Red Flags in Service Contracts. The terms contract is a broad one. A good number of people has tried to give a concise definition of contract however, a concept like contract is too complex to be described only as ” a legally binding agreement” . Contract of employment is defined under section 91 of the Labour Act 2004 as “an agreement whether oral or written, express or implied whereby one person agrees to employ another as a worker and that person agrees to serve the employer as a worker”. America Restatement (2nd) of the law of contract 1978, defined contract as ” a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty. A service contract therefore is an agreement whereby a contractor in other words called party to the contract, supplies time, effort, experience and expertise instead of a tangible product. It can be defined in other terms as a form of legally binding agreement between two or more parties in which an exchange of value is made.
A service contract as a legally binding agreement simply implies that the agreement may be enforceable in a court of law . With respect to this write up of red flags in service contract, a service contract can also be referred to as employment contract. Employment is the relationship that exist between two parties, where work is paid for and where one party is s the employer and the other is the employee. The employee work in return for payment in form of salaries from the employer.
The employment contract of Nigeria is expended under the employment and labour relationship to ascribe rights and responsibilities between two parties. It emphasizes the power of the employee. The contract of employment is defined under section 91 of the Labour Act 2004 as ” an agreement whether written or oral expressed or implied whereby a person agree, to employ another as a worker”. With the enforcement of laws that guides the relationship between employee and employer, a contract of employment must be signed and agree upon by both parties to the contract, when signed, it becomes legally binding on the parties involved. Where there is a breach of the contract, the offended party can enforce his right by going to the National Industrial Court for redress.
The main legislation that regulates employment and labour relationship in Nigeria is the Labour Act, others includes the Constitution of the federal republic of Nigeria, the trade union act if 2004, the National Industrial Court Act of 2006 among others.
One of the purpose of an employment contract is that it specifies what is expected from the person providing the service and the person paying for the service, it therefore can protect the interest of both parties. It ensures that quality services is being provided and ensure that the client do not hesitate to pay duly for the services rendered.
Fundamental components of an employment contract
There are factors that constitutes a legal contract of employment, for instance, in a contract of employment, an employer must give the employee a written contract within three months of starting the employment, this is according to the stipulations of section 7 of the Labour Act. In pursuance of the provisions of the Act, an employment contract must also include; the employer, Name and address of the employee, nature of employment etc. It should also define if the contract is for a fixed term or not , it must state when the contract will expire, the period of notice to be given before the termination of the contract as well as stipulate any terms concerning the hours of work, remunerations, insurance etc.
Drafting an employment contract
When drafting an employment contract, there are important provisions that should not be excluded they includes.
The position of the prospective employee, thus should be stated in clear and unambiguous words. It should entail the job requirements, descriptions and essential duties required of the employee.
The contract of employment must also dictate the conditions under which the employer or employee can extend, reduce or terminate the contract terms.
It should define the wages and compensation of employees, whether it is done monthly, weekly or by percentage rate.
The termination of the contract must be in compliance with section 11 of the Labour Act. The contract should make provisions for the intention of parties to terminate the employment.
Type of Employment Contract
Permanent employment contract: this type of contract applies to workers who work regularly and are paid salaries or hourly wage. The employees on these contracts are entitled to full employment rights and benefits like paid holidays, sick leave, maternity leave, pension, overtime, financial support etc.
Part-time employment contracts is similar to full time, but the number of work hours is less.
Fixed term contracts gives an end date for the employment for example 3 months, 6 months or 1 year. The employees also enjoy the same right as permanent employees and can be extended with mutual agreement though not more than four years.
Red flags in an employment contract
One should always ensure that you have a binding contract before you do business with some one, so as to help you protect and manage relationships with your employer. However, this doesn’t implies that you should blindly append your signature to any contract an employee places in front of you. You should always read the prints of the contract meticulously before signing on them. Whilst you are doing these. You should be on the look out for red flags like the following.
Indemnity clause: this is the risk or expenses incurred in the case of a breach of contract. The employer might include this in the employment contract to define the actions he will take if you breach your employment contract. However, it should also make provisions for your right as an employee. If your employer is in breach. If it only favours your employer, then you need to look at it a second time. Indemnity clause should therefore not be one sided.
Non-compete clause: in employment contract, this is included by your employer to place some form of restrictions on the employee especially if he is a highly competitive field. However, the restrictions should be reasonable and limited to a period of a year or two after you have left the organization. In essence, your employer should not have to right to sue you to court every time you go out there to work indefinitely.
Payment terms: the payment terms should be stated clearly, if otherwise then it is a cause for concern. The amount to be paid, when it will be paid ant through what method if payment should be clear, understood and agreed on by both parties.
Termination clauses: This should be read carefully as it could be a red flag in service contract. this should stipulate clearly the conditions under which a contract can be terminated.this will also ensure that your employer can not terminate your contract for no reason without compensation for the work you already done.
Finally, when you are being put under unnecessary pressure to sign a contract and you are not given enough time to review them, then surely you have a reason to be wary of such contract. You should never sign a contract that you have not carefully read. You may need the assistance of an attorney to interprete difficult jargon enclosed in the contract.