An Introduction to employment law

The Legal Aspects of the Organisation of the Workforce (Employment Law)

 Employees versus workers
 When a Contract of Employment Exists (more recent developments in the test)
 Workers/Independent Contractors/other categories
 Casual Workers
 Agency Workers
 Vicarious Liability

Employee
 “An individual who has entered into or works under (or, where the employment has ceased, worked
under) a contract of employment” (Sect. 230(1) of the ERA)

What is a contract of employment?

 “A contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or
in writing” (sect. 230(2) of ERA 1996)

Main typologies of Contracts

 Contract of service (between an employer and employee)

 Contract for services (between an employer and worker/an independent contractor)

Why is the distinction important?

 Vicarious liability for an employee
 Implied terms in contract of employment
 Statutory protection (unfair dismissal)
 Tax-national insurance

How to identify a contract of service

Control Test:
 Employer directs ends and means
 Employer directs what work is done and how and where and when it is done

Performing Rights Society v Mitchell and Booker [1924] 1 K.B. 762

Whittaker v Minister of Pensions [1967] 1 Q.B. 156

“Organisation” test/integration test (the Lord Denning 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”.
 Therefore, the contract of service exists also if the control is missing

Stevenson, Jordan & Harrison Limited v MacDonald & Evans Ltd. [1952] 1 T. L.R. 101

Multiple factor test/economic reality test

 What is relevant is the substance of the relationship rather than the form
 Multiplicity of different factors and criteria according to the circumstances

Contract of Service: Multiple test

 Market Investigations v Minister of Social Security [1968] 3 All ER 732
 Researchers were in charge of carrying out market research for MI
 A controversy arose between the company and the Minister as to the payment of social security
 It was held that a contract existed because
 The control
 Provision of tools & equipment
 Hiring of helpers
 The financial risk (on the company itself)
 Opportunity to profit from good work

Contract of service: Multiple test (mutuality)

 Is the employer required to provide work when it is available and is the individual required to do it
when it is provided?
 Important to resolve cases of regular casuals?
 O’Kelly v Trusthouse Forte plc [1983] I.C.R. 728
 Carmichael v National Power plc [2000] I.R.L.R. 43
 Montgomery v Johnson Underwood ltd [2001] IRLR 269
 Nethermere (St Neots (Ltd) v Taverna [1984] I.C.R. 612

Multiple Test (contd)

 Other terms of the contract may be consistent with a contract of service; among others:
 provision of equipment
 hiring of helpers
 financial risk
 opportunity to profit
 label or name of contract
 income tax and national insurance

Contract for Services: the Worker

Who is a worker?
 “an individual who has entered into, or works under (or, where the employment has ceased, worked
under) –

 a contract of employment;
 any other contract, whether express or implied and (if it express) whether oral or in writing, whereby
the individual undertakes to do or perform personally any work or service for another party to the
contract whose status is not by virtue of the contract that of a client or customer of any profession
or business undertaking carried on by the individual.”

 Sect. 230(3) of ERA 1996

 Characteristics
 Mutuality of obligations
 Personal service on the side of the individual providing the services
 The recipient of the services must not be the client or customer of the individual providing the services

Worker vs Employee
 Benefit for the businesses
 A worker more flexible
 Possibility to dismiss him at any time
 No application of the legislation in the matter of redundancy
 The worker nonetheless entitled to basic protection (discrimination; working time regulations)
 Worker more frustrated (no guarantee for his job; instability; personal life)
 See the example of zero-hour contracts