WHAT IS A CONTRACT OF SERVICE

CONTRACT OF SERVICE

Contract of service means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agree to serve his employer as his employee and includes an apprenticeship contract (s.2 EA).

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 ;

•       name of employee/NRIC

•       occupation or appointment

•       wage rates (excluding allowances)

•       allowances payable and rates

•       rates for overtime work

Implied Terms in a CoS are terms which the law assumes to be known by both the employer and employee - essential to facilitate the smooth running of the business. E.g:

•       to work diligently and honestly

•       to be punctual

•       to obey all lawful orders, instructions, regulations etc

•       not to be absent without leave

•       not to commit fraud or criminal breach of trust

Express conditions on the other hand are those expressly stated in the contract, job description, company handbook or manual, circulars, memos etc

However by Sec 10 - a contract of service for a specific period of time exceeding one month or for the performance of a specified piece of work which is likely to take more than a month to complete - MUST be in writing.

WEB HOSTING 

The terms and condition of a CoS which are less favourable than those stipulated in the EA - will be null and void but those which are more favourable are allowed - as long as not contravene any express prohibition under the Act.

A CoS cannot be changed unilaterally by either party

In  SPORTS TOTO MALAYSIA v. WONG YAT SING (1998) 1 ILR 79 

The company unilaterally vary the age of retirement of the claimant through a company letter send to him where no such clause existed in his letter of appointment. The claimant claimed termination was illegal and without just cause.IC held that the termination was indeed without just cause and order termination benefits to  be paid to the claimant.

A CoS cannot in any way restrain an employee from joining a Trade Union, join in the activities or organizing the formation of a TU

In every written CoS- manner in which the contract may be terminated by either party must be set out.

The EA allows for the employer and employee to agree upon the notice period between themselves provided that:

–      the period agreed upon is the same for both parties

–      such provision for notice is put in writing

If either party wants to terminate the CoS - give notice of his intention to do so in the agreed period as stated in the CoS

If there is no such provision included in the CoS, then the notice period SHALL NOT BE LESS THAN i.e.the minimum of:

•       4 weeks notice if employed less than 2 years

•       6 weeks notice if employed for more than 2 years but less than 5 years

•       8 weeks notice if has been employed for more than 5 years

Usually the notice period contained in the CoS comes into play when the employee wants to resign from his job.

However in case of termination - the notice period required may differ according to the ground for termination

Where the grounds for termination is related to retrenchment due to:

•       closure of business

•       shrinkage of operation, restructuring or reorganization

•       change in the business ownership (sale, merger, takeover etc)

•       refusal of the employee to accept a transfer that he is not contractually bound to

then the law requires that a notice to be served to the employee and the period must NOT BE LESS than those prescribed by Sec 12(2) regardless of anything contained in the CoS.

If any party fails to provide any notice of termination - has to pay the other indemnity in lieu of notice for example: one day’s wage for each day of notice short of the required period.

The requirement of notice may be dispensed with :

•       if the party who is supposed to receive it agree to waive his rights

•       in the case of the dismissal for misconduct of the employee

•       in situation where the termination is caused by willful breach of the CoS by either party  e.g:

◦       employee Absence Without Leave more than 2 days - Sec 15 (2)

◦       employer not pay wages according to the law - Sec 15(1)

◦       employee terminate contract due to immediate threat to the safety of him and his family