By Omoruyi Edoigiawerie
In Nigeria and indeed all over the world, the contract of employment regulates the terms and conditions of engagement between the employer and the employee.
A contract of employment is defined as – “An agreement entered into between an employer and an employee at the time the employee is hired that expressly outlines the nature of the working relationship, especially stating what compensation the employee will receive in exchange for the specific work performed”
It is a legally binding agreement between two parties, designed to give both parties requisite protection, and for emphasis sake, it is the law that regulates the entire relationship between employer and employee so long as it relates to the relationship that has so arisen.
The reason for this emphasis is that it oftentimes outlives the employment itself and goes on to bind the parties to the performance of one act or the other for some time or even in perpetuity and parties are bound by the terms of the contract of employment.
An employment contract can set performance standards and grounds for termination and with these spelt out, a company may find it easier to hold an employee accountable and terminate an employee’s employment should that employee fail to measure up to the company’s standards. It also helps an employee understand the rights that are available for his/her protection in the course of employment.
It is important to state that the Labour Act which regulates employment and labour matters in Nigeria stipulates that an employer must give an employee a written contract within three months of commencement of employment.
Thus, it is then surprising how some employers recruit staff without entering into a proper contract of employment with them, and for most who do, more often than not, the contracts of employment are grossly inadequate and create more problems than they seek to prevent.
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This failure to make use of written contracts of employment is common in small businesses or the Nigerian parlance “One-Man Businesses”. This can be attributed to the fact that such businesses run/revolve around the individual owner/owners and operate under a semi-formal atmosphere where entrepreneurs assume that their dealings with employees can be handled verbally. This is a big misconception and today accounts for one of the major reasons most businesses fail or falter within the first three years of inception.
The focus of this article is to educate employers, especially entrepreneurs and prospective employees to nudge them to avert their minds to the importance of a ‘contract of employment and its effect on ensuring a healthy working relationship and improving business output.
A contract is defined as an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.
On the other hand, a contract of employment is a contract in itself with terms that govern the relationship between the employer and the employee.
While the validity of a contract is predicated on three major things namely; offer, acceptance, and consideration, on a broader scale, for a contract to be effective, the following must be present: an offer; an acceptance of that offer which results in a meeting of the minds;
a promise to perform;
a valuable consideration
a time or event when performance must be made or duration
terms and conditions for performance, including fulfilling promises;
Performance.
It is instructive to note that a contract of employment should contain the following information which should also be properly written:
1. The full name and address of the employer;
2. The full name and address of the employee;
3. A description of the work for which the employee is employed;
4. The place of work, and, where the employee is required or permitted to work at various places, an indication of this;
5. The date on which the employment is to begin;
6. The employee’s ordinary hours of work and days of work;
7. The employee’s income or the rate and method of calculating the income if on a pro-rated basis;
8. All entitlements of the employee;
9. Confidentiality clause; which should be properly spelt out;
10. Any deductions to be made from the employee’s remuneration;
11. The period of notice required to terminate the employment, or if employment is for a specified period, the date when the employment is to terminate;
12. A list of all other documents that form part of the contract of employment, indicating a place that is reasonably accessible to the employee where a copy of each may be obtained.
Furthermore, a contract of employment also protects the employer and the business as it regulates the behaviour of the employee in the workplace, handling of the company’s trade secrets and intellectual property, disciplinary measures, and reward incentives where applicable.
This is vitally important because all company policies, as well as an employer’s disciplinary code, should form part of the contract of employment. If there is no contract regulating these matters, it becomes quite difficult to take disciplinary action against a recalcitrant employee or seek legal redress when an employee acts in bad faith or a manner detrimental to the interest of the business.
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To put the above in context, oftentimes, growing businesses struggle with employee attrition and one major result of this is the exposure of the company’s trade secrets which employees get acquainted with while in employment. One smart way of curbing this is the inclusion of non-competing clauses in employment contracts; these clauses are used by employers to limit where employees can work if they end up leaving the company within a defined period after the termination of their employment. This is especially important where a competitor tries to recruit or poach a vital employee or where an employee tries to start a competing business and attempts to coax customers from the previous employer.
A written contract of employment prevents unnecessary disputes and the likelihood of litigation, it is, therefore, a no-brainer that any company that wants to build a sustainable business should have in place a properly documented employment protocol and ensure that it enters into a contract of employment with employees at the onset of the employment relationship.
While some scholars may argue that employment contracts can be oral once there is a clear understanding or agreement (meeting of minds) by the parties, it is also generally agreed that for certainty, lucidity and to minimize dispute, the contract is better off written and duly signed by both parties. Oral agreements often lead to misunderstandings.
The absence of a written contract of employment often gives rise to ambiguity in respect of the terms and conditions of the employment, which in turn often leads to conflict between the employee and the employer and possibly an eventual breakdown of the employment relationship. The implication of this is a negative impact on the growth and productivity of the business.
It is often said that a properly drafted contract of employment is a precursor to a good and productive working relationship between an employer and employee and more importantly it ensures that as the business grows, it does not have to grapple with avoidable problems created by a faulty or failed employer/employee relationship.
If our business must thrive and scale the three-year survival mark, they must take the documentation of their employee contracts seriously, this will not just provide clarity, but more importantly, ensure optimal productivity and protection of trade secrets.
Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, a full-service law firm offering bespoke legal services with a focus on start-ups, established businesses, and upscale private clients in Nigeria. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Edoigiawerie and Company LP can be reached by email at hello@uyilaw.com.
