Introduction

The relationship of an employer and an employee is generally governed by the terms of the
contract of employment

Any term or condition in the contract must be consistent with the spirit and letter of law

It must be noted that the terms and conditions laid down by the statutes, collective
agreements and judicial interpretations form part of the contract of service

Therefore, it must incorporate such terms and conditions as laid down under employment
law.

Terms

Terms are maters that mutually agreed by both parties. For example the amount of wages.
Failure to comply with the terms will lead to a breach of the contract. Terms cannot be
unilaterally changed by either party without the consent to the other.

Conditions

Conditions are matters that unilaterally imposed by the employer to the employee. Failure to
comply with the conditions will not breach the contract between the parties. For example the
employer requested the employee to open an account with CIMB bank for the purpose of
payment of wages. If the employee refused and wanted to continue using his Maybank
account, it will not render the contract to be breached. He will receive his wages a little bit
late , that is all.

Sources of terms

Sources of terms refer to the documents that listed the terms and conditions of the
employment contract. Nevertheless the terms and conditions of the contract of employment is
not found in one document like any other commercial contracts i.e. hire purchase contract,
PTPTN loan contract and so on.

An offer letter sent to an employee when he receives an offer for employment usually does
not contain the following information such as the name of his post, job description, job status,
wages, hours of work, days of work, annual leave, sick leaves and termination clause. Thus,
he will need to see whether there are other documents available within the employer’s
organization and whether the documents are applicable to him. These documents are know as
sources of terms.

Unfair Terms of Contract

Every term of contract must be fair and reasonable. A contract of service may be legally
binding contract and may not be inconsistent with any provision of employment law. The
term also may not be valid if it is not just, fair and reasonable and is contrary to the spirit of
industrial relations and labour law

Case study
In Pherdzaha Maneekji Framroz v Nowroji Rustamji Mistri, the defendant was employed
by the plaintiff as a manager. In their agreement, a clause stated that if the defendant ceases
to work for the plaintiff, he cannot commence any similar business in in the Island of
Singapore or any other place where the employer is carrying on a similar business in 5 years.
The defendant’s services were terminated, and he informed the plaintiff of his intention to
commence a similar business on his own account. The plaintiff brought an action claiming an
injunction to restrain him from doing so. It was held that the argument contained in such
clause is clearly in restraint of trade and thus prima facie void because it was not reasonable.
The court held that there did not exist any special circumstances to take the argument out of
the general rule avoiding covenants in restraint of trade.

 
In Acme Canning Corporation Ltd v Lee Kim Seng, the appellant employed the respondent
and the respondent was paid salary according to the terms of the contract of service and the
company was overpaying him to the extent of $85 as food, housing and traveling allowance.
However, he was not paid overtime wages as it was not a condition of service between the
applicant and respondent. It was held that any entitlement of overtime under Eemployment
Ordinance was subject to the conditions which Respondent himself had accepted. There was
well-understood and well-defined oral contract of service between the parties that
Respondent will not be entitled to the overtime wages
 
Implied Terms of Contract

On certain matters, sometimes the contract of service is silent and there is no express
provision under the employment law to fill the gap.

In such situation, it is necessary to imply a term to give efficacy to the contract and make it a
workable agreement in such manner as the parties would clearly have done if they had
applied their minds to the contingency which had arisen.

Therefore, according to the case Reigate v Union Manufacturing Co. (Ramsbottom) Ltd.
And Elton Cop Dyeing Company Ltd., for a term to be implied, it must be reasonable,
necessary to give business efficacy to the contract, obvious, capable of clear expression, and
not contradict any express term of the contract.

Case Study

In Balan v National Electricity Board Employees Union, the applicant was engaged by
Respondent, National Electricity Board Employees Union, as its executive secretary for 5
years. When he was on medical leave, he gave the Respondent 6 months notice of
resignation. He remained on medical leave until the expiry of the notice, and then made a
claim for his salary for the period of 6 months and 1/3 of the medical fee which he had
incurred during that period. The Respondent resisted the claim on the ground that there was
no term in the contract of service for providing salary to the Applicant during the period of
his illness. The Federal Court held that there was an implied term that the applicant would be
entitled to wages during his illness. There was no express or implied term in the contract that
no salary was payable to the applicant during his absence from work on account of illness.

In Gold Coin Limited v Tay Kim Wee, the respondent was employed as head of sales of
promotion by the appellant. Conditions of his letter of appointment provided by the empoyer
stated that "After the development of sales of Equipment and Chicks, a certain amount of
commission will be given from the profits." After 20 years in service, Tay Kim tendered
resignation ending his employment and for the first time claimed commission. The claim was
not entertained by the employer contending that Tay had waived his right to commission by
remaining silent on the matter for 20 years.

It was held that the trial judge is right to decide that a proper construction of the paragraph
there was no concluded contract obliging the employers to pay a commission since the
essential term as to the amount of the commission was left blank. But the trial judge was also
right to imply a contract to pay a quantum merit, which would be fixed after taking into
account what would be a reasonable commission in all the circumstances. Brushing aside the
argument of the employer that Tay had waived his right to commission, the court said that the
selfless activity of one party and the ignorance of the other party does not imply consensual
variation of the contractual term to pay a quantum meruit.
 

Conditions of General Application and Existing Contract of Service

Whether a new condition of general application could be incorporated in the contract of

service if the condition is in conflict with the contract of service?

In the case of Dr. Paramsithy v University of Malaya, the appellant was appointed a lecturer
in University of Malaya and the letter of offer expressly sets out conditions including the
following: "(ii) subject to satisfactory service, passing the prescribed examinations and
fulfilling other relevant conditions you shall be eligible to be considered for confirmation in
your appointment at the end of this period. (ix) You shall at all times, be subjected to the
Constitution of the University of Malaya. The university council passed a resolution requiring
all officers in Group A & B, who are still on probation to pass the Peperiksaan Am Kerajaan
in addition to any other examination as a pre-requisite for confirmation on the posts. The
resolution was embodies in a Service Circular. A contended that the new condition of service
imposed by the Council was invalid and in conflict with the terms and conditions of his
contract of employment, and also in violation of S45(3)(b) of the Constitution of University,
it amounted to a unilateral variation of his contract of employment. It was held that there was
no conflict with his contract as the employment was subjected to the university council.

Less Favourable Condition in Collective Agreement and Contract of Service

Any term or condition of a contract of service, whether such contract was entered into before
or after the coming into force of the Act, which is less favourable to an employee than a term
or condition of service prescribed by the Act or any regulation or order shall be void.

In Pengurus Wilayah Bahagian Kenderaan MARA, Kedah v Hasnah, the respondent was
employed by the appellant as a clerk. She claimed maternity allowance at the rates prescribed
in the Employment Ordinance 1955. Applicant contended that Respondent was not entitled to
the maternity allowance under the Ord. The Ordinance is not applicable to MARA, as MARA
does not fall within the definition of the employer. It was held that under the special
provision of Employment Ordinance, the respondent was entitled to the maternity allowance.
S10(1) of MARA does not exclude the operation of the Employment Ordinance.

Employer-implied terms
(a) Payment of wages

An employer has the implied duty to pay wages to the employee.

In Turner v Sawdon, the Defendant agreed to engage and employ Plaintiff as their
representative salesman for a period of four years. Before the expiration of that time, the
Defendants though willing to continue to pay wages to Plaintiff refused to give any work to
do as their representative salesman. The court was of the view that there was only an implied
term to pay wages. A contract of service requires a consideration for it to be valid. The
consideration on the employer’s part is to pay wages whilst for the employee to do the job.

Employees’ Right to be Provided with Work and Not with Wages only.

Duty to provide work

If an employer provides wages but does not provide work to an employee, the courts are of
the view that this does not amount to breach of contract of service. In Collier v Sunday
Refree Publishing Co., it was held that a contract of employment does not bind the master to
provide the work to the servant, provided he is paid the wages. The general rule that the
obligation to pay wages does not extend to an obligation to provide work was also laid down
in the case Turner v Sawdon. This case set out 3 exceptions to the general rule, namely, (1)
employee paid on a commission basis; (2) employee paid on piece-rated work and (3)
employee in the performing arts industry where the publicity involved may be as
important as the remuneration.

An employer is under no duty to provide an employee with work. However, the courts have
created exceptions to this general rule in certain factual circumstances where the nature of the
employee's work is so important that the employee is required to work at all times in order to
maintain or develop key skill levels; or keep up to date with developments in the industry,
sector or trade within which he works.

Furthermore, an employer may also be under a duty to provide work where there was an
understanding between the employer and employee that the employee would be given a
reasonable amount of work in order that he could enjoy a certain level of earnings; or the
failure to provide the employee with work may lead to a loss of reputation or publicity on the
part of the employee. It will depend on the facts and circumstances of the case.

Garden leave

The first exception can be seen in the case of William Hill Organisation Ltd v Tucker. In this
case, the employer of a senior dealer in a spread betting business requested that he go on
'garden leave' when the dealer served notice that he was terminating his contract of
employment to take up fresh employment with a competitor of the employer. “Garden leave”
describes the situation where an employer requires an employee not to work during the period
of notice of termination of employment, subject to the continued receipt of all other
contractual benefits, including salary, during that period. It was held that in the case of a
highly skilled employee (such as Mr Tucker), in the absence of a clause in the contract of
employment, garden leave will not be possible. If the employee had not been highly skilled,
this case suggests that the employer would have been able to put him on garden leave,
whether or not an express term to that effect had been inserted in his written contract.

Meanwhile, in SG & R Valuation Service v. Boudrais, it was held that where the employees
have breached the contract of employment or some other duty such that they have rendered it
impossible or reasonably impracticable for the employer to provide work, the employer will
be entitled to compel the employees to go on garden leave — even in the absence of a garden
leave clause.
Skilled man
In Langston v AUEW, when the employee worked on night shifts or worked overtime he was
paid his basic wage plus premium payments. His employers suspended him without pay, and
thus took away his opportunity to earn the premium payments. It was held that when an
employer employs a skilled man, is bound to provide him with work. By which I mean that
the man should be given opportunity of his doing work when it is available and he is ready
and willing to do it. A skilled man takes a pride in his work. He does not do it merely to earn
money. He does it so as to keep him busy, to use his skill, and to improve it. Therefore, it is
arguable that in these days a man has, by reason of an implication in the contract, a right to
work.

Ahmad Hariri & Ors v Lembaga Pelahuan Kelang [1982] 2 MLJ 28

Ahmad Hariri & Ors v Lembaga Pelahuan Kelang 69

Facts: As were employed by the Respondent. Some were employed as security officers, some
as assistant security officers and some as junior security assistants. Respondent issued a
Service Circular, and Para 84 of the circular provided for “Dark Allowance” to those who
worked btw 10pm to 6am. Since the Applicants worked in shifts, it included night shifts and
therefore they claimed Dark Allowance. It was contended by Respondent that the Applicants
were not entitled to the dark allowance form the day they had opted to accept the new salaries
and terms and conditions of service as set out in the service circular. Para 177 of Service
Circular No 1 of 1975 : The rules and regulations governing the terms and conditions of
service obtaining in the Statutory Authority shall cease to be applicable to these employees
who opt to accept the New Salaries and terms and conditions of service as set out in the
Service Circular.
Held: Para 177 makes it clear that rules that governed terms and conditions of service, of
those who were given option to accept the terms and conditions as laid down in the service
circular will cease to be applicable to them as from the date of option. Insofar as the
Applicants were concerned, they would be entitled to the benefits provided under the circular
effective from the date of option.
 

No Right to Remain Premises after Termination

General principle is an employee has no right to remain on the premises provided by the
employer after his services are terminated

In Board of Governors of Sekolah Menegah St. Gabriel v Ranjit Singh, the plaintiff hired
the defendant as a watchman and provided him with accommodation. It was held that the
defendant cannot remain on the premises once his services are terminated.
Duty to provide safe system of work

( c) Provide safe system of work

It is the employer’s duty to provide his employees safe and proper system of work. It is his
duty to take reasonable care to avoid exposing his employee to unnecessary risk of injury.

In Manlio Vasta v Inter Ocean Salvage and Towage Ltd, while performing diving operation
for Defendant company, the Plaintiff was injured. On the claim for damages by Plaintiff, the
High Court held that the defendant company had failed to provide safe and proper system of
work, as they did not provide a second diver at the scene, and also they were negligent in that
through their agents they were responsible for the unreasonable delay in brining Plaintiff to
the decomposition chamber at Loyang after the accident. The employer cannot rely on the
doctrine of common employment as a defence.
In Mcdermid v Nash Dredging & Reclamation Co Ltd, the plaintiff was employed by the
defendant on a boat and suffered personal injury by the captain’s negligence. He claimed for
compensation for breach of an implied duty to provide a safe system of work. The House of
Lords held the defendant liable despite the captain being employed by a third party.

The Court explained the duty of an employer towards his employees as regards their safety:
‘an employer owes to his employee a duty to exercise reasonable care to ensure that the
system of work provided for him is a safe one. Secondly, a provision of a safe system of work
has two aspects: (a) the devising of such a system and (b) the operation of it. Thirdly, the duty
concerned has been described alternatively as either personal or non-delegable. The meaning
of these expressions is not self-evident and needs explaining. The essential characteristic of
the duty is that if it is not performed it is no defence for the employer to show that he
delegated his performance to a person, whether his servant or not his servant, whom he
reasonably believed to be competent to perform it. Despite such delegation the employer is
liable for the non-performance of the duty.’ 

In Johnstone v Bloomsbury Health Authority, Dr Johnstone, a junior doctor at University

College Hospital was required under his employment contract to work 40 basic hours, and to
be available on call for a further 48 hours per week. He worked over 88 hours for several
weeks and became ill as a result. He brought an action seeking a declaration that he should
not have to work more than 72 hours per week, and damages in negligence for an alleged
failure to take reasonable care of his safety in the workplace. It was held that a stipulation that
a doctor should work such hours would reasonably foreseeably result in damage to his health.
The express contractual term requiring the 88-hour week had to be placed in context. The
implied term requiring trust and confidence in every employment contract, and the common
law duty to take reasonable steps to provide a safe system of work co-existed, and therefore,
Dr Johnstone had a right to attempt to establish his case at trial.

The duty to provide a safe system of work in also governed by the Occupational Safety and
Health Act 1994, making it an express term for both the Employer and employees.

 
Duty of Care Vicarious Liability

An employer is liable vicariously for not providing safe system of work even if the employee
was doing work under the directions and control of some other person to whom services of an
employee were lent by the employer.
In Chang Fah Lin v United Engineers (M) Sdn Bhd & Ors, the Plaintiff, was one of the
labourers engaged by Defendants for the contruction of a factory. In the course of fixing
aluminum sheets on the roof of the said factory, Plaintiff fell to the ground and sustained
severe injuries. Plaintiff claimed for damages caused by the negligence and breach of
statutory duty. It was held that the Defenfant was liable as there was a relationship of
employer employee and the defendant has control over the works done by the plaintiff, even
though the work had been subcontracted to the other defendents.

Implied terms on the part of the employees

The Basis of Duty

Employment is clearly a relationship to which confidentiality applies, so that there is no need

to concern ourselves with a discussion of what principle if any define such relationship.

Most modern development of protection of confidence has been based on equitable

principles, the law of employment continues to be firmly based on the supposition of a term
in the contract of employment

Confidentiality in Employment

It is the employee’s obligation to respect the confidentiality of info which is the property of
his employer which comes from the general duty of faithful service.

In Wessex Dairies Ltd v Smith, an employee in a dairy canvassed the dairy’s customers while
in the employment of the dairy but to take effect after his employment had terminated. The
question to be determined depended upon the term to be implied in the ordinary case of a
contract of employment in the absence of express agreement, and held that it ‘is a necessary
implication which must be engrafted on such a contract that the servant undertakes to serve
his master with good faith and fidelity’. Greer LJ formulated the implied term thus: ‘during
the continuance of his employment he will act in his employer’s interests and not use the time
for which he is paid by the employers in furthering his own interests.’

(a) Implied term of fidelity

The duty of fidelity can be express and implicit. An employee is expected to safeguard the
employer’s confidential info throughout his employment. Such duty can be divided into 2
situations. During the contract of employment, an employee has duty to observe the said
duty. After termination of the contract, the duty only covers information that falls within the
meaning of a trade secret confidential. In the case of Faccenda Chicken Ltd v Fowler, the
defendant was employed as sales manager of the plaintiff’s company which sells chicken.
Later, the defendant set up his own business selling chicken to majority of former customers
of Faccenda. There’s no express agreement restricting his activity after employment. The
plaintiff asked for damages as the defendant had used confidential sales info relating to
requirements of customers and prices they paid. It was held that while employee remains in
the employment of the employer, he has implied duty not to dispose any info whether
important or not. After contract of service ended, the employee only has the obligation not to
use or disclose trade secret. The obligation does not extend to all information acquired by
employee during his employment.
How can the employer protect his other information that does not fall within the meaning of
trade secret or confidential information equivalent to a trade secret?

(i) restrictive covenant/ restraint of trade

Section 28 of the Contracts Act 1950 prohibits any agreement which restrains a person from
exercising a lawful profession, trade, or business of any kind.
S28 of the Contracts’ Act must be fulfilled o Be a reasonable clause (scope/length) . If can be
replaced with money, clause is not legitimate (cannot affect another’s livelihood) .

In the case of Stamford College Group Sdn Bhd v Raja Abdullah bin Raja Othman, there
was a clause in the contract whereby the lecturer cannot give any lectures anywhere without
the college's approval. It was held that this restriction was not approved of because ‘not at all’
is unreasonable. Argument of the course belonging to them is untrue. Also, asking a lecturer
not to teach would affect his living.

(ii) injunction

Employer must be able to prove:

In order to obtain an injuction, the employer must be able to show an arguable case that this
information falls under Trade Secret or Confidential secrets similar to Trade Secret. The
employer must also identify information involved that cannot be used, which is specific and
not general .

The injunction that is given must be for a reasonable period of time. This is to prevent the
employee from using the advantage against the ex-Employer. What amounts to a reasonable
period of time will depend on each case. The law does not discourage competition as it does
not encourage monopolization. If injunction fails, the employer can apply for compensation.

Duty of care

( c) duty of care

An employee has a duty to do his work with due care. This duty includes the duty to take
good care of the employer’s property. If he fails to do so and the employer suffers loss, the
employee will have to pay compensation for the said loss.

In Lister v Romford Ice & Cold Storage Co Ltd, the defendant was a lorry driver who was
employed by the plaintiffs to drive their lorry to a slaughterhouse in order to collect waste.
The driver took his father with him for the journey and during the course of which, the son
reversed the lorry into the father, causing injury. The House of Lords held that contracts of
employment contain an implied term that an employee owes a duty to take reasonable care of
the employer's property and in the performance of his tasks. So the lorry, which was entrusted
to him, was used carelessly when the driver ran over his father. This meant the son was
responsible, and because no term could be implied that an employee may be indemnified by
the employer or his insurance, the son would have to pay the insurance company back.

The case of Majlis Perbandaran Pulau Pinang v Lim Soo Seng had followed Lister’s case
but altered slightly to prevent injustice. It was held that the effect of s.10(1) of Civil Law Act
is that while an employer may claim contribution as a joint tort feasor form the negligent
servant, the servant cannot claim contribution from the employer. The appellant, local
authority was entitled to recover from the driver damages for breach of that contractual
obligation and that there was no implied term in the contract of service that the Respondent
was entitled to be indemnified by the Appellant.