employment status and conditions
Council Directive 91/533/EEC of 14 October 1991 obliges the employer to inform
employees of the conditions applicable to the contract or other employment relationship.
As the Explanatory Memorandum to the proposed Directive put it, some workers have
neither a written contract of employment nor a letter of appointment explaining the
elements of the employment relationship or referring to a collective agreement or any
other easily accessible written document. Article 2 of the Directive imposes an
obligation on employers to inform employees of the conditions applicable to the contract
or other employment relationship, and Article 3 requires this information to be given in
written form.
In addition, Council Directive 89/391/EEC of 12 June 1989 on the introduction of
measures to encourage improvements in the safety and health of workers at work
stipulates specific requirements on employers in respect of the provision of information
to individual workers. This obligation extends to temporary and hired workers currently
working in the enterprise or establishment and workers from any outside undertakings
working in the employers establishment.
There is always a contract between an employee and employer. You may not have
anything in writing, but a contract will still exist. This is because your agreement to work
for your employer and your employers agreement to pay you for your work forms a
contract. Your employer does have to give you a written statement within two months of
you starting work. The statement must contain certain terms and conditions.
A contract gives both you and your employer certain rights and obligations. The most
common example is that you have a right to be paid for the work you do. Your employer

11
has a right to give reasonable instructions to you and for you to work at your job. These
rights and obligations are called contractual terms.
The rights that you have under your contract of employment are in addition to the rights
you have under law, such as, for example, the right to a national minimum wage and the
right to paid holidays.
Generally, you and your employer can agree to whatever terms you wish to be in the
contract, but you cannot agree to a contractual term which gives you less rights than you
have under law. A contract of employment will usually be made up of two types of
contractual terms. These are:

express terms

implied terms.

Express contractual terms

Express terms in an employment contract are those that are explicitly agreed between you
and your employer and can include:

amount of wages, including any overtime or bonus pay

hours of work, including overtime hours (there is a legal limit for most employees
on the maximum number of hours they can work per week)

holiday pay, including how much time off you are entitled to (nearly all workers
are entitled by law to 24 days' paid holiday - they may be entitled to more under
their contract. Part-time workers are entitled to a pro rata amount)

sick pay

redundancy pay

how much warning (notice) the employer must give you if you are dismissed.

The express contractual terms may not be in one written document, but may be in a
number of different documents. They may not be written at all. The express terms may be
found in:

12

the job advertisement

a written statement of main terms and condition

any letters sent by your employer to you before you started work

anything you were asked to sign when or since you started work

instructions or announcements made by your employer on a notice board at work

an office manual or staff handbook

pay slips.

You may not have possession of all the relevant papers. You may be able to get copies
from your Personnel Department, foreman, or trade union representative.
You should always keep any papers given to you by your employer.
Because a contract will still exist even if there is nothing written down, anything which
was said to you by your employer about your rights, and anything which you agreed
verbally, should be recorded.
Implied contractual terms
Implied terms in an employment contract are those which are not specifically agreed
between the employer and employee.
Implied terms are:

general terms which are implied into most contracts of employment

terms implied by custom and practice

terms from agreements made with the employer by a trade union or staff
association.

General implied terms

The following duties and obligations will usually be implied into any contract of
employment:-

13

the employee and employer have a duty of trust to each other. This means, for
example, that if you give your employers industrial secrets to a competitor, you
will have broken an implied contractual term of trust

the employer and employee have a duty of care towards each other and other
employees. This means, for example, that the employer should provide a safe
working environment for the employee and that the employee should use
machinery safely

the employee has a duty to obey any reasonable instructions given by the
employer. There is no legal definition of reasonable, but it would not be
reasonable to tell an employee to do something unlawful, for example, a lorry
driver should not be told to drive an uninsured or untaxed vehicle

your employer has a duty to pay your wages and provide work. As long as you are
willing to work, your employer must pay your wages even if no work is available,
unless your contract says otherwise.

Terms implied by custom and practice

When dealing with a particular employment problem, there may be no express
contractual term covering the matter. In such a case, it is helpful to look at what has
happened to other employees in the workplace. This is because if other employees have
been given this right, you can argue that you also have the right under custom and
practice.

What happens if part of the contract is broken

A contract may be broken if either you or your employer does not follow a term in the
contract. This is known as a breach of contract. For example, if your employer doesn't
pay you in lieu of notice which you are entitled to under your contract, this would be a
breach of contract.
If your employer breaks your contract, you should try and sort the matter out with them
informally first.

14
If this doesn't work, you could try raising a grievance against your employer. There are
special procedures you may need to follow if you want to take out a grievance against
your employer.
If you think your employer has broken your contract of employment, you should get
advice about what action to take from an experienced employment adviser, for example,
at a Citizens Advice Bureau.

15
Employees right to written details about the employment contract
All employees, regardless of the number of hours they work per week, are entitled to
receive a written statement from their employer within two months of starting work. The
statement should describe the main terms of the contract of employment. You are entitled
to the statement even if your job finishes before the initial two months, as long as the job
was supposed to last for more than one month and you have worked for at least a month.
An employee who wants a written statement may request one verbally or in writing. It is
usually best to request the statement in writing and keep a copy of the letter, so that you
can prove you asked for the statement.
What written details must be given
The written statement must include by law:

the names of you and your employer

the date you started work

the amount of pay and how often you will be paid, for example, weekly or
monthly

the hours of work

your holiday entitlement, including how many days off you are entitled to and
what your holiday pay will be, if any

how much warning (notice) you are entitled to if you are dismissed and how much
warning you must give the employer if you want to leave the job

the title of the job

where the job is based, for example, whether you will have to work in more than
one location

what the disciplinary, dismissal and grievance procedures are in the workplace

what sick pay you are entitled to

whether you can join the employers occupational pension scheme, if there is one.

16
The above information does not have to be included in the written statement of terms and
conditions. It can be given in, for example, a staff handbook which all the employees can
have access to.
An employer may try to dismiss you for asking for the written terms and conditions of
your job, even though you are entitled to this information by law.

How the rights in the employees contract relate to rights in law

Most employees have rights given by law. These are called statutory rights. They are in
addition to any rights you have under your employment contract. Statutory rights which
you may have include:

a right to a written statement of the terms of employment

a right to an itemised pay statement

a right to maternity leave

a right to pay in compensation for being made redundant

a right not to be unfairly dismissed.

Generally, you and your employer can agree any terms in the employment contract.
However, you cannot agree to a contractual term which gives you fewer rights than your
statutory rights. If you have agreed to a contractual term that gives you fewer rights than
your statutory rights, for example, you have agreed that you will not take maternity leave,
your employer will not be able to enforce the contractual term. You will still have a legal
right to maternity leave.
There are particular rules regarding health and safety at work. For example, if you believe
that a piece of equipment or a process may be dangerous, you may have a right to refuse
to work with it and insist that your employer takes adequate safety measures.

17
People on fixed term contracts
There are special rules about employees who are on fixed term employment contracts,
which means the contract contains a date when it will end.
Probationary periods
It is common for employers to treat new employees as being in a probationary period
when they first start work. The employer may then argue that you can be dismissed while
you are in this probationary period with no warning (notice). Employers also often argue
that employees do not have usual employment rights to, for example, pay or holidays,
during this probationary period.
There is no such thing in law as a probationary period. Once you have started work, the
number of weeks you have worked begin on the day you start, not from some time when
a probationary period is over. Your full contractual rights also start from the first day of
work, unless your contract says otherwise.
Your contract could, however, contain terms which only apply during your probationary
period and which are less favourable than those which apply when your probationary
period has ended. These terms must not take away your statutory rights.
Your employer can extend your probationary period, as long as your contract says they
can do this. For example, your employer may want to extend your probationary period in
order to have more time to assess your performance. However, they can only do this if
your contract has a term which says your probationary period can be extended under
these circumstances.
Employees employed on a series of short term contracts and casual workers
Employers may employ employees on a series of short term contracts, usually lasting for
about a year, but always less than one or two years, to try to avoid the employee gaining
employment rights. They may also employ the employee only during a particular season,
for example, during the summer to pick fruit, but the employee may be expected to go
back and work for that employer each year during that season.

18

Some employers call their workers casual workers in order to avoid having to give them
what they are entitled to under employment law. Even if your employer says you are a
casual worker, this doesn't mean that you are.
Contracts without specific working hours
Zero contracts and key time contracts
Zero contracts are contracts of employment which do not specify any number of hours
that the employee will be required to work. They are common for shop workers. The
contract says that instead of working a specific number of hours per week, you must be
ready to work whenever you are asked.
Key time contracts are those where you are guaranteed some work, but are not
guaranteed regular hours each week.
The problem with zero and key time contracts is that you are only paid for the time you
work, so even if you have to wait on work premises or be at home waiting by the phone,
you may not be paid for this waiting time. However, legally, if you're on a zero hours
contract, you are entitled to be paid for any time you have to be on work premises waiting
for work to come up, unless your contract of employment says otherwise. You should be
paid your normal hourly rate or, at the very least, the National Minimum wage.

19
Illegal Contracts of Employment
You will have an illegal contract of employment if:

you get all or part of your wages paid cash in hand; and

tax and national insurance contributions are not paid on the wages when they
should have been; and

you knew you were being paid in this way to avoid paying tax and/or national
insurance contributions.

A contract will also be illegal if it is for an immoral or illegal act.

A contract of employment will not be illegal if only one of the parties is not declaring the
payments and/or making appropriate deductions.

20

CONCLUSION
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.
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.

21

BIBLIOGRAPHY
BOOKS REFERRED
Mishra S. N., Labour Law, Twenty-Fifth Edition 2009; Central Law Publication

Malik P.L., Labour and International Law; Tenth Edition 2006; Eastern Book
Company

WEBSITE REFERRED:

www.bls.gov

nihfw.nic.in

www.employment-studies.co.

www.icmr.nic.in

labour.delhigovt.nic.

DICTIONARY REFERRED

Garner Blacks Law Dictionary

Oxford Advanced Learners Dictionary