EMPLOYMENT LAWWEEK 2 :

CONTRACTUAL RELATIONSHIP BETWEEN EMPLOYER- EMPLOYEE1

LEARNING OUTCOME The students will be able to;

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DEFINITION OF CONTRACT OF SERVICES

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From the definition, it looks like a contract of service can be in writing, oral, express or implied. But the Regulation 8 of the Employment Regulation 1957 states:

"Employer to furnish certified copy of particulars under regulation 5(b);"

Regulation 5(b) states as follow: "Details of terms and conditions of employment:

Name of employee and NRIC No. Occupation or appointment; wage rates (excluding other allowances); Other allowances payable and rates; Rates for overtime work;

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Other benefits; Agreed normal hour of work per day;

Agreed period of notice for termination of

employment or wages in lieu; No. of days

of holidays and annual leave; Wage

period. "

Thus, a contract of service is in fact should be in writing.

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THE ELEMENTS OF VALID CONTRACT

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1) MUST HAVE THE AGREEMENT – OFFER AND ACCEPTANCE.

Advertisement in the newspaper is not an offer.

Offer letter may be issued by the employer and must be accepted by the employee.

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2) MUST HAVE A CONSIDERATION

The employee must perform the work and the employer must pay wages.

It is an executory contract- The considerations are not given when the contract is formed.

Employee Employer

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3) MUST HAVE INTENTION TO CREATE LEGAL RELATIONSHIP

Must not voluntarily done. Voluntarily work is not a contract of service

even the person is given certain amount of money.

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4) BOTH PARTIES MUST HAVE THE CAPACITY TO ENTER INTO A CONTRACT

An employer cannot be deemed bankrupt.

Children : majority age is 18 years

Akta (Pekerjaan) Kanak-kanak dan Orang Muda 1966, section 13 –

The age for children is 14 years old The age for ‘orang muda’ is 14-16 years old’ Children can become the employee but not

employer. They can sue to claim any damages without their guardian ad litem. 11

5. BOTH PARTIES MUST AGREE ON THE TERMS OF THE CONTRACT

- There should be no element of duress, fraud or misrepresentation.

6. THE SUBJECT MATTER IS NOT AGAINST THE LAW

- The contract to do illegal act is not a valid contract.

- Similarly the contract to do immoral acts. - illegal smuggling, prostitution, selling

pirated goods etc.12

THE IMPORTANCE OF CONTRACT

The contract of employment plays a twofold role.

1) It creates a contractual relationship between the employer and the employee.

These elements are: the nature of the work, working time, the place where work is to be performed, pay, and the duration of the contract itself. These elements constitute the subject of obligations which are entered into when the employee is hired, or the formalities stipulated in order to define their nature or the manner in which they are to be fulfilled.

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2) Secondly, it serves to formalize the employee's position, fitting him or her into the institutional relationships within the enterprise which give rise to various rights concerning representation or participation in trade union activity.

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CONTRACT OF SERVICE & CONTRACT FOR SERVICE

A contract OF service - is an agreement whereby one person agrees

to employ another as an employee and the other agrees to serve his/her employer as an employee.

- The employer would need to contribute EPF and comply with relevant statutory benefits i.e the Employment Act 1955 such as annual leave, sick leave and et cetera for its employees engaged under a contract of service.

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A contract FOR service is an agreement whereby a person is engaged as an

independent contractor, such as a self-employed person or vendor engaged for a fee to carry out an assignment or a project for the company. Under such a work arrangement, there is no employer-employee relationship, and the employee is not covered by the Employment Act.

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The differences:

1) In the contract of service, the employer has the control over the employee

2) The employer in the contract of service is vicariously liable for the offence made by the employee.

3) The statutes in Malaysia mostly deal with contract of service.

Several test to differentiate between these two but they are not exhaustive

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THE TERMS OF CONTRACT There are two types; 1) Express terms 2) Implied terms

The express terms of a contract of employment are those specifically agreed between the parties, whether verbally or in writing.

The implied terms are those are not specifically discussed by the parties but are;

1) Implied by laws- the Employment Act 1955 2) Implied by practice 3) Implied by collective agreements between

employers and trade union18