Employment Status

Learning Outcomes:

•Explain the core principles that underpin employment law as it applies

in the UK (or Ireland), including common law, their purpose, origin and
practical implications

•Identify how employment status is established

•Recognise some of the employment rights attached to employee

status
Task

In groups of 2, identify 3 factors that may

suggest that an individual is an employee
 Introduction

• People are able to work under a variety of legal arrangements which may satisfy all
parties concerned, but are difficult to legally analyse

• An employment tribunal will try to establish the relationship between the parties

• There are numerous ‘tests’ devised to help determine which category a particular
person will fall
 Workers

• This can mean ‘anyone who works for a living’, including a managing director of a large
company to a machine operator in a factory

• Employment Rights Act 1996, Section 230

‘an individual who works under a contract of employment, or any other contract whereby
the individual undertakes to do or performs personally any work for another party to the
contract…’

• May have some rights identical to an employee, even though he may be self-employed

• Flynn v Torith Ltd – self-employed joiner entitled to holiday pay

 Employees

• Employment Rights Act 1996, Section 230:

‘an individual who enters into or works under…a contract of employment which is a contract of
service of apprenticeship, whether express or implied, and…whether oral or in writing’

What is the distinction between employees and self-employed persons?

 Contract of Service

• Employee works under a contract OF service, whereas the self-employed person

works under a contract FOR services

• In practice, it is difficult to draw this distinction

• Over the years, the courts have developed a variety of tests to produce a given
result
 Control Test
• Longest established approach

• Master/servant relationship

• Yewens v Noakes (Bramwell LJ)

‘a servant is a person subject to the command of his master as to the manner in
which he shall do his work’

• Skilled workers make it difficult for this test to be applicable in modern society.
This test is no longer conclusive, but is still a central consideration
 Organisational Test

• Stevenson, Jordan and Harrison Ltd v MacDonald and Evans (Denning LJ)
‘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’

• Whittaker v Minister of Pensions and National Insurance – trapeze artist was deemed
integral to the circus business

• Franks v Reuters – individual worked for same company for six years
 Multi-factorial approach

• Movement away from one factor being determinative of employment status

• The question which the courts ask is, looking at the evidence as a whole, is it more likely
that the individual is an employee?

• The test was first utilised in the case of Ready Mixed Concrete. Justice McKenna
established three irreducible minimums, that is, the minimum criteria to which a person
must satisfy to be found as an employee

1. Mutuality of obligations
2. Control
3. Factual matrix
 Mutuality of Obligations
• There must be an obligation on the part of the employer to provide work,
and an equal obligation upon the worker to do the work when offered

• If this is not present, it is likely that no contract of employment exists

• Bebbington v Palmer – paperboy. Failed to turn up, alternate

arrangements made.

• There must be personal service.

• Ready Mixed Concrete (McKenna LJ):

“Freedom for a job either by one’s own hands or by another’s is
inconsistent with a contract of service though a limited or occasional
power of delegation may not be.”

• Substitutes?
 Control
• It is the ‘right to control, not the exercise of
control’

• Walker v Crystal Palace Football Club - held to

be enough for the players to obey general
directions from the club for evidence of a
contract of service, even though players
exercised their own judgement on how to play
 Multifactorial Approach

City and East London FHS Authority v Durcan

•Ran his own dental practice on a self-employed basis

•Once a week, he provided emergency services at a local hospital
•Paid a fixed fee, made his own arrangements for tax and NI
•Arranged a replacement if unable to attend
•Used the hospital premises, equipment and medicine
•Was not subject to control as to how work was to be done
An employment tribunal should consider:

•The contractual provisions and whether they represent the true

relationship between parties
•Degree of control
•Obligation on the employer to provide work (Nethermere Ltd v Gardiner)
•Obligation on the employee to do work (Ahmet v Trusthouse Fore
Catering Ltd)
•Duty of Personal Service (Ready Mixed Concrete v Minister of Pensions
and NI)
•Arrangements for tax, NI, VAT, Statutory sick pay (Davis v New England
College of Arundel)
•Other contractual provisions including holiday pay, sick pay, notice etc.
(Tyne and Clyde Warehouses Ltd v Hamerton)
•Degree of financial risk and the responsibility for investment and
management (Market Investigations Ltd v Minister of Social Security)
 Why is the distinction important?

• An employee must pay secondary Class 1 contributions in respect of employed earners,

whilst self-employed earners pay a flat-rate class 2 contribution.

• LIABILITY – an employer will not normally be vicariously liable for the tortious acts
committed by an independent contractor

• Cassidy v Minister of Health compared to Hillyer v St Bartholomew’s Hospital

• HEALTH & SAFETY – employer owes a duty at common law to to his employees to take
reasonable care for their safety. These duties do not normally apply with respect to
independent contractors.

• STATUTORY RIGHTS – employee is entitled to all the rights contained in the

Employment Rights Act, including a written statement of employment, maternity,
guarantee pay, medical suspension pay etc.