ACCA F4 - Corp and Business Law (ENG)

Part C Employment law  8: Contract of employment 129

SIGNIFICANCE OF THE DISTINCTION

Employed Self-employed

Tortious acts Employers are generally vicariously liable for

tortious acts of employees, committed in the

course of employment

Liability of the person hiring an

independent contractor for the

contractor's acts is severely limited

unless there is strict liability

Implied

terms

There are rights and duties implied by statute

for employers and employees This will affect

things such as copyrights and patents

These implied rights and duties do

not apply to such an extent to a

contract for services.

VAT Employees do not have to register for or

charge VAT

An independent contractor may have

to register for, and charge VAT

Bankruptcy In an employer's liquidation, an employee has

preferential rights as a creditor for payment of

outstanding salary and redundancy payments,

up to a statutory limit

Contractors are treated as non-

preferential creditors if their

employer is liquidated

Health and

safety

There is significant common law and

legislation governing employers' duties to

employees with regard to health and safety

The common law provisions and

much of the legislation relating to

employees also relates to

independent contractors

3 Employment contract: basic issues

There are no particular legal rules relating to the commencement of employment – it is really just like any

other contract in requiring offer and acceptance, consideration and intention to create legal relations.

An employment contract is a contract of service which may be express or implied. If express, it can be

either oral or written. This means that employment contracts can be simple, straightforward agreements.

The contract must, of course, comply with the usual rules relating to the formation of a valid contract.

At the one extreme, an employment contract may be a document drawn up by solicitors and signed by

both parties; at the other extreme it may consist of a handshake and a 'See you on Monday'. In such

cases the court has to clarify the agreement by determining what the parties must be taken to have agreed.

Senior personnel may sign a contract specially drafted to include terms on confidentiality and restraint

of trade. Other employees may sign a standard form contract, exchange letters with the new employer or

simply agree terms orally at interview.

Each of these situations will form a valid contract of employment, subject to the requirements regarding

written particulars, as long as there is agreement on essential terms such as hours and wages. Nor

should it be forgotten that even prior to employment commencing the potential employer has legal

obligations, for example not to discriminate in recruitment.

3.1 Implied terms

Implied terms usually arise out of custom and practice within a profession or industry. In Henry v London

General Transport Services Ltd 2001 it was held that four requirements should be met before such terms

can be read into a contract.

 The terms must be reasonable, certain and notorious

 They must represent the wishes of both parties

 Proof of the custom or practice must be provided by the party seeking to rely on the term

 A distinction must be made between implying terms that make minor, and terms that make

fundamental changes to the contract

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