CMA Class Note on

GE05: Fundamentals of Ethics, Corporate Governance and Business Law

CMA:
Business Level
GE 05: Fundamentals of Ethics, Corporate Governance and Business Law
GE 05– F. The tests used to distinguish an employee from an independent
Class contractor.
No. 18 The law of
employment The express and implied terms of a contract of employment.
& 19 The rights and duties of employers and employees.
(10%)
Notice and dismissal.
Unfair and wrongful dismissal.
The main rules relating to health and safety at work, sanctions on
employers for non-compliance, and remedies for employees.
Social security compensation.
Civil liability for occupational injuries.
Proverbial outcomes:
We will learn to explain the essential elements of an employment contract and the remedies available
following termination of the contract.-
• Be able to explain the differences between employees and independent contractors;
• Able to explain how the contents of a contract of employment are established;
• Be able to explain the distinction between unfair and wrongful dismissal.
• Able to explain how employers and employees are affected by health and safety legislation;
• Be able to describe the consequences of a failure to comply with health and safety legislation.

(Read your Tex Book: Page # 151 to 195)

The tests used to distinguish an employee from an independent contractor.
The law of employment was developed under common law principles as an application of the law of
contract.
What is an employee? An employee is 'an individual who has
It is important to distinguish between a contract of entered into, or works under a contract of
service (employment) and a contract for services employment'.
(independent contractor). Each type of contract has
different rules for taxation, health and safety
provisions, protection of contract and
vicarious liability in tort and contract.
A contract of service is distinguished from a contract
for services usually because the parties express the
agreement to be one of service. This does not always
mean that an employee will not be treated as an
independent contractor by the
court, however; much depends on the three tests. A contract of employment is 'a contract of
• Control test service or apprenticeship, whether express or
• Integration test implied, and (if it is express) whether it is
• Economic reality test oral or in writing.'
A general rule is that an employee is someone who is employed under a contract of service, as
distinguished from an independent contractor, who is someone who works under a contract for services.
However, it is important to note that some statutory provisions apply to 'workers' and this term is wider
than 'employees' and includes those personally performing work or services unless they are truly self-
employed.
The fundamental prerequisite of a contract of employment is that there must be mutual obligations on the
employer to provide, and the employee to perform, work.

A valid employment contract does not have to be a written document.

Page# 131 November 27, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law

The express and implied terms of a contract of employment.

All employees have an employment contract, which can be verbal, written or a combination of both.
Many contracts of employment are purely verbal. While this does not reduce any contractual rights, it
may be difficult to prove the existence of a particular term. A verbal contract may be later evidenced in
writing, for example, by a letter of confirmation sent after the verbal contract has been made. If an
employee is covered by a workplace agreement or an award, it is normal to rely on a verbal contract with
a letter of confirmation, because the workplace agreement or award usually provides details of most of
the conditions of employment.
However, if the employee is not covered by a workplace agreement or award, it is advisable to draw up a
written contract of employment so that the conditions of employment are recorded. The contract should
cover issues such as:
• the main duties of the employee
• the location of the employment site
• whether the employee is casual, part-time or full-time,
• the normal hours of work and whether the employee is entitled to payment for overtime, or time
off in lieu of overtime (usually there are limits on the amount of time that can be accumulated
and overtime must be agreed to in advance)
• the level of salary or wages including whether the employee is entitled to pay rises upon certain
occurrences, including cost of living increases, national wage increases, increments for age or
years of service
• whether the job is for a fixed period or is ongoing
• whether there is a probationary period and the period of probation
• where there is a probationary period, or where the position is for a fixed period but is renewable,
the form of the review process.

The express terms of a contract of employment are those specifically agreed between the parties,
whether verbally or in writing. In many cases these are few (the wage, the hours, the type of work that
has to be done and where), but there are always other terms that are implied (that is, they exist without
being stated or written down). These fall into two categories - those implied by law and those implied by
the circumstances of a particular case. Implied terms do not apply when contradicted by an express term.
Employment contract terms
A contract of employment is an agreement between the employer and employee and will contain some
terms such as:
Statutory Express terms: these Implied terms: these are terms Incorporated
terms: are are terms that have been that are not set out in writing or terms: are things
imposed, varied or specifically mentioned, agreed orally, but may be too that have been
regulated by law either in writing or obvious to need to be recorded. put into contracts
such as the orally, and have been An example of this may be that from work rules
minimum statutory agreed by both employer the employee will not steal or collective
notice period. and employee. from the employer. agreements.
What is the difference between Implied and Express terms?
The rights and duties of both employers and Express contract Implied contract
employees are to be found in the contract of
employment. They are called terms of the contract.
Some of these terms are express terms – that is
they are expressly or specifically stated, either
orally, at the initial interview, say, or in writing.
Express terms include things like pay, hours and holidays.
The law states that certain express terms must be put in writing and handed to the employee in the form
of a written statement of particulars within two months of starting work.

Page# 132 November 27, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
There are other contractual terms called implied terms. These are not expressly or explicitly stated
because, in the main, they are fairly obvious to both parties to the contract of employment.
Occasionally, the courts will imply a term in a contract of employment where an important term has been
left out. Implied terms include statutory rights, such as the right to equal pay and duties, such as a duty
of care.

The rights and duties of employers and employees.

The rights and duties of employers :

The rights of employers The duties of employers: Any employers in addition to special
All employers have the right to stipulations in the contract of employment have the following
appoint and dismiss workers in duties/ obligations:
accordance with proper 1. To provide work to the worker according to the contract of
procedures and to expect employment.
reasonable performance from 2. To provide him with materials and implements necessary for the
their employees. However performance of the work.
employers do not have the right 3. To pay the worker wages and other necessary payments that
to: should be made.
4. To respect the worker’s human dignity.
5. To take all the necessary occupational safety and health measures
• discriminate
and to abide by the standards and directives given by the
against existing or
appropriate authorities in respect of these measures.
potential employees; or
6. To cover the cost of medical examination of the worker
• allow sexual
whenever such medical examination required.
harassment;
7. To give the worker, weekly rest days’ public holidays and leave.
• victimisation; or
8. When the contract of employment is terminated or whenever the
• vilification to occur in
worker so requests, to provide the worker, free of charge, with a
the workplace.
certificate stating the type of work he performed, the length of
service and the salary he was earning.
The rights and duties of employees:
Right to Know - Every employee has the
right to know of hazards that exist in their
workplace.
Right to Participate - Every employee
has the right to participate in matters
relating to health and safety in their
workplace.
Right to Refuse - Every employee has
the right to refuse if they believe there is
an unusual danger present that does not
normally exist in that work.

Notice and dismissal.

What is dismissal?
Dismissal may be identified in three separate circumstances.
• Actual dismissal is usually fairly clear-cut and can be recognised from the words used by an
employer.
• Constructive dismissal, as described earlier, involves a fundamental breach of the employment
contract by the employer.
• Expiry of a fixed-term contract without renewal amounts to a dismissal.
The employee must show that he has in fact been dismissed. The courts often have to debate whether
or not the use of four-letter words by employers constitutes mere abuse or indicates dismissal.

Page# 133 November 27, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
Termination by notice
Where employment is terminated by notice the period given must not be less than the statutory
minimum. As regards termination by notice, the following rules apply.
(a) The period of notice given must not be less than the statutory minimum, whatever the contract
may specify.
(b) It may be given without specific reason for so doing, unless the contract requires otherwise.
(c) Where notice periods are not specified in the contract, reasonable notice should be given. This is
usually regulated by reference to trade practice, length of service and importance of the
position the employee was employed to perform.
Termination of a contract by notice is modified by the statutory code, which imposes a minimum period
of notice of termination to be given on either side.
Notice due from employers Notice due from employees
If an employer terminates the contract of employment by
giving notice, the minimum period of notice to be given is Employers are entitled to one
determined by the employee's length of continuous service in week's notice after one month of
the employer's service as follows: employment otherwise notice is the
• An employee who has been continuously employed period specified in the employment
for one month or more but less than two years is contract.
entitled to not less than one week's notice.
• An employee who has been continuously employed
for two years or more but less than twelve years is
entitled to one week's notice for each year of
continuous employment.
• Any employee who has been employed for twelve
years or more is entitled to twelve weeks' notice.
Garden leave may be offered to the employee. This is where the employer pays the employee, who is
no longer required at the workplace, in lieu of notice.
Termination by dismissal
Summary dismissal and constructive dismissal are both examples of dismissal without proper notice.
In a case of summary dismissal, the employer dismisses the employee without notice. He may do this if
the employee has committed a serious breach of contract. In a case of constructive dismissal, the
employer commits a breach of contract, thereby causing the employee to resign.
Summary dismissal occurs where Constructive dismissal occurs where the employer, although
the employer dismisses the employee willing to continue the employment, repudiates some essential
without notice. term of the contract and the employee resigns. The employer
He may do this if the employee has is liable for breach of contract. For example, the employer
committed a serious breach of might seek unilaterally to impose a complete change in the
contract and, if so, the employer employee's duties.
incurs no liability. To establish constructive dismissal, an employee must show
that:
Misconduct by the employee in their
• His employer has committed a serious breach of
own time may justify summary
contract (a repudiatory breach).
dismissal if it is relevant to their
• He left because of the breach.
position.
• He has not 'waived' the breach, thereby affirming the
However, if he has no sufficient contract.
justification the employer is liable
Examples of breaches of contract which have led to claims of
for breach of contract and the
constructive dismissal include the following.
employee may claim a remedy for
• A reduction in pay
wrongful dismissal.
• A complete change in the nature of the job
Whether the employee's conduct • A failure to follow the prescribed disciplinary
justifies summary dismissal will vary procedure
according to the circumstances of the • A failure to provide a suitable working environment
case.
The breach must be a serious one.
Page# 134 November 27, 2015
Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
Examples of dismissal
a) An employee resigns following their employer's serious repudiatory breach of the employment
contract
b) An employer terminates an employee’s contract with notice
c) An employer fails to renew an employee’s fixed term contract
d) An employee is offered garden leave

Unfair and wrongful dismissal.

Unfair dismissal
Certain employees have a right not to be unfairly dismissed. Breach of that right allows an employee to
claim compensation from a tribunal. To claim for unfair dismissal, the employee must satisfy certain
criteria. Unfair dismissal is an extremely important element of employment protection legislation. The
remedies available following a successful action for wrongful dismissal are limited to damages
compensating for the sum which would have been earned if proper notice had been given. Unfair
dismissal allows for a number of other remedies as well.
Unfair dismissal is a statutory concept introduced by employment protection legislation. As a rule, every
employee has the right not to be unfairly dismissed. Note that the distinction between wrongful and
unfair dismissal depends not so much upon the nature of the dismissal, as on the remedies available.
In order to obtain compensation or other remedies for unfair dismissal the employee must satisfy several
criteria.
(a) Have been continuously employed for one year whether full-time or part-time.
(b) Have been dismissed. In the case of constructive dismissal, the tribunal may have to
determine this.
(c) Have been unfairly dismissed. Dismissal may be unfair even if it is not a breach of
contract by the employer. This is up to the tribunal to determine.
In some cases, a person need not have been employed for the year to claim unfair dismissal. These
exceptions are:
• Where a safety representative is being penalised for carrying out legitimate health and safety
activities
• Where an employee is being denied a statutory right (for example an unlawful deduction from
wages)
• Where the employee is pregnant
The effective date of dismissal is reckoned as follows:
• Where there is termination by notice, the date on which the notice expires
• Where there is termination without notice, the date on which the termination takes effect
• Where an employee's fixed term contract is not renewed, the date on which that term expires
Making a claim:
To claim compensation for unfair dismissal, there are three steps.
(1) The employee must apply to a tribunal within three months of being dismissed.
(2) The employee must show that
• He is a qualifying employee, and
• He has been dismissed
(3) Then the employer must demonstrate:
• What was the only or principal reason for dismissal
• That it was a fair reason under the legislation

Remedies for unfair dismissal

Remedies for unfair dismissal include:
• Reinstatement
• Re-engagement
• Compensation
An employee who alleges unfair dismissal must present his complaint to an employment tribunal
(Labour Court, in Bangladesh) within three months of the effective date of termination.
Page# 135 November 27, 2015
Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
Wrongful dismissal
If an employee is dismissed with shorter notice than the statutory or contractual requirements, or
without notice when summary dismissal is unjustified, the employer can be sued for wrongful dismissal.
Wrongful dismissal is a common law concept arising in specific circumstances and which gives the
employee an action for breach of contract, for example where insufficient notice has been given.
Where the employer has summarily dismissed an employee without notice (as where the employer
becomes insolvent), there may be a claim for damages at common law for wrongful dismissal.
All employees, regardless of the length of employment, are entitled to claim wrongful dismissal but
claimants have a maximum of six years to bring a claim.
Justification of dismissal
The following have been taken as justifiable circumstances.
(a) Willful disobedience of a lawful order. However it must amount to wilful and serious defiance
of authority. A single act of disobedience may not justify immediate dismissal.
(b) Misconduct, in connection with the business or outside it if it is sufficiently grave. For example,
acceptance of a secret commission, disclosure of confidential information, assault on a fellow
employee or even financial embarrassment of an employee in a position of trust.
(c) Dishonesty, where the employee is in a position of particular trust.
(d) Incompetence or neglect, insofar as the employee lacks or fails to use skill which he professes to
have.
(e) Gross negligence, depending on the nature of the job, for example, negligently landing an aeroplane.
(f) Immorality, only if it is likely to affect performance of duties or the reputation of the business.
(g) Drunkenness, only if it occurs in aggravated circumstances such as when driving a vehicle or a train,
or is repeated.
Remedies for wrongful dismissal
Generally, the only effective remedy available to a wrongfully dismissed employee is a claim for
damages based on the loss of earnings. The measure of damages is usually the sum that would have
been earned if proper notice had been given. There is no limit to the amount of compensation available
so this remedy is often used by those in senior positions who have large salaries.
As with any other case of compensation, the wronged party is expected to mitigate his loss by, say,
seeking other employment.
Where breach of contract leaves the employer as the injured party, he may dismiss the employee and
withhold wages. The employer may recover confidential papers, or apply for an injunction to enforce a
valid restrictive covenant. Employment tribunals (Labour Court, in Bangladesh) have jurisdiction to
deal with wrongful dismissal cases, which formerly had to be heard in the civil courts.

The main rules relating to health and safety at work, sanctions on employers for non-
compliance, and remedies for employees. (read your text book page no. 180)

Health and safety

Regarding the Health and Safety at Work, it is the duty of every employer, as far as is practicable, to
ensure the health, safety and welfare of all employees.

In particular, they should:

• Provide and maintain plant and systems of work which are safe and without risk
• Make arrangements to ensure health and safety in relation to the use, handling, storage and
transport of articles and substances
• Provide adequate information, instruction, training and supervision
• Maintain safe places of work
• Ensure there is adequate access in and out
• Provide a safe and healthy working environment.

Page# 136 November 27, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
Social security compensation.
Social security
Other financial protection is available for employees injured at work or unable to work.
• Statutory sick pay and incapacity benefit whilst away from work
• Disablement allowance
• Other supplements are available to dependants.
In UK, where compensation is paid to the employee, the government can recoup social security payments
paid in the last five years from the compensation payment.

Civil liability for occupational injuries.

The compensation for occupational injuries states

that employers must pay a certain amount of money
into a central fund each month. The amount depends
on how dangerous the industry is, how many workers
are employed in the company and the wages paid to
the workers. This fund is called the Compensation
Fund. If workers are injured at work or get a disease
caused by their work (occupational disease), they get
paid out of this fund.
A compensatory award is an award given on common law principles of damages for breach of contract so
that loss may be compensated.
Roundup
• It is important to distinguish between a contract of service (employment) and a contract for
services (independent contractor). Each type of contract has different rules for taxation, health
and safety provisions, protection of contract and vicarious liability in tort and contract.
• A contract of service is distinguished from a contract for services usually because the parties
express the agreement to be one of service. This does not always mean that an employee will not
be treated as an independent contractor by the court, however; much depends on the three tests.
– Control test
– Integration test
– Economic reality test
• The distinction between employed and self-employed is important as to whether certain rights
are available to an individual and how they are treated for tax purposes.
• There are no particular legal rules relating to the commencement of employment – it is really
just like any other contract in requiring offer and acceptance, consideration and intention to
create legal relations.
• The employer has an implied duty at common law to take reasonable care of his employees;
he must select proper staff, materials and provide a safe system of working. The employee has a
duty of faithful service and to exercise care and skill in performance of his duties.
• Statute implies terms into employment contracts, which may not usually be overridden,
regarding pay, maternity leave and work-life balance generally, time off, health and safety and
working time.
• A contract of employment can only be varied if the contract expressly gives that right, or if all
parties consent to the variation.

• Vicarious liability means liability for the torts of others and arises because of a relationship
between the parties.
• Certain employment rights are only available if an employee has a specified period of
continuous employment.
• Statute implies terms into employment contracts to prohibit discrimination in various categories.
In addition to the longstanding legislation preventing discrimination on grounds of sex or race,
there is new legislation which expands the framework considerably.
• It is the duty of every employer, as far as is practicable, to ensure the health, safety and welfare
of all employees. In particular, they should
Page# 137 November 27, 2015
Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
CMA Class Note on
GE05: Fundamentals of Ethics, Corporate Governance and Business Law
Provide and maintain plant and systems of work which are safe and without risk
o
Make arrangements to ensure health and safety in relation to the use, handling,
o
storage and transport of articles and substances
o Provide adequate information, instruction, training and supervision
o Maintain safe places of work
o Ensure there is adequate access in and out
o Provide a safe and healthy working environment.
• The responsibility for making health and safety regulations rests on the government.
• Where employment is terminated by notice the period given must not be less than the statutory
minimum.
• If an employee is dismissed with shorter notice than the statutory or contractual requirements, or
without notice when summary dismissal is unjustified, the employer can be sued for wrongful
dismissal.
• Certain employees have a right not to be unfairly dismissed. Breach of that right allows an
employee to claim compensation from a tribunal. To claim for unfair dismissal, the employee
must satisfy certain criteria.
• Dismissal must be justified if it related to the employee's capability or qualifications, the
employee's conduct, redundancy, legal prohibition or restriction on the employee's continued
employment or some other substantial reason. Some reasons for dismissal are automatically fair
or unfair.
• Even where the reason for dismissal is justified or automatically fair, the tribunal must also
decide whether the employer acted reasonably in the circumstances.
• Remedies for unfair dismissal include:
o Reinstatement
o Re-engagement
o Compensation
Employment Act in Bangladesh

Labour Laws 2006 and Labour Laws (Amendment) 2013

& Bangladesh Labor Rules 2015 :
(1) Classification of workers, Employers
(2) Approval of Service Rules
(3) License of Contracting Agencies
(4) Misconduct, Punishment and Disciplinary Proceedings,
(5) Employer and Employee control under section 28 (ka)
(6) Appointment of Juvenile worker
(7) Behavior with pregnant worker
(8) Health, Safety and Welfare
(9) Function and eligibility of welfare officer
(10)Formation and function of Safety committee
(11)Child Room, Canteen and Canteen Management Committee,
(12)working hour and Over Time calculation
(13)Different type of Leave [Annual, Festival etc], its calculation and payment
(14)Wage and Piece rate worker, wage deduction, ADR for Wage
(15)Trade Union, CBA and its Registration,
(16)Formation and function of Participation Committee
(17)Profit Participation: Its rules and procedure
(18)Formation of Provident Fund, Rules and Trusty Board
(19)Apprenticeship
(20)Power and responsibility of Director of Labor
(21)Power and responsibility of Inspector’
(22)Approval of Factory’s Layout plan and Registration Procedure
(23)Different Forms and Reporting formats and procedure

Page# 138 November 27, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com