Employment contract in English law

An employment contract in English law is a specific kind of contract whereby one person performs work under the direction of another. The two main features of a contract is that work is exchanged for a wage, and that one party stands in a relationship of relative dependence, or inequality of bargaining power. On this basis, statute, and to some extent the common law, requires that compulsory rights are enforceable against the employer.

There are diverging views about the scope by which English law covers employees, as different tests are used for different kinds of employment rights, legislation draws an apparent distinction between a "worker" and an "employee", and the use of these terms are also different from their use in the European Court of Justice and European Union Directives. Under the Employment Rights Act 1996 section 230, an "employee" is anyone with a contract of service, which takes its meaning from a series of court cases that are also applicable for tax and tort law, where different judges have given different views about the meaning of the word. An "employee" is entitled to all types of rights that a worker has, but in addition the rights to reasonable notice before a fair dismissal and redundancy, protection in the event of an employer's insolvency or sale of the business, a statement of the employment contract, rights to take maternity leave or time off for child care, and an occupational pension.

A "worker" is a broader concept in its statutory formulation, and catches more people, but does not carry as many rights. A worker means any person who personally performs work, and is not a client or a customer. A worker is entitled to a minimum wage, holidays, to join a trade union, all anti-discrimination laws, and health and safety protection.

As yet, the UK has not consolidated a comprehensive definition of the people to whom employment rights and duties apply. Statute and case law, both domestic and European, use 2 main definitions, with approximately six others. The EU does have one consolidated definition of a ‘worker’, which is someone who has a contract for work in return for a wage, and also stands as the more vulnerable party to the contract. This reflects the kernel of classical labour law theory, that an employment contract is one infused with “inequality of bargaining power”, and stands as a justification for mandating additional terms to what might otherwise be agreed under a system of total freedom of contract.

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