Contract of Employment – SS3 Commerce Lesson Note (First Term)

A contract of employment is an agreement in which an employee agrees to work for an employer in return for wages.

Behavioural objectives

By the end of the lesson, students should be able to:

1. state the duties of the employer and the duties of the employee;
2. explain the rights of the employer and the employee;
3. explain what government regulation of business means;
4. give reasons why the government regulates business;
5. describe the methods the government uses to regulate business.

What is a contract of employment?

A contract of employment is a legal agreement between an employer and an employee that sets out the rights and duties of each side.

• Employer: the person or organisation that hires workers and pays them.
• Employee: the person who is hired to work and receives wages.
• Wages: the payment (remuneration) given to the employee for work done.
• Terms: usually cover the duties of the job, pay, working hours, leave and notice of ending the contract.

What are the duties of the employer?

The employer has seven main duties to the employee.

1. Payment of wages: the employer must pay the agreed remuneration.
2. Provision of work: the employer must give the employee work to handle.
3. Holidays: the employer must give the employee leave and holidays.
4. Safety: the employer must take reasonable care of the employee’s safety.
5. Indemnity: the employer must reimburse any expense or loss the employee incurs on the employer’s behalf.
6. Tools: the employer must provide the necessary tools for the work.
7. Responsibility for injury: the employer must accept responsibility for personal injuries the employee suffers while performing his duties.

What are the duties of the employee?

The employee has six main duties to the employer.

1. Duty of care and diligence: the employee must perform his duties in a reasonable and careful manner.
2. Personal service: the employee must do the work himself and not send someone else in his place.
3. Obedience: the employee must obey the lawful and reasonable instructions of the employer.
4. Secrecy: the employee must not give the employer’s confidential information to third parties.
5. Good faith: the employee must not allow his own interest to conflict with his duties.
6. No secret profit: the employee must not make a hidden gain from his job, such as taking a secret commission from a supplier.

What are the rights of the employer and the employee?

The rights of each party match the duties of the other party.

What is the additional right of the employer?

• Inventions and patents: the employer enjoys the benefits of an employee’s invention, if it was made while the employee was working for the employer.

What is government regulation of business?

Government regulation of business is the set of ways by which the government controls the activities of business organisations to ensure social and economic order in society.

Why does the government regulate business?

The government regulates business for seven main reasons.

1. Revenue: to raise money through taxes, such as VAT and education tax.
2. Consumer protection: to protect consumers from exploitation by producers and middlemen, for example by ensuring quality products and regular supply of essential goods and services.
3. Uniformity: to ensure uniform commercial practices.
4. Industrial peace: to protect employers and employees.
5. International law: to ensure conformity to international law and protocols, such as IATA guidelines in the aviation sector.
6. Even development: to develop all parts of the country evenly and promote critical sectors of the economy.
7. Economic growth: to promote the general improvement of the economy.

How does the government regulate business?

The government regulates business through eight main methods: registration of business, patents, trade marks, copyrights, approval of business location, government agencies, regulation of ownership and statutory obligations.

1. Registration of business

• Meaning: the government records business organisations so that it has accurate and up-to-date figures on their number and types.
• Example: the Corporate Affairs Commission registers limited liability companies.

2. Patents (patent rights)

• Meaning: a right granted by law to the inventor of a machine or production process to enjoy the benefits of his effort for a given period.
• After the period: other people may copy or imitate the invention or process.

3. Trade marks

• Meaning: a distinctive symbol, design or special mark used to tell the products of one business from those of others.
• Registration: the owner registers the mark and gains the exclusive right to use it on his product.
• Importance: it is most useful when products are advertised or promoted.
• Examples: the Coca-Cola continuous ribbon and the Mercedes-Benz star.

4. Copyrights

• Meaning: the sole right of the owner of literary, artistic, dramatic or musical works to reproduce them and enjoy the financial benefits for a specific period.
• Permission: no one else may reproduce the work without written permission from the copyright owner.
• Duration: copyright lasts for a definite period set by law, after which it expires.

5. Approval of business location

• Meaning: the government sometimes approves where a business may be sited.
• Example: the CBN directive to banks to open branches in rural areas.

6. Government agencies

• Meaning: bodies set up to monitor and enforce quality, price standards or laws.
• SON: the Standards Organisation of Nigeria, which sets and checks product standards.
• NAFDAC: the National Agency for Food and Drug Administration and Control, which regulates food, drugs and similar products.
• FEPA: the Federal Environmental Protection Agency, which dealt with environmental protection.

7. Regulation of ownership of business

• Indigenisation: a policy that places ownership of businesses in the hands of Nigerians.
• Commercialisation: a policy that requires government-owned enterprises to run on commercial lines and earn part of their income.
• Privatisation: a policy that transfers government-owned enterprises to private owners.

8. Statutory obligations

• Meaning: duties that the law requires a business to carry out.
• Examples: payment of corporation tax and publication of accounts.

What is the difference between a patent, a trade mark and a copyright?

A patent protects an invention, a trade mark protects a symbol that identifies a product, and a copyright protects written, artistic or musical work.

Evaluation

1. State four duties of the employer in his relationship with the employee.
2. Mention three rights of the employer.
3. Explain four ways by which the government regulates business.
4. State four reasons why the government regulates business activities in Nigeria.
5. The agency in Nigeria which ensures that products meet government quality specifications is the (a) MAN (b) FBPA (c) SON (d) NLC.

Assignment

1. Explain patent, trade mark and copyright, and give one example of each.