Employment Case Law – Terms and Conditions of Employment / Contracts
Each month we review a number of interesting employment law cases and consider their implications for organisations. This month we are focusing on the area of redundancy, including alternatives to redundancy and associated case studies.
The contract of employment is an agreement between the Employee and Employer regarding the terms and conditions applicable to that employment. It may be expressed as a written or oral agreement. Therefore, even where there is no written agreement in place, a contract still exists. However, where the agreement is not expressed in writing, confusion may arise as to the agreed terms and conditions, therefore, it is recommended to put in place written terms and conditions of employment.
In any case, under The Terms of Employment (Information) Act, 1994 – 2001, every Employee who has commenced employment after 16th May 1994 must be provided with a written statement of terms and conditions of employment within 2 months of their commencement with an Employer. Employees that commenced prior to that date are entitled to be furnished with a contract of employment within one month of making a request for same.
A written statement of terms and conditions of employment provides for a number of Employer benefits:
Employers may also decide, due to the nature of their particular business, that they need to include additional terms in the contract. For example, where an Organisation requires an Employee to be available for work on a Sunday this must be stated in the contract of employment.
Types of Contracts of Employment
The language used to describe contracts of employment is often confusing, and misused. A description of each contract type is set out below:
Permanent contract– A permanent contract is a contract of employment contract which is of an indefinite duration, i.e. it is an open ended agreement with no end date. A permanent contract may be terminated provided this is done fairly and in accordance with relevant legislation, e.g. by way of a dismissal, resignation, retirement or redundancy.
Temporary contract– A temporary contract is a contract which is put in place for a temporary period and has a definite duration or purpose. A temporary contract is more correctly referred to as fixed-term contract, irrespective of whether the end of the contract is determined by reaching a specific date, or a specified purpose being completed. For a contract to be legally considered as a temporary contract, there must be a written agreement which outlines the objective provision which will bring the contract to an end.
Casual contract– A contract whereby the Employee is available to be offered work from time to time subject to business requirements. A casual contract places the Employee on a panel of workers who will be contacted when the Organisation requires additional labour.
Zero-hours contract- A contract whereby the Employee is available to be offered work from time to time subject to business requirements. A zero hours contract differs from a casual contract in that it requires the Employee to be available when called.
Full-time and part-time contracts– Full and part time are terms often used to describe contract types; however these only refer to the working hours of the Employee.
Case 1 - Implied Terms and Conditions of Employment (Finnegan v J & E Davy; 2007)
This case relates to a bonus scheme discussed by the Plaintiff and the Respondent at interview stage for a stockbroking role. The Plaintiff alleged he was informed at interview that there was a year-end bonus scheme. The interviewer on the other hand recalled nothing of the sort. The Plaintiff alleged in this case he was owed over €260,000 as a result of several years of not receiving his bonus payments. The first full year the Plaintiff worked at the equity desk, the Plaintiff estimated his bonus, however when it came to payment of this bonus the Plaintiff was informed by the Respondent he was no longer to be paid his bonus in the year to which it related, and that his bonus would be deferred over a two year period – therefore tying the Plaintiff to the Organisation for another two years. The Plaintiff was also advised that if he left his Employer to go to a competitor he would not receive his bonus entitlement.
The Court found that this new provision in relation to deferred bonus had not been agreed with the Employee, and was a unilateral and retrospective attempt by the Respondent to change the terms and conditions of the contract of employment. The Plaintiff did not agree to this so this was in breach of the employment contract. This attempt was onerous on the Employee and the Court found it to be unreasonable. The Plaintiff succeeded.
This case highlights the need for Employers to engage with Employees when attempting to alter terms and conditions of employment. There should be a process of consultation, and indeed negotiation if required, in order to change terms and conditions of employment.
Case 2 - Changing of Sales Targets (Melligan versus Karmarton Ltd)
This case relates to a claim of Unfair Dismissal. The Claimant’s began working with the Organisation in November 2006. In April 2007 during a meeting with the General Manager, his sales figures were increased by 150%. He had to achieve this target in order to achieve his bonus. The Claimant believed he would not reach the target, and informed the General Manager accordingly. The Claimant believed that his terms and conditions of employment could not be changed without negotiation. There was a new General Manager appointed in September of the same year, and the Claimant indicated to him that he felt the new target was unreasonable. The Claimant hoped to achieve €800,000 and would endeavour to increase same. Relationships in the Organisation deteriorated and the Claimant invoked the grievance procedure. Following a number of incidents the Claimant resigned in January 2008.
The Respondent Organisation refused to allow the Claimant to bring a representative to a meeting prior to the Claimant’s resignation where the Claimant alleged that his position was threatened and therefore he felt there was a ruse to get rid of him.
The Tribunal found that it was not satisfactorily explained where the figures in relation to where the sales targets came from and neither was it explained how the Claimant would achieve these targets. The Tribunal found that the Claimants contract of employment was interfered with to such an extent that he could no longer continue in the workplace and was entitled to consider himself to be reasonably dismissed. The Claimant succeeded in his claim under Unfair Dismissals Acts and was awarded €60,000.
This case highlights the importance of managing any proposed changes to an Employee’s terms and conditions, including those associated with bonuses and targets.
The contract of employment is an agreement between the Employee and Employer regarding the terms and conditions applicable to that employment. It may be expressed as a written or oral agreement. Therefore, even where there is no written agreement in place, a contract still exists. However, where the agreement is not expressed in writing, confusion may arise as to the agreed terms and conditions, therefore, it is recommended to put in place written terms and conditions of employment.
In any case, under The Terms of Employment (Information) Act, 1994 – 2001, every Employee who has commenced employment after 16th May 1994 must be provided with a written statement of terms and conditions of employment within 2 months of their commencement with an Employer. Employees that commenced prior to that date are entitled to be furnished with a contract of employment within one month of making a request for same.
A written statement of terms and conditions of employment provides for a number of Employer benefits:
- When the agreement is in writing there can be certainty of the agreed terms and conditions of employment. This can be invaluable where a dispute arises in relation to terms and conditions.
- Any terms that may have been agreed verbally can be confirmed in the contract.
- The contract sets out the Employer’s expectations as regards the Employee, i.e. to attend work for the specified times during the specified days, to perform their function and to conduct themselves appropriately.
- The Employer can agree terms with an Employee that may otherwise be difficult or illegal to enforce without agreement, e.g. the right to search an Employee or subject him/her to drug or alcohol testing.
- Terms of Employment (Information) Act, 1994 - 2001
- Protection of Employees (Fixed-Term Work) Act, 2003
- Protection of Employees (Part-Time Work) Act, 2001
- Terms of Employment (Additional Information) Order, 1998
- The full names of the Employer and the Employee,
- The address of the Employer in the State or, where appropriate, the address of the principal place of the relevant business of the Employer in the State or the registered office,
- The place of work or, where there is no fixed or main place of work, a statement specifying that the Employee is required or permitted to work at various places,
- The title of the job or nature of the work for which the Employee is employed.
Employers may also decide, due to the nature of their particular business, that they need to include additional terms in the contract. For example, where an Organisation requires an Employee to be available for work on a Sunday this must be stated in the contract of employment.
Types of Contracts of Employment
The language used to describe contracts of employment is often confusing, and misused. A description of each contract type is set out below:
Permanent contract– A permanent contract is a contract of employment contract which is of an indefinite duration, i.e. it is an open ended agreement with no end date. A permanent contract may be terminated provided this is done fairly and in accordance with relevant legislation, e.g. by way of a dismissal, resignation, retirement or redundancy.
Temporary contract– A temporary contract is a contract which is put in place for a temporary period and has a definite duration or purpose. A temporary contract is more correctly referred to as fixed-term contract, irrespective of whether the end of the contract is determined by reaching a specific date, or a specified purpose being completed. For a contract to be legally considered as a temporary contract, there must be a written agreement which outlines the objective provision which will bring the contract to an end.
Casual contract– A contract whereby the Employee is available to be offered work from time to time subject to business requirements. A casual contract places the Employee on a panel of workers who will be contacted when the Organisation requires additional labour.
Zero-hours contract- A contract whereby the Employee is available to be offered work from time to time subject to business requirements. A zero hours contract differs from a casual contract in that it requires the Employee to be available when called.
Full-time and part-time contracts– Full and part time are terms often used to describe contract types; however these only refer to the working hours of the Employee.
Case 1 - Implied Terms and Conditions of Employment (Finnegan v J & E Davy; 2007)
This case relates to a bonus scheme discussed by the Plaintiff and the Respondent at interview stage for a stockbroking role. The Plaintiff alleged he was informed at interview that there was a year-end bonus scheme. The interviewer on the other hand recalled nothing of the sort. The Plaintiff alleged in this case he was owed over €260,000 as a result of several years of not receiving his bonus payments. The first full year the Plaintiff worked at the equity desk, the Plaintiff estimated his bonus, however when it came to payment of this bonus the Plaintiff was informed by the Respondent he was no longer to be paid his bonus in the year to which it related, and that his bonus would be deferred over a two year period – therefore tying the Plaintiff to the Organisation for another two years. The Plaintiff was also advised that if he left his Employer to go to a competitor he would not receive his bonus entitlement.
The Court found that this new provision in relation to deferred bonus had not been agreed with the Employee, and was a unilateral and retrospective attempt by the Respondent to change the terms and conditions of the contract of employment. The Plaintiff did not agree to this so this was in breach of the employment contract. This attempt was onerous on the Employee and the Court found it to be unreasonable. The Plaintiff succeeded.
This case highlights the need for Employers to engage with Employees when attempting to alter terms and conditions of employment. There should be a process of consultation, and indeed negotiation if required, in order to change terms and conditions of employment.
Case 2 - Changing of Sales Targets (Melligan versus Karmarton Ltd)
This case relates to a claim of Unfair Dismissal. The Claimant’s began working with the Organisation in November 2006. In April 2007 during a meeting with the General Manager, his sales figures were increased by 150%. He had to achieve this target in order to achieve his bonus. The Claimant believed he would not reach the target, and informed the General Manager accordingly. The Claimant believed that his terms and conditions of employment could not be changed without negotiation. There was a new General Manager appointed in September of the same year, and the Claimant indicated to him that he felt the new target was unreasonable. The Claimant hoped to achieve €800,000 and would endeavour to increase same. Relationships in the Organisation deteriorated and the Claimant invoked the grievance procedure. Following a number of incidents the Claimant resigned in January 2008.
The Respondent Organisation refused to allow the Claimant to bring a representative to a meeting prior to the Claimant’s resignation where the Claimant alleged that his position was threatened and therefore he felt there was a ruse to get rid of him.
The Tribunal found that it was not satisfactorily explained where the figures in relation to where the sales targets came from and neither was it explained how the Claimant would achieve these targets. The Tribunal found that the Claimants contract of employment was interfered with to such an extent that he could no longer continue in the workplace and was entitled to consider himself to be reasonably dismissed. The Claimant succeeded in his claim under Unfair Dismissals Acts and was awarded €60,000.
This case highlights the importance of managing any proposed changes to an Employee’s terms and conditions, including those associated with bonuses and targets.
