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Chapter 18

Chapter 18 BU231.docx

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Wilfrid Laurier University
Valerie Irie

BU231 Chapter 18 – The Contract of Employment Development of the Law Governing Employment -The principles of modern employment law are derived from the common law rules defining the relationship of master and servant – the contractual relationship between an employer and an employee -Statutes have been passed to establish minimum standards for safe and fair working conditions; this branch of the law as is known as employee welfare legislation -The organization of labour into trade unions has led to the evolution of the collective agreement; a separate body of law known as labour law or the law of collective bargaining governs the relationship between employers, trade unions, and their members Relationship of Employer and Employee Compared with Agency -The relationship of employer and employee is established by a contract that gives one party, the employer, authority to direct and control the work of the other party, the employee -The services that are contracted for may or may not include making contracts with third parties as agent for the employer -Both principals and employers may be liable in tort for the acts of their agents and employees Compared with an Independent Contractor -An independent contractor undertakes to do a specified task such as building a house -The contract between the parties does not create an employer-employee relationship because the contractor is not subject to the supervision of the person engaging him -His job is to produce a specified result, but the means he employs are his own affair -When a firm undertakes work as an independent contractor, any liabilities it incurs in carrying out its task are almost entirely its own -A person engaging an independent contractor is not generally responsible for the contractor’s obligations Employment Relationship at Common Law -At common law, the relationship of employer and employee carries with its responsibilities about: -the employer’s liability to third persons -the notice required to terminate the relationship -the limited reasons an employer could terminate the relationship without notice -assessment of damages for wrongful dismissal The Employer’s Liability to Third Persons Liability in Contract -The promisor will be liable for breach of contract should its own employees do improper work Liability in Tort -A business is liable for damages to a third party for the consequences of any tort an employee may commit in the course of employment -When an employer has been held liable for the negligence of an employee, it has a right to be indemnified by the employee; it may sue the employee BU231 Chapter 18 – The Contract of Employment Notice of Termination of Individual Employment Contracts Implied Term of Reasonable Notice -One way employment contracts differ from other contracts is that they do not usually say how or when they will come to an end -Notice – advance warning that the employment relationship will end -Fixed term – a contract of employment with defined start and end dates -Indefinite hiring – a contract of employment for an undetermined length of time, with no expectation of termination or described end date Length of Reasonable Notice -In the absence of an express term about termination in a contract of employment, the common law rule is that reasonable notice – the acceptable length of notice of termination considering the nature of the contract, intentions of the parties, circumstance of the employment, and characteristics of the employee – shall be given -The usual minimum reasonable notice for a weekly hiring is one clear work-week, and for a monthly hiring, one clear work-month -Key considerations are the length and character of employment, the age of the employee, and the availability of similar employment, given the education, training, and experience of the employee -If an employer wants to dismiss an employee immediately, it may satisfy its obligation to give reasonable notice if it pays the employee for a period equal to the time required for reasonable notice -Payment in lieu of notice – payment of the amount of compensation the employee would have earned during the reasonable notice period - Employers commonly terminate this way to avoid friction with the now-terminated employee -An employee who decides to leave voluntarily also has a contractual obligation to give the employer the same amount of notice as he himself would be entitled to receive for dismissal -Demotion – transferring an employee to a job with less responsibility and/or income potential -Constructive dismissal – a substantial change to an employee’s job that amounts to termination of the existing employment Grounds for Dismissal without Notice The Contractual Basis -An employer need not give notice of termination when it can show that the employee was dismissed for cause -Dismissal for cause – dismissal without notice or further obligation by the employer when the employee’s conduct amount to breach of contract Misconduct -May be a crime associated with employment -Employers set their own standards of conduct for misconduct -Codes of conduct addressing activities such as harassment, discrimination, privacy, and use of technology are used to set standards of appropriate behaviour for employees BU231 Chapter 18 – The Contract of Employment Disobedience -Wilful disobedience of a reasonable and lawful order from an employer is grounds for immediate dismissal without notice -Job description – a description of the responsibilities of a position, including objectives, qualifications, and supervisor Incompetence -The degree of skill an employer may demand depends on partly on the representations made by the employee when seeking the position and partly on the degree of skill ordinarily to be expected of an employee of that category and rate of pay -Incompetence is a cause for dismissal Illness -Permanent disability of constantly recurring illness entitles an employer to consider the contract at an end, regardless of any terms in the contract requiring notice -An employer cannot recover damages from an employee for breach of contract in these circumstances: the contract is discharged by frustration and not by breach Effect of Dismissal -Any of the four grounds for dismissal set out above permits an employer to treat the contract of employment as discharged -Misconduct, disobedience, or incompetence amounts to discharge by the employee’s breach, but illness discharged the contract by frustration -Sometimes an employer has such a general dissatisfaction with or mistrust of an employee that it dismisses him apparently without cause. If the employer should later discover that there was in fact cause for dismissing the employee without notice, it could use these grounds to defeat an action by the employee for wrongful dismissal Failure to Warn -Only the most serious events of cause entitle an employer to immediately terminate an employee after the first incident: -violate an essential term of the employment contract -breach the faith inherent in the relationship -fundamentally or directly conflict with the employee’s obligation to the employer -Most circumstances require an employer to warn the employee that the offending conduct is unacceptable and further occurrences will result in termination Adverse Economic Conditions -Adverse economic conditions do not excuse an employer from its implied obligation to give employees reasonable notice of termination Wrongful Dismissal -If the employer does not follow the rules for cause or reasonable notice, the employee has a cause of action against her employer for breach of the employment contract -This cause of action is ‘wrongful dismissal’ BU231 Chapter 18 – The Contract of Employment Damages -The measure of damages for wrongful dismissal is a particular application of the rules for assessing damages in contracts generally -To calculate the damages, and once the length of reasonable notice is determined, the court multiplies the employee’s rate of pay and the value of fringe benefits by the length of reasonable notice -In addition to damages for the lack of notice, employers may be liable for other damages when they act in bad faith, use hard-ball tactics, or humiliate an employee -Damages may be assessed against the employer for mental anguish, pain and suffering, or in extreme circumstances, punitive damages Mitigation -A party injured by breach of contract is expected to act reasonably in order to mitig
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