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Employment Contracts In Writing or Not

April 1, 1997
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Related Topics: Global Employment Law, Featured Article
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One of the marked differences of the employment process between the United States and most European countries is the extent of written communication between the company and the employee regarding applicable terms and conditions of employment.

In the United States, written correspondence normally will be limited to a short offer letter noting time, place and initial compensation for the new hire. In Europe, however, employers frequently provide a detailed statement of particulars, often accompanied by further generic statements of policy.

The origin of this difference can be traced back to the basic legal systems. The United States, the United Kingdom and Ireland operate under common law, meaning there’s an assumption that contracts made between two equally independent contractors may resolve disputes through the courts. The rest of Europe operates under Roman law, which regulates through statutory general principle relationships between different types of citizens, such as employers and employees.

Thus, the United States has no single body of employment law, and regulations are made at federal, state and local levels. There’s no requirement for written statements of detail in an employment contract—although such statements are becoming more common in contracts for senior managers, fixed-term contracts and contracts with unusual terms and conditions. In these cases, special attention typically is paid to compensation and benefits, confidentiality, noncompetition and termination rights and circumstances.

The European Union (EU) on the other hand, has a European directive requiring employers to provide written proof of a contract of employment—giving the details of terms and conditions within two months of starting work. There are exceptions for employees who are temporary (less than a month) and part-time (less than eight hours a day).

How employers must comply varies among European countries. We’ll take a close look at four of these countries.

The United Kingdom requires a written statement.
Strictly, the following applies to England and Wales, as Scotland and Northern Ireland have different legal systems. But the provisions relating to employment contracts are basically the same for all four regions.

The United Kingdom derives its employment law from three sources: common law (as in the United States), statute law and EU directives. Until the 1960s, individual employment law was governed, as in the States, by the law of contract. Since then, there has been much statute- and EU-driven legislation, and in the area of written contracts, the law now requires all employers to issue a written statement covering:

  1. Name of employer and employee
  2. Date when employment began
  3. Rights to any continuation of previous employment rights
  4. The rate of pay and method of calculating remuneration
  5. The pay periods
  6. Hours of work
  7. Vacation entitlement
  8. Sickness pay schemes
  9. Pension scheme
  10. Place of work
  11. Job title
  12. Disciplinary rules
  13. Grievance procedure
  14. Notice period

Some of these may be covered by reference to a collective agreement or general policy statement.

In Germany, oral contracts are the official word.
Perhaps, surprisingly, there’s no legal requirement to provide a written contract of employment in Germany. Oral agreements are as legally binding as written agreements. The EU directive requires written particulars to be supplied, but this isn’t regarded as a legal contract.

Contractual rights in Germany arise from the Civil Code and many subsequent legislative regulations—all of which are being integrated into the new Labour Law Code. As a result, legal provisions on minimum notice, hours of work, wages, vacations, maternity/paternity rights, works council (or consultative body) rights, confidentiality provisions, equal pay, sickness pay, invention rights and non-competition duties apply automatically whether written or not.

In addition, many terms and conditions are regulated by collective agreement (excluding managerial employees), and these are deemed to form part of the employment contract.Despite the lack of legal requirement, it’s the custom and practice to provide a written contract of employment specifying the particular provisions in relation to the above list as it provides a firmer basis for the resolution of disputes than oral agreements.

Prudence calls for written records in Italy.

Similarly, in Italy there’s no legal requirement for a written contract of employment but, even more so than in Germany, prudence dictates that written particulars are desirable in the complex, and at times confusing, legal structure in Italy.

Contracts of employment in Italy are governed by:

  • The Constitution and some specific regulations
  • Statutes, particularly the Civil Code
  • Regulations by authorities other than the Parliament and the Government
  • Custom and practice
  • Corporate rules determined by collective bargaining.

It’s normal, in establishing in both parties’ interests, that the contract is "indefinite," (or without a prescribed end date) and should provide written details of the following:

  1. Start date
  2. Probationary period
  3. Working hours
  4. Category of employment and duties
  5. Job description
  6. Place of work
  7. Basic salary
  8. Noncompete clause.

In addition, collective bargains often require that written statements of the main terms and conditions of employment are provided—and this will apply equally to managers (dirigenti) who have their own collective agreement between FNDAI, the industrial management, or FNDAC, the commercial management, and the employers.

Contracts are the law in France.
France requires a written contract of employment to be given to an employee within two months of commencing work. The contract must set out the identity of the parties, the place of work, the title of the employee or the type of job or job description, the date of commencement, vacation period, notice period, basic salary, dates of payment, hours of work and relevant collective agreement.

The contract, whether based on a collective agreement or not, operates within the Labour Code, which itself defines minimum notice periods, limits on working hours, minimum wages, vacations, maternity/paternity rights, confidentiality and noncompete duties, and sickness provisions.

The provisions applying to other European countries have similar variations but usually require, either by law or prudence, the provision of a reasonably extensive written contract of employment. The use of references to standard provisions in collective agreements, often nationally based, can limit the length of the employment contract in a number of countries. But rarely do these apply to senior management. In fact, the trend toward written contracts for senior managers in the United States is following the established practice in Europe.

Each country in Europe will be different. Therefore, it’s important to obtain appropriate advice when initiating the contract to ensure that you’re fulfilling the legal requirements and prudent management practice in that particular country.

Global Workforce, April 1997, Vol. 2, No. 2, pp. 12-13.

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