Employment status Flashcards
(30 cards)
Why does the common law draw a distinction between employees under contracts of service/employment and other types of worker?
(a) employer’s vicarious liability to third parties for their employees’ civil legal wrongs (i.e. their torts) and
(b) the personal common law duty of care owed by employers to employees
Who differentiates between employed earners under contract of service/employment as the ‘self employed’?
The tax, NI and social security systems -different benefits/taxation
How would you maximize your statutory rights?
- Necessary to be an ‘employee’
- E.g. most of the rights contained in the ERA 1996(inc UD and redundancy) an individual must be an ‘employee’ who has entered into or works under a ‘contract of employment’
What is the definition of ‘contract of employment’? And who does it exclude?
Section 230(2) of the ERA defines a 'CoE' as: 'a contract of service or apprenticeship, whether expressed or implied, and (if it is express) whether oral or written' Therefore excludes 'independent contractors' or self-employed persons working under what are characterized as contracts for services
What other statutory rights are conferred on a broader category of ‘worker’?
Protection against unlawful deduction of wages, national minimum wage and Working Time Regulations 1998
What is the definition of ‘worker’?
‘…an individual who has entered into or works under (or, where the employment has ceased, worked under) -
(a) a contract of employment; or
(b) any other contract, whether express or implied and (if it is express) whether oral or written, whereby the individual undertakes to do or perform personally any work or services for another party to the contract…’ (reg 2(1))
What are the relevant cases to do with ‘defining worker’?
Byrne Brothers (Formwork) Ltd v Baird and others (2002) more recently: Cotswold Developments Construction Ltd v Williams (2006)
Byrne Brothers (Formwork) Ltd v Baird and others (2002)
- applicants self-employed building trade workers who started working for BB in 1999
- signed a standard form of ‘subcontractor agreement’
- ’ not entitled to holiday pay, sick pay or pension’
- ‘no liability for contractor if fails to give assignment to subcontractor’
- ‘no obligation to accept work’
- ’ can provide alternative worker…only after express approval of contractor’
FACTS
- worked exclusively at site in MK
- worked under direction of Co + paid/time
- paid tax on basis of self-employed
- no holiday pay over xmas
CLAIM
They were entitled to holiday pay over xmas under the Working Regulations 1998
Depends on whether they are workers within the definition reg 2(1) of ERA 1996
ET held - They were workers under (b) of reg 2(1) and were entitled to holiday pay
(1) applicants undertook personally to perform work or services for the company notwithstanding that they could be replaced - A LIMITED POWER TO APPOINT SUBSTITUTES IS NOT INCONSISTENT WITH AN OBLIGATION OF PERSONAL SERVICE
(2) applicant power to appoint a substitute was qualified and exceptional
(3) worked under close control of the company
(4) significant and indefinite period
(5) paid on time basis
Cotswold Developments Construction Ltd v Williams (2006)
- carpenter for London Underground
- worker but employee? holiday pay and UD
The EAT said there had to be “mutual obligations” to have any sort of contract. The real question for the tribunal was “whether or not there was some minimum amount of work which the facts demonstrated that the claimant had obliged himself to do”.
In order to decide whether someone like Mr Williams was an “employee” or a “worker”, the EAT said that tribunals must ask:
• was there one contract or a succession of shorter assignments?
• if one contract, can it be inferred from the facts that the claimant agreed to undertake a minimum amount of work for the company in return for being given that work, or pay?
• if so, did the employer exercise sufficient control over the individual to make it a contract of employment, giving rise to rights of unfair dismissal, as well as a right to holiday pay?
• if there was insufficient control, or any factor negating employment, was the claimant nevertheless obliged to do some minimum (or reasonable) amount of work personally?
In this case, it said that the tribunal did not seem to have addressed the question of whether or not there was some minimum amount of work that the claimant had to do personally. The EAT therefore allowed his appeal and remitted it to the employment tribunal to look at again.
S212 of ERA 1996 overriding contracts
Dacas v Brook Street Bureau (2004)
- Dacas worked for Wandsworth Council (on assignment through Brook Street) as a cleaner for 4Y
- Dismissed for rudeness with a visitor
CLAIM: Unfair dismissal
HELD
- Brook street had been under no obligation to provide her with work / no obligation to accept it
- Simply because Brook paid her did not make her an employee
- Council had day to day control
- No employment contract between Brook and Dacas
- But IMPLIED CONTRACT between council and Dacas
Protectacoat Firthglow Ltd. v Szilagyi (2009)
- Court must decide what the true relationship is
- If true relationship different from what is described in the document then it is that relationship that defines the contract
- Have the parties ever realistically intended or envisaged that its terms particularly its essential terms would be carried out as written
- essential terms: mutuality of obligation and the obligation of personal performance of work
FACTS
- S worked for PF Ltd.
- Required to sign what purported to be a partnership agreement with another man, Mr Nesbitt, who would work as his assistant
- Provided with equipment
- If someone asked: he was employed by P
- pay goes directly to individuals / not partnership
- Went to P yard each morning and returned after shift
- P terminated the contract after S asked for a scaffold
CLAIM
- Unfair dismissal
P said not an employee nor but ‘partnership agreement’
HELD
- Employment judge held that P wanted to enjoy the advantages of being able to control its installers without the disadvantaged of being an employer
- Partnership agreement and service agreement were a SHAM contract - didn’t reflect true relationship
What is a sham contract?
- working as a contractor but believe you are an employee
- employer attempts to disguise an employment relationship as a contracting arrangement
- one party employer/principal dictates the terms of the agreement, employee/contractor takes it or leaves it
- basic principle said to be that courts and tribunals should focus on the realities of the relationship and not simply its appearance, and that the parties cannot alter the truth of their relationship by putting a different label upon it
- however, when situation is in doubt or is ambiguous an agreement between the parties stipulating what the legal relationship between them is affords strong evidence as to the real relationship and may be decisive
- CASES: , Protectacoat, Autoclenz Ltd.
What are the tests utilized by courts to distinguish contracts of service/employment from other firms of hiring? (i.e. tests for determining who is an ‘employee’)
(a) Control test
(b) Organisation and integration test
(c) ‘Multiple’ test
(d) Entrepreneurial and economic reality test
(e) Mutuality of obligation
(f) Minimum requirements: coming full circle?
Define ‘Control test’
A requirement for a ‘sufficient framework of control’ recognizing that on many cases the employer or controlling management ‘may have no more than a very general idea of how the work is done and no in inclination directly to interfere with it’
Montgomery v Johnson Underwood Ltd. (2001)
Montgomery v Johnson Underwood Ltd. (2001)
THE FACTS
- Mrs Montgomery registered with agency JU Ltd. Got offered a job with a local company and worked there for over two years.
- She was paid through the agency.
- Not doing a good job responding to phone.
- Contract terminated by agency and offered a different position.
- She declined and claimed UD
- The ET had erred in holding that the applicant was employed by the employment agency notwithstanding “little or no control, direction or supervision” of the applicant by the agency
“Mutuality of obligation” and “control” are the irreducible minimum legal requirements for the existence of a contract of employment. In determining whether a contract of employment exists, the guidance of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968) - best guide and should be followed by tribunals.
MULTIPLE TEST
This requires three conditions to be fulfilled: (i) that the servant agrees that, in consideration for a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master, “mutuality of obligation”; (ii) he agrees, expressly or implicitly that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master; and (iii) the other provisions of the contract are consistent with its being a contract of service.
- Test show ‘ mutual obligations’ and the “control” an employer has over the individual.
- A contractual relationship concerning work to be carried out in which there is no control cannot sensibly be called a contract of employment. It is not essential that there is control of how the work should be done. In many cases, the employer or controlling management may have no more than a very general idea of how the work is done and no inclination directly to interfere with it. However, some sufficient framework of control must exist.
- In certain circumstances, an offer of work by an employment agency, even at another’s workplace, accepted by an individual for remuneration to be paid by the agency, could satisfy the requirement of mutual obligation.
- Whether in any given situation “sufficient control” exists to constitute the one party an employer is a matter for the tribunal. In the present case, however, the employment tribunal’s clear finding of lack of control was fatal to its decision that the applicant was an employee of the agency and the appeal would be allowed.
How has the control test evolved over time?
- ‘the master’ could stipulate what, where, how and when work was to be performed ‘the servant’
- employee being subject to the employer’s ‘general directions’, to allow for growing degrees of discretion in manner of performance of obligations by professional/skilled employees
- This is now conceptualized as a requirement for a ‘sufficient framework of control’ recognizing that in many cases the employer or controlling management ‘many have no more than a general idea of how work is done an no inclination directly to interfere with it’
- The Court of Appeal has thus most recently emphasized that the ‘absence of actual day-to-day control’ does not itself determine the question of whether a contract of employment exists.
Define the ‘organisation and integration test’
- ‘…under a contract of service, a man is employed as part of the business,and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it’
- relatively weak test unless complemented by others
Define the ‘Multiple’ test
- In further recognition of the growing complexity of employment relationships, the courts began to apply a multiple (or mixed factor) test
- ‘A contract of service exists if these three conditions are fulfilled:
(1) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service of his master;
(2) He agrees, expressly or implied, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master;
(3) The other provisions of the contract are consistent with its being a contract of service’
CASE: McKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968)
- The Court of Appeal stated that the ET should consider whether there are any terms of the agreement which are inherently inconsistent with the existence of a contract of employment. E.g. if a person is not required to perform his/her work personally
- However a provision allowing for a limited ability to delegate does not necessarily mean that a contract is for services
Byrne Borthers case
Define the ‘entrepreneurial or economic reality’ test
- Problem been looked at the other way: is the worker in reality self-employed? (/his/her own boss)
- '’Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that is YES, then the contract for services. If NO then contract of services.
CASE: Market Investigations Ltd. v Minister of Social Security (1968)
O’Kelly v Trust House Forte CA (1983)
Market Investigations Ltd. v Minister of Social Security (1968)
FACTS
- Mrs Anne Irving from time to time conducted market research questionnaires. There was a dispute between the business for whom she did the surveys, Market Investigations, and the Minister for Social Security; over whether National Insurance contributions should have been made on her behalf. This depended on whether she was an employee.
JUDGEMENT
- Firstly, the Court stipulated that employment is determined by the degree and extent of control that a company exercises over the person’s performance of the task to show ‘a master and servant’ relationship. Secondly, the Court held that in order to distinguish between a contract ‘of service’ and ‘for services,’ the test to be applied is: whether the person is engaging the services “as a person in business on his own account.” Considering the surrounding circumstances and contractual provisions, if the answer to the question is “no,” the person is an employee under a contract ‘of service.’ On the facts of the case, the Court placed weight on the way in which the company exercised control over, for example, the technique of interviewing, subjects of the interviews, content of the interviews, questionnaires, forms and other details concerning the performance of the task, and the way in which the woman was not conducting the business on her own account but on behalf of the company. Accordingly, the Court held that the woman was an employee of the company under a ‘contract of service.’
O’Kelly v Trust House Forte CA (1983)
- For the entrepreneurial test: need ‘to consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account’
- FACTS
-Waiters were hired to do dinner functions at the Grosvenor House Hotel
Their work was organised on the basis of a weekly rota and they required permission to take time off from rostered duties + equipment and uniforms provided - Under control of the respondents
- They were called up for banqueting occasions, and in their contracts it was written ‘that they had no obligation to come’ and employer had no obligation to call them
- Tried to organize a TU - but got dismissed
CLAIM
UD
- TULRCA 1992 - right to organize as ‘employees’
HELD
- contract lack of mutuality / lots of little contracts - no consistency
- they were found self-employed
Define ‘mutuality of obligation’
There are minimum requirements that must be met. Key amongst these is the existence of ‘an irreducible minimum of obligation’ on the part of the employer to offer work and on the employee to accept it
CASE
O’Kelly v Trust House Forte CA (1983)
Nethermere Ltd. v Taverna and Gardiner (1984)
Nethermere Ltd. v Taverna and Gardiner (1984)
FACTS
- Mrs Gardiner was one of a number of outworkers engaged by the company, N. Ltd., which manufactured trousers and also employed FT staff in its factory
- These outworkers were paid PT and sewed trouser flaps and pockets using machines provided by the company
- No fixed hours
- Paid accordingly to the work they did and were not obliged to accept and particular quantity of work
- In general work was delivered to her and collected twice ad day/or daily
CLAIM
-Following a dispute about holiday pay, Mrs Taverna and Mrs Gardiner complained that they had been unfairly dismissed.
- HELD
- Mutual obligation built up over time
- They were not in business for themselves
- Expected a pick up every day
- Depended on the driver to deliver work
- Therefore employees under a contract of service
- Irreducible minimum obligation between the parties whereby the individual was paid for the work done and was obliged to provide his own work and skill in the performance of a service for the employer
What are the conclusions of the Ready Mixed Concrete case?
- mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment
- ‘MO’ ans ‘C’ to a sufficient extent are first identified before looking at the whole
- The Court held that the driver had sufficient freedom in the performance of his contractual obligations as he was free to decide the vehicle, his own labour, fuel, and other requirements in the performance of the task. In lieu of these freedoms, he was an independent contractor and not an employee of the company (Montgomery vJohnson Underwood Ltd. (2001))
