FACULTY OF ENTREPRENEURSHIP AND BUSINESS BUSINESS LAW APT 2033

CONTRACT OF EMPLOYMENT
-CONTRACT OF SERVICE, CONTRACT FOR SERVICE, & TERMINATION -

GROUP MEMBERS: NOR NADIA BT ABDUL WAHAB SITI KHATIJAH BT MOHD SALLEH WAN NURSHAHIDA BT WAN ZULKIFLI MOHAMAD FAIZAL BIN KAMARUDDIN A08A062 A08A087 A08A095 A08A031

SECTION: SAK2_2 SUBMITTED TO: EN AZHAR SUBMISION DATE: 09 FEBRUARY 2010

Contract of Employment: Contract of Service, Contract for Service & Termination

CONTRACT OF EMPLOYMENT 1.0 Contract of Service and Contract for Services When a problem in a work relationship results in court action the courts will establish the existence of a contract of service/ employment before they consider the specifics of a case. They do this by applying common-law 'employment' tests. In investigating the legal relationship, the courts are looking to define whether one of two types of employment contracts exists: either a 'contract of service' or a 'contract for service'. A 'contract of service' is taken to denote employment. A 'contract for service' does not involve employment. Contracts of Service
y y y y y y y y

Contracts for Service
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Employer-Employee relationship. Usually a continuous relationship. A duty of care owed to employees, as the employer The employer is generally liable for the vicarious acts of employees. Protective legislation applies to contract. Wages/Salary payment method. Subject of contract is to carry on continuous work.

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y y

Employer-Independent Contractor relationship. A relationship organized around the completion of a once-off piece of work. A duty of care, arising from occupiers¶ liability. The employer is generally not liable for the vicarious acts of independent contractors. In general, protective legislation does not apply, except for the Safety, Health and Welfare at Work Act, 1989 and the Equality Act. Various methods of payment, including lump sum per job. Subject of contract is once-off job

The fundamental difference is that:
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An employee-employer contract is a contract of service A contractor-client contract is a contract for services In each of these types of contract, both parties have specific rights and responsibilities, which differ according to the type of contract in place.

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Contract of Employment: Contract of Service, Contract for Service & Termination

A. Employer-employee contract of service Permanent employees have a contract of service with their employer. By definition, if a worker has a contract of service with an organization, they are an employee. The key rights and responsibilities of employee status under a contract of service are:
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The worker is controlled by their employer ± they must perform the tasks they are instructed to by a line manager according to their job description The worker is expected to work at a specific place during specific hours on specific days (even flexi-time has core hours) The worker must present themselves for work and cannot send someone else as a substitute Employees have statutory rights to holiday pay, sick pay, maternity and paternity rights and redundancy payments Employees have statutory rights regarding how they can be asked to leave their employment Employees enjoy a range of additional benefits, which can vary according to the employer, but might include company cars, private health insurance, staff canteens, health clubs and gyms and so on Employees are not personally liable for any errors they make when completing work for their employer, nor are they expected to make good in their own time.

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There is also a relationship between an employee and employer called µmutuality of obligation¶, often referred to in shorthand as µMOO¶. Mutuality of obligation is one of the key tests of employment status and whether a contract is inside or outside of IR35. Mutuality of obligation means that an employer is obliged to provide work for an employee, and the employee is obliged to complete the work. Within the scope of their job description, employees have to complete the work that µcomes down the pipe¶, which is one of their fundamental distinctions from a contractor. If the employee fails to fulfil their obligations, the employer can take action that may ultimately result in the employee¶s dismissal. Similarly, if the employer does not fulfil their obligation to the employee, the employee can take action that might result in an industrial tribunal.

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Contract of Employment: Contract of Service, Contract for Service & Termination

B. 1.2 Contractor-client contract for services Contractors have a contract for services with their client or agency. Or to be more precise, the contractor¶s limited company or Umbrella Company has a contract of service with the client or agency. A contract for services is a strictly business to business contract between two firms on a buyer and supplier basis. The client, or agency, is a buyer and the contractor¶s limited company or Umbrella Company is the supplier. There is no question of any employment relationship. Contractor¶s companies that enter into a contract for services with another organization (including public sector organizations or not-for-profit companies) have clear rights and obligations. The key rights, obligations and responsibilities that a contractor¶s limited company or Umbrella Company has under a contract for services include:
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A requirement to supply services to the client according to the contract schedule¶s specification A requirement to complete the project, and any milestones, according to the contract schedule A requirement to provide services to the standard required by the client as agreed in the contract An obligation to make right any errors or defective work, without additional remuneration Liability for any errors or defects in work completed for clients, and this may expand to personal liability (assuming the contractor is a director) for worst-case scenarios, such as corporate manslaughter The right to be paid the rate agreed in the contract, assuming the services have been provided according to the contract¶s requirements The right to be paid according to the terms agreed, such as within 7 days, or 30 days depending on the terms agreed in the contract The right to provide a substitute to complete the work specified in the contract Often the contractor is required to abide by any health and safety and security arrangements when working on the client¶s site The client is obliged to provide a safe working environment for the contractor.

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As directors of their own limited companies, contractors also have a range of duties, responsibilities and potential liabilities under company law, which employees do not have.

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Contract of Employment: Contract of Service, Contract for Service & Termination

If either party fails to fulfill their obligations under the terms of the contract, they are in breach of contract and can take legal action to remedy the situation. In effect, the relationship between a contractor¶s limited company or Umbrella Company and the client or agency is no different from a major international corporation¶s relationship with its suppliers. Contractors who are aware of the full range of issues surrounding contracts of service and contracts for service are in a much better position to judge whether their employment status is affected by IR35, and can seek professional assistance accordingly. Why is the distinction important? This is because only employees/workers (those employed under a contract of service) get the protections of employment legislation. This includes wider protection such as compensation under workers compensation acts and protection under occupational health and safety legislation.

C. Applicable Test When a dispute in a work relationship results in court action, the courts will establish the existence of a contract of service before they consider the specifics of a case. The courts do this by applying common law µemployment¶ tests, as mentioned below. (a) ³Control´ Test It is the "degree of control" exercised by the employer over the work performed by the employee. This test was first introduced by the court in Ready Mixed Concrete (S.E,.) Ltd. V Minister of Pensions and National Insurance (1968) 1 All E.R. 433). In the first instance, the court investigates if the user of labor has the µright to control¶ the worker. They will look at the work relationship for indicators of control. Facts Ready Mixed Concrete (South East) Ltd (³RMC´) was in the business of making and selling ready mixed concrete. The company had engaged an independent haulage contractor to deliver the concrete to customers but that contract was terminated and RMC decided to introduce a scheme whereby concrete was delivered by owner-drivers working under written contracts. The owner-drivers entered into a hire purchase agreement with Ready Mix Finance Ltd to purchase a lorry but the mixing equipment on the lorry was the company¶s property. In 1965 the company asked the Minister of Social Security for a determination of the employment status of one of the owner- drivers, Mr Latimer.

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Contract of Employment: Contract of Service, Contract for Service & Termination

Decision The Minister decided that Mr Latimer was employed under a contract of service but, on appeal to the High Court, MacKenna J held that he was running a business of his own. In summing up MacKenna J said that Mr Latimer was a ³small business man´ and not a servant. He concluded that the contract was not one of service but of carriage. Whether the relationship between the parties to a contract is that of master and servant is a conclusion of law dependent upon the provisions of the contract. If the... contract... is that of master and servant, it is irrelevant that the parties who made the contract would have preferred a different conclusion.´

In the first instance, the courts investigate if the user of labour has the 'right to control' the worker. They will look at the work relationship for indicators of control. It was held in Hillyer v Governors of St Bartholomew¶s Hospital [1909] 2 KB 820 that nurses working in the operation theatre were not employees of the hospital because they took their orders from the operating surgeon and not the hospital authorities, although they were employees of the hospital for general purposes. For the case of Lian Ann Lorry Transport & Forwarding Sdn. Bhd. v Gonvidasamy ([1982] 2 MLJ 232), the brief relevant facts of this case are as follows: The respondent in this case was employed on a daily rate wage of RM15 a day and had only sereved the appellants 3 days. As the result of the accident which occurred on the fourth day of his employment, he became incapacitated and had to cease employment. According to the appellant¶s managing director, the respondent was put on a daily rated wage because he was a new employee and had he been treated as a permanent employee on a fixed monthly wage of RM90 per month plus commissions based on the tonnage of goods transported by him. Salleh Abbas FJ stated that: ³in our view, the duration and nature of the employment, be it temporary or permanent, is immaterial for the purpose of determining the existence of a contract of service. As long as there exists a relationship of a master and servant or that of an employer and employee, the law will infer a contract of service or the employment is intended by the person in a position of master to be temporary or of a short duration only. And the law will imply the existence of such relationship where a person is hired by another as an integral part of the latter¶s business. ( He referred to Stevenson Jordan and Harrison Ltd v Mcdonald and Evans (1952) 1 TLR 101,111 and Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968) 2 QB 497,524). The judge stated further that. ³the circumstances of this case clearly show
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Contract of Employment: Contract of Service, Contract for Service & Termination

that there was a contract of service between the appellants and the respondent because the respondent was employed as a part of the appellant¶s transport business; the term of the employment being that the respondent was placed on a temporary basis at a daily wage of RM15 per day until he would eventually be absorbed into permanent service or otherwise have this employment terminated. Thus, clearly the respondent was an employee.´ Next, we examine the following Federal Court case: Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor (1995) 3 MLJ 369. The relevant brief fact of the case is as follow: The appellent was employed by Dorf Industries Pty Ltd (µDorf¶) as the general manager of its Malaysian company in 1977. In 1983, Dorf was taken by the respondent which continued to employed the appellant under a fresh agreement. The appellent was later promoted as the group general manager of the respondent¶s group of company. However, in 1987, the respondent brought a charge of misconduct aganst the appellant, who was subsequently dismissed following a domestic inquiry. The appellant lodged a complaint under s 20(1) of the Industrial Relations Act 1967 (µthe Act¶) which was then referred by the Minister to the Industrial Court for adjudication. Before hearing the case on its merits, the Industrial Court dealt with the preliminary issue as to whether the appellant came within the statutory definition of µworkmen¶ appearing in section 2 of the act. The court ruled that the appellant was a workmen within the Act and made an award in his favour. The respondent then sought an order of prohibition in the High Court to restrain further conduct of the appellant¶s before the Industrial Court on the ground that the appellant was not a workmen. The respondent¶s counsel further complained that the Industrial Court had failed to make a proper assessment of the evidence and had given wrong reasons fpr the conclusion it arrived at in this case. The High Court judge held that the Industrial Court had committed an error of law in ruling that the appellant was a workmen and thus issued an order of prohibition restraining the Industrial Court from hearing the appellant¶s complaint on its merits. The appellant appealed. In allowing the appeal, the Federal Court stated inter alia, (1) When ascertaining the meaning of the term µworkmen¶, it is important to bear in mind the nature of a legislation in which it appears so that the construction given truly reflects the collective will of Parliament. It is well settled that the Act is a piece of beneficent social legislation by which Parliament intends the prevention and speedy resolution of disputes between employers and their workmen. In accordance with well-settled canons of construction, such legislation must receive a liberal and not a restricted interpretation. Thus, the expression µworkmen¶ appearing in the Act should be liberally interpreted. (2) As the word µworkmen¶ is defined in the Act, it is not permissible to ascribe to it its common and ordinary meaning. The fact that the definition had been left unamended despite several amendments made to the Act, points to the conclusion

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Contract of Employment: Contract of Service, Contract for Service & Termination

that Parliament intended to keep the definition of µworkmen¶ flexible, with a view of being work out on a cases by case basis. (3) The flexible and correct approach to determine whether a claimant is a workmen under the Act is to ascertain whether the contract is one of service or for services. A workmen under the Act is one who is engaged under a contract of service whereas an independent contractor engaged under a contract for services is not. (4) Where it is necessary to determine whether a contract is one of service or for services, the degree of control which an employer exercises over a claimant is an important factor, although not the sole criterion. The terms of the contract between the parties must first be ascertained to determine the nature of the claimant¶s duties and functions. However, in a majority of cases, there are facts which show the nature, degree and extent of control, and these include the conduct of the parties at all relevant times. In Employees Provident Fund Board v Bata Shoe Company (Malaya) Ltd [1968] 1 MLJ 236, the Court of Appeal upheld the decision of the High Court that shop managers were employees of Bata due to the considerable control which the company had over the shop managers. However there was no relationship of employer and employee between the Bata Shoe Co. (M) Ltd and the salesmen employed by the shop managers of the company. Under the agreement between the company and the managers, the managers were given power to employ persons to assist them and it was stated that the managers would be responsible for payments under the Employment Provident Fund Ordinance. In this case, the court states that the ³employee´ and ³employer´, in both of which the essential feature is a ³contract of service´. Whether or not there was a contract of service and between who is a pure question of fact. The five tests are simply there to help the court to determine the answer to the µfundamental test¶. As such their application is really a matter of common sense. (b) Multi-Factorial Test Another test will be applied by the court is known as ³multi-factorial´ test. This test also includes the method of payment (payment on a commission basis is indicative of self-employment) and the payment of sickness and holiday pay (which indicates the existence of contract of service). The first case in which this test was applied is Market Investigation v Minister of Social Security (1969) 2 QB 173. As expressed in this case: the fundamental test to be applied is this: ³Is the person who has engaged himself to perform these services performing them as a person in business on his own account?´ If the answer to that question is ³yes´ then the contract is a contract for services. If the answer is ³no´ then the contract is a contract of service.
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Contract of Employment: Contract of Service, Contract for Service & Termination

It is also important to remember that ³multi-factorial´ test also includes: a) The method of payment (payment on a commission basis is indicative of selfemployment); and b) The payment of sickness and holiday pay (which indicates the existence of contract of service) (c) Integration Test The µintegration test¶ seeks to test if the worker is 'part and parcel' of the business organization, and also involves study of each and every specific situation. It test either the work being performed under the contract integral to the operation of the business structure as a whole, or is it only work on the side of the main business. This test was decisive in the below case: In Stevenson, Jordan and Harrison Limited v MacDonald and Evans [1952] 1 TLR 101, a case on copyright, Denning LJ said that: "[This case] raises the troublesome question of the distinction between a contract of service and a contract for services. The test usually applied is whether the employer has the right to control the manner of doing the work. It is often easy to recognize a contract of service when you see it, but difficult to say wherein the distinction lies... One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it"¶ Lord Denning gave the illustrative comparison between the captain of a ship (an employee of the ship-owners) and the pilot who boards the ship only to take it safely into harbour (an essential service but not one which makes the pilot an integral part of the shipowners¶ business). Unfortunately most situations where the status of the worker is an issue do not provide such clear cut differences. As a result the µintegration test¶ has not played a large part in the evolution of the law on this matter. The test was employed by Wan Suleiman FJ in Employees Provident Fund Board v MS Ally & Co Ltd [1975] 2 MLJ 89. In this case, the Federal Court found that working assistants who conducted and managed the business of M S Ally &Co Ltd and were rewarded by a share of the profits were employees of M S Ally as, inter alia, there was a sufficiency of control over the working assistants.

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Contract of Employment: Contract of Service, Contract for Service & Termination

Quoted to the case of Employees Provident Fund Board v MS Ally & Co Ltd [1975] 2 MLJ 89, in this contention that compensation was not wages for the purpose of the Employees Provident Fund (EPF) Act. It can clearly be distinguished that in this case the payment on which EPF contributions were based were shares of profits which the Federal Court held were not wages.

(d) Economic Reality or Entrepreneur Test The µeconomic reality test¶ focuses on the inconsistency of seeking a profit from doing the work with doing the work as an employee. The idea underpinning the development of this "test" was that it was not enough to establish the degree of control exercised by the employer over the worker. What really distinguishes employees from independent contractors, it was said in a number of cases, is that the independent contractor is working in the hope of making a profit rather than merely for a wage or salary. In Market Investigations Ltd. v Minister of Social Security [1969] 2 WLR 1 Cooke LJ came close to assigning primacy to the economic reality test. But he did recognize that other tests might be more relevant or decisive in particular circumstances. This test offers real advantages where the employer and worker have dressed up a master/servant relationship in the garb of a contract for services (usually to secure the tax advantages which accrue to self-employed persons). The usefulness of the "working for profit?" test became most apparent in dealing with cases which involved the µlump¶. The µlump¶ was the term used to characterize the common practice in the construction industry of hiring workers as µlabour-only subcontractors¶. This is the one way of deciding whether a person is self employed is to ask whether he can be said to be running a business of his own. In other words, the only thing the worker brought to the performance of the job was his own skill and effort. According to the Lee Swee Seng (see www.leesweeseng.com/newsletter05.asp12.11.2007), although it is now widely accepted that the first test to apply is the economic reality test, it may be that the circumstances of the worker whose case is at hand also require the application of a further test, namely the µmutual obligation test¶.

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Contract of Employment: Contract of Service, Contract for Service & Termination

(e) Mutual Obligation Test It is said that the relationship of employer and employee cannot exist unless the employer perceives and acts on an obligation to supply work; and the worker feels obliged to undertake any work offered. Mutuality of obligation ± whether the employer feels obliged/compels to offer work and the worker feels obliged to take it when offered - can be an important question where casual working is involved. Both parties to the contract have obligations to each other, the employee to perform work as directed, the employer to pay for the work performed.

Two questions arise about casual workers: 1. Are they working in a contract for services or a contract of service? 2. Does each period of work stand separate from all the others - i.e. is each spell of work performed under a new contract? Or can all the periods of work be said to have been performed under one global contract? The answer to this question can be important in determining continuity of service.

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Contract of Employment: Contract of Service, Contract for Service & Termination

2.0 Employment Relationship A. Form of Contract Terms and Conditions in Contract of Service A contract of service may be oral or in writing, but under Rule 5(b) and 8 Employment Regulations 1957 the following terms must be given to an employee in writing on or before the commencement of his employment:
a) b) c) d) e) f) g) h) i) j)

Name of employee and National Registration Identification Card No; Occupation or appointment; Wage rates (excluding other allowances); Other allowances payable and rates; Rates for overtime work; 0ther benefits (including approved amenities and services); Agreed normal hours of work per day; Agreed period of notice of termination of employment or wages in lieu;. Number of days of entitlement to holidays and annual leave with pay; and Duration of wage period

Other optional clauses:
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Transferability Retrenchment benefit c) Confidentiality clause d) Restraint of trade clause

Prohibitions in the terms:
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Term in the contract of service cannot be less favorable than those prescribed under the provisions of the Employment Act.[s. 7EA] A contract of service must not restrict the rights of an employee to join, participate in the activities or in the organizing of a trade union. [s. 8EA]

Terms and Conditions in Contract for Services
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The following are some of the terms and conditions in contracts for services (source from Her Majesty Treasury) (http://www.hmtreasury.gov.uk/About/about_procurement/about_procurement_service.cfm) Contractor¶s Status (Principal) Manner of carrying out the Services Standard of Work Remedies in the event of inadequate performance Variation of the Service Contractor¶s Personnel Purchases on behalf of the Client Access to Client¶s Premises
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Contract of Employment: Contract of Service, Contract for Service & Termination

y y y y y y

Licence to occupy Client¶s Premises Offers of Employment Conflict of Interest Programme of Work and co-ordination Security of Confidential Information Professional Indemnity

Service-Level agreement The following terms are particular in a Service-Level agreement:
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Confidentiality Termination clause Types of service provided Turnaround time Fees

Most employment contracts have common elements such as the employee's start date, salary, and benefits. Other provisions that often appear in employment contracts are listed here, so that you can think about what kind of employment contract is agreeable to you before you sign your next employment agreement. An employment law attorney can advise you about the pros and cons of agreeing to the various provisions, and may also suggest other terms to include. 1. CONFIDENTIALITY AGREEMENT. An employee confidentiality agreement is a contract (or part of a contract) in which the employee promises not to share any information about the details of the employer's business or the employer's secret processes, plans, formulas, data, or machinery. Usually a confidentiality agreement lasts even after the employee no longer works for the employer. 2. NONCOMPETITION AGREEMENT. In the noncompetition clause, the employee agrees that for a certain amount of time after he or she stops working for the employer, the employee will not become employed by a rival company or any company engaged in a similar type of business, and the employee will not set up a company that will compete with the employer's business (or solicit the employer's customers). Usually the noncompetition clause is limited to a particular geographic area. 3. OWNERSHIP OF INVENTIONS. This provision applies to employees who invent things as part of their jobs. In this part of the contract the employee agrees that anything he or she invents at work (or during a set period of time after termination) becomes the employer's invention, not the employee's own invention. Additionally, employees usually agree to assign their inventions to the employer, cooperate with the employer in getting inventions patented, and keep information about the invention confidential like any other trade secret. In return, sometimes the employer agrees to share with employee-inventors a percentage of the royalties paid for inventions.
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Contract of Employment: Contract of Service, Contract for Service & Termination

4. BEST EFFORTS. Although it is often just assumed that the employee will work hard for the employer, sometimes employers add a best-efforts provision to the employment contract. It states that the employee promises to work to the best of his or her ability, and to be loyal to the employer. Sometimes it also states that the employee specifically agrees to make suggestions and recommendations to the employer that will be of benefit to the company. 5. EXCLUSIVE EMPLOYMENT. In this provision, the employee promises that as long as he or she works for the company the employee will not work for anyone else in the same or similar type of business. It may also extend to a promise not to be a shareholder or director in a similar business, or even to provide services voluntarily to a competitor business. 6. NO ADDITIONAL COMPENSATION. The "no additional compensation" clause states that if the employee becomes an elected director or officer of the company or serves on a company managing committee, the employee will not be entitled to additional compensation for doing that work. 7. NO AUTHORITY TO CONTRACT. Sometimes this part of the contract is called the "agency" provision. It makes clear that the employer and employee have an employment relationship only, not an agency relationship; the employee has no right to enter into a contract or otherwise obligate the employer, unless the employer gives express written consent to do so. 8. TERMINATION. A standard part of any employment contract is the "termination" clause. It states that either party may terminate the employment contract for any reason by giving a certain amount of notice, such as two weeks' notice. It may also give the employer the right to just terminate the contract without notice if the employee violates the contract in any way. Another aspect of the termination clause is a statement that the employer has the right to terminate the contract if the employee becomes permanently disabled because of ill health or physical or mental disability such that the employee can no longer do the job. 9. ARBITRATION. Arbitration clauses are found in many types of contracts, including employment contracts. In this provision, the parties agree at the onset of the relationship that, if they ever have a dispute about any aspect of the employment relationship, they will submit that dispute to arbitration rather than seek resolution by a court of law. The "arbitration" clause may include details about the arbitration, such as whether the arbitration decision will be binding and how the parties will find an arbitrator when the time comes. 10. CHOICE OF LAW. Employment laws vary from state to state. Some states have laws that are generally viewed as more favorable or beneficial to employers than employees, or vice versa. The "choice of law" provision in an employment contract is an agreement that, if the parties ever have a dispute that results in a lawsuit, the laws of a particular state will govern it, no matter where the lawsuit itself is filed.

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Contract of Employment: Contract of Service, Contract for Service & Termination

B. Termination There are four ways in which a contract of employment may come to an end: 1) Resignation - termination with/without notice on the part of the employee, due to the cause that the employer by his or her conduct, in breach of the contract, has shown an intention not to be bound by the contract ; 2) Dismissal ± termination with/without notice by the employer. Where a contract of service is considered broken, an employer can dismiss an employee. A contract of service is considered to have been broken when an employee has been absent from work for more than 2 consecutive working days without prior leave from the employer or without informing or attempting to inform the employer at the earliest opportunity during such absence with reasonable excuse. An employee has the right to terminate the contract of service, where an employer fails to pay wages within seven days after the wages period. A contract of service can also be terminated without notice :
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by paying to the other party or indemnity in lieu of notice if there is a willful breach by the other party of a term or condition of the contract of service

Where the contract of service has expired or work being completed, the contract may also be terminated. Written notice being given by either party may also terminates a contract of service. An employer may terminate the contract of service where the employee is found guilty of misconduct, misdemeanor or negligence. 3) Expiry of fixed term employment - A limited-term contract is a contract for a fixed term or the performance of a specific task, or one which ends when a specified event does or does not occur. 4) Mutual agreement to terminate employment.

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Contract of Employment: Contract of Service, Contract for Service & Termination

(i) Section 12: Notice of Termination of Contract (1) Either party to a contract of service may at any time give to the other party notice of his intention to terminate such contract of service. (2) The length of such notice shall be the same for both employer and employee and shall be determined by a provision made in writing for such notice in the term of the contract of service, or, in the absence of such provision in writing, shall not be less than: (a) four weeks' notice if the employee has been so employed for less than two years on the date on which the notice is given; (b) six weeks' notice if he has been so employed for two years or more but less than five years on such date; (c) eight weeks' notice if the has been so employed for five years or more on such date; provided that this section shall not be taken to prevent either party from waiving his right to a notice under this subsection. (3) Notwithstanding anything contained in subsection (2), where the termination of service of the employee is attributable wholly or mainly to the fact that: (a) the employer has ceased, or intends to cease to carry on the business for the purposes of which the employee was employed; (b) the employer has ceased or intends to cease to carry on the business in the place at which the employee was contracted to work; (c ) the requirements of that business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish; (d) the requirements of that business for the employee to carry out work of a particular kind in the place at which he was contracted to work have ceased or diminished or are expected to cease or diminish; (e) the employee has refused to accept his transfer to any other place of employment, unless his contract of service requires him to accept such transfer; or (f) a change has occurred in the ownership of the business for the purpose of which an employee is employed or of a part of such business, regardless of whether the change occurs by virtue of a sale or other disposition or by operation of law; the employee shall be entitled to, and the employer shall give to the employee, notice of termination of service, and the length of such notice shall be not less than that provided under

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Contract of Employment: Contract of Service, Contract for Service & Termination

subsection (2)(a), (b) or (c ), as the case may be, regardless of anything to the contrary contained in the contract of service. (4) Such notice shall be written and may be given at any time, and the day on which the notice is given shall be included in the period of the notice. Description: An employee may resign by giving notice of resignation or termination to the employer to terminate the contract of service. An employer may also dismiss an employee by giving notice of termination to such employee. In both situation, the length of notice shall be the same pursuant to the contract of service. Where the period of notice of termination is not specified in the contract of service, the notice period shall be as follows : 
 

less than 2 years of service - minimum 4 weeks 2 years or more but less than 5 years of service - minimum 6 weeks 5 years of service or more - minimum 8 weeks

Where the contract of service has expired or work being completed, the contract may also be terminated. Written notice being given by either party may also terminates a contract of service. (ii) Section 13: termination without notice (1) Either party to a contract of service may terminate such contract of service without notice or, if notice has already been given in accordance with section 12, without waiting for the expiry of that notice, by paying to the other party an indemnity of a sum equal to the amount of wages which would have accrued to the employee during the term of such notice or during the unexpired term of such notice. (2) Either party to a contract of service may terminate such contract of service without notice in the event of any wilful breach by the other party of a condition of the contract of service. Description: A contract of service can also be terminated without notice :
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by paying to the other party or indemnity in lieu of notice if there is a willful breach by the other party of a term or condition of the contract of service

Where you are a female employee and your employer is found guilty of terminating you during your maternity leave, your employer shall be liable, on convictio n to a fine not exceeding RM2,000.
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Contract of Employment: Contract of Service, Contract for Service & Termination

(iii)Section 14: termination of contract for special reasons (1) An employer may, on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service, after due inquiry -y y y

(a) dismiss without notice the employee; (b) downgrade the employee; or (c) impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.

(2) For the purposes of an inquiry under subsection (1), the employer may suspend the employee from work for a period not exceeding two weeks but shall pay him not less than half his wages for such period: Provided that if inquiry does not disclose any misconduct on the part of the employee the employer shall forthwith restore to the employee the full amount of wages so withheld. (3) An employee may terminate his contract of service with his employer without notice where he or his dependants are immediately threatened by danger to the person by violence or disease such as such employee did not by his contract of service undertake to run. Description: Where an employee is found guilty of misconduct by an employer, the employer may take the following actions : 
 

Dismiss without notice the employee downgrade the employee impose any other lesser punishment as the employer considers just and fit

(iv) Section 15: when contract is deemed to be broken by employer and employee (1) An employer shall be deemed to have broken his contract of service with the employee if he fails to pay wages in accordance with Part III. (2) An employee shall be deemed to have broken his contract of service with the employer if he has been continuously absent from work for more than two consecutive working days without prior leave from his employer, unless he has a reasonable excuse for such absence and has informed or attempted to inform his employer of such excuse prior to or at the earliest opportunity during such absence.

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Contract of Employment: Contract of Service, Contract for Service & Termination

Description: An employee has the right to terminate the contract of service, where an employer fails to pay wages within seven days after the wages period. Where a contract of service is considered broken, an employer can dismiss an employee. A contract of service is considered to have been broken when an employee has been absent from work for more than 2 consecutive working days without prior leave from the employer or without informing or attempting to inform the employer at the earliest opportunity during such absence with reasonable excuse.

CONCLUSION Courts have applied the tests of control, integration and multiple or mixed. The control test simply asks the question can the employer tell the employee what to do? In other words, is the employee under the control of the employer? The integration test asks to what extent is the employee¶s work integrated into the business. Someone brought in on contract to repair or maintain plant or premises may not be integrated in any way into normal operations. The multiple or mixed test asks a series of questions such as are there wages, sick pay and holiday pay? If there are, who pays them? Are PAYE and PRSI deducted? Does the worker share in the company¶s profits and losses? Who provides the tools and equipment for the job? Is the employer entitled to exclusive service from the employee? A court¶s interpretation will not necessarily depend upon what it says in the contract ± labels will themselves not determine the matter, the courts will decide. In short, is this a case of genuine selfemployment or an attempt by an employer to avoid protective legislation?

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Contract of Employment: Contract of Service, Contract for Service & Termination

APPENDICES
CONTRACT FOR SERVICES Contract Number ________________ This contract, made and entered into this ____day of______,19___, by and between ________________________________ a nonappropriated fund instrumentality hereinafter called NAFI) and _______________ ___________________________________________________ hereinafter called Contractor), is for _________________ _____________________ _________________ (services) subject to the provisions set forth hereunder. The parties agree to contract for the furnishing of _______________________________ (services) as more specifically described in Appendix A hereto. The part ies agree as follows: 1. Performance of Service/Price: The Contractor agrees to perform services in accordance with the attached Appendix A at the prices set forth herein $_________ per month/ $__________ per year. The NAFI will not be liable for any co sts incurred by the Contractor other than those specified above. 2. Contract Period. The period of performance for this contract will be for _______ months, _______ years, from the commencement date. The contract service period shall begin _____________ ___. The NAFI may extended the term of this contract for successive periods of ______ months, ______ years. The Contracting Officer will advise the Contractor in writing at least 30 calendar days before the contract period expires of the activity's desir e to extend the period of the contract. The total duration of this contract, including any extension pursuant to the option exercised under this clause will not exceed five (5) years from the date of the original contract. 3. Payment Cycle. In considera tion for the services rendered, the NAFI agrees to pay the Contractor monthly, at the time of the normal payroll cycle, or on expiration of this contract, whichever occurs first. The amount to be paid the Contractor under the terms of this contract will be that amount stipulated above, unless otherwise specified by a modification to this contract. 4. Invoices. The Contractor will submit invoices to _________ ____

_______________________________________________________________ ____

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Contract of Employment: Contract of Service, Contract for Service & Termination the last week of each m onth of the contract period for work completed during that month. Payment of invoice will be accomplished within 30 days of presentation of the invoice. 5. Subcontracts. The Contractor will not subcontract parts or the whole of this contract without obt aining the Contracting Officer's consent. If a subcontractor is permitted to execute part or all of this contract, the Contractor will continue to he held responsible for all provisions of the contract in total. 6. Licenses, Taxes, Permits, and Fees. Th e Contractor is fully cognizant that this contract is a contract for services and that an employee-employer relationship does not exist between the Contractor and NAFI. The Contractor is not an employee of the NAFI and is not covered by Workmens' Compensa tion, group life, accident or health insurance, nor other benefits associated with an employer -employee relationship. Therefore, it is the Contractor's responsibility to obtain, at its own expense, all licenses and permits, and to pay such taxes and fees as may be required of the Contractor by federal, state, and local governments in the execution of the terms of this contract. The Contractor shall comply with all laws, rules, and regulations applicable to the service carried on under this contract. 7. Payment Rates. Payment for services performed by the Contractor will be made at the rate prescribed in paragraph 1, upon submission of the Contractor of proper invoices to the NAFI designated herein and at the time provided for herein. In addition to th e foregoing the Contractor will be paid (a) a per diem rate in lieu of subsistence for each day the Contractor is in a travel status away from his or her home or regular place of employment in accordance with standardized US Government Travel Regulations; and (b) such other transportation expenses as may be provided for in Appendix B hereto. Payments must be made in accordance with the clause titled "Invoices."

_________________________________ Print Name of Contracting Officer

_____________________________ Print Name of Contractor

_________________________________ Signature of Contracting Officer

_____________________________ Signature of Contractor

_____________________________

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Contract of Employment: Contract of Service, Contract for Service & Termination Social Security Number (required when contracting with an individual)

________________________________ _____________________________ Date Date

________________________________ ________ _____________________ ________________________________ _____________________________ ________________________________ _____________________________ Address & Telephone Number Address & Telephone Number

APPENDIX A & B

(type in your specific requirements)

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Contract of Employment: Contract of Service, Contract for Service & Termination

Reference Retrieved from y http://www.contractorcalculator.co.uk/difference_contract_for_services_of_services_i r35.aspx y www.paypershop.com/faq/contract.html y http://www.siptu.ie/YourRights/TUFGuideToLabourLaw/ContractofEmployment/Con tractOfServiceandContractForService/ y http://www.hbp.usm.my/aziz/Contract%20of%20Service.htm y http://www.vanuatu.usp.ac.fj/Courses/la317_labour_law/LA317_topic2.html y http://www.leesweeseng.com/newsletter05.asp y http://www.swarb.co.uk/lisc/Emplm19601969.php y http://www.lawyerment.com.my/library/doc/empl/fr/ y http://www.ipsofactoj.com/archive/1990/Part06/arc1990(6)-015.htm

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