Categorization of Employment Status in UK Law

Employee, worker and self employed persons should enjoy different legal status as the kind of work done by each category of persons is different from each other. However; it is unfortunate to mention that their status is not being clearly recognized in the UK employment law. There are different legal implications which are associated to each of these categories taking into account rights and liabilities. It is important to classify the status of ‘employee’, ‘worker’ and ‘self employed’. Many experts in the field have different views about the status of each of the persons in the category. Employees enjoy a better legal status than workers and self employed persons as employees enjoy benefits like industrial rights, state pensions, sickness and unemployment protection. There are 3 major problems in identifying the status of the employee, worker and the self employed:

Insufficient legislative regulation

The problems due to management practices and

Judicial Engineering through the common law.

In Quninnen v Hovell [1984] IRLR 227, it was held that all workers, no matter what their status be are protected by Sex Discrimintations Act 1975 however the protection awarded by the employment law only defends employees from unfair dismissal, redundancy compensation and maternity rights.

Let us now explore these 3 key problems which are hindrance in setting legal status to each of the categories.

Insufficient legislative regulation

Section 230(1) of Employment Rights Act 1996 states employee as an individual who has entered into or works under a contract of an employment whereas Sec 82(1) of the Sex Discrimination Act 1975 defines it as employment under a contract of service or a contract personally to execute any work or labour. ‘Contract of employment’ does not qualify as it is not being made clear in both the above mentioned acts, hence the burden lies on the courts to define it. Workers consider contractual remedies more effective form of job protection due to the alleged weakness of this legislative base of employment rights.

There is disagreement on part time workers and the self employed due to inadequate protection set by the UK government. The Employment Rights in other European communities are reliable as compared to the UK. In most of the national constitutions, the values of equal treatment of the employment despite of the status are recognised. [1] The British Government then passed in reaction to the critics Part-Time workers (Prevention of Less Favourable Treatment) Regulations 2000 in which the same hourly rate of pay should be allotted the part-time workers along with privilege of annual leave and adequate training. The efficiency of the regulations needs to be judged or examined with systematic practical study.

The Statutes are not effective to go hand in hand with the development in employment law. Painter

The problems due to Management Practices

In The President of the Methodist Conference v Parfitt [1984] ICR 176 May J approved that no test is appropriate to split contracts of service and contracts for services in all cases as the work assigned to the people has become more frequent, different and systematic. In the views of Rubenstein, the management practice can unlock the prospect for the employers and their advisors to prepare contracts which will contradict the employment status for certain workers by adding a substitution clause in their contracts. In Byrne Brothers v Baird [2002] IRLR 96, the Court has held that this approach would not exist if it is presented before the court. Hence the gradual basis of the enforcement is considered as fictitious and the matter will only be enforced by the court when it is brought to the Court of Law.

Under the Social Security Contribution and Benefits Act 1992, an employer must pay secondary Class 1 contributions for employed earners and is exempted from deducting Pay-As-You-Earn (PAYE) income tax under schedule E of the same Act, where self-employed earners will pay a different contribution under Class 2. This leads to the concern to evade the unnecessary tax, where the costs can be avoided if the workers are not categorised as employees. Under the Health and Safety Act 1974, it can be witnessed that health and safety measures are more for employees than that of Independent Contractors. It was observed by Selwyn that the Court has the tendency to incline before ‘employees’ than the ‘independent contractors’. In Hillyer v St. Bartholomews’ Hospital [1909] 2KB 820, it was held that by avoiding the ‘employee’ status the employer can avoid the vicarious liability for tortuous act by the management for the independent contractors whereas in Cassidy v Ministry of Health [1951] 2 KB 598, the management is not exempted from being the secondary defendant in a dispute subject to certain factors. The contract of employment should be considered to exist, if the worker performs services for another unless it falls under 2 exceptions: 1) it is due to the performance of tasks, coupled with uncertain duration of time and 2) ‘no badges of membership’ of the firm’s organisation apply, such as compliance with the corporate dress code of the company. Hence, through this it can be justified that the Cost Minimisation measure is also one of the reasons which persuades the management decision.

The House of Lords has given its valuable guidance in deciding the case of Carmichael and Leese v National Power Plc [1999] IRLR 43 which worries the management practices in the industry which proves that the Court’s attitude has been more accessible. The Court of Appeal and the House of Lords had different opinions in the above mentioned case. The Court of Appeal was of the opinion that the phrase ‘casual as required’ consisted the important ingredient of mutual commitment and trust between the employer and the employee. Whereas the House of Lords opposed and reversed the decision, on the basis of the fact and the claimants were not entitled to a written statement of particulars which indicated that they are not considered as the employees. On the other hand, in resolving the challenge Lord Chancellor and Lord Hoffman ordered that the parties in dispute should first look at their contractual documents which contain the terms and conditions of employment and in case of any discrepancies the parties should refer to the conduct of both parties as proof. Painter and Holmes favoured this approach to fight superficial language of employment contract [2] , even though it is absolutely a subjective question to decide the conduct of both parties which will undoubtedly lead them to settle their differences before the court. On the contrary, the House of Lords decision had attracted harsh criticism from the feminist writers who mentioned that the Court of Appeals approach is seen as more protecting of the women rights within employment. The fact is that when it comes to labelling the workers as ‘casual staff’ in the attempts to avoid employment rights and obligations imposed on them, the human resource has always faced challenges to convince the management.

Judicial Format and Common Law

Judicial system is one of the reasons which has been a major obligation in overshadowing the difference between the employee, worker and self-employed.

The Key Tests under the judicial format to be analyzed and studied are:

Control

Integration

Mutuality of Obligations and

Economic Reality [3]

a) In Performing Rights Society v Mitchell and Booker [1924] 1 KB 762, it was observed that initially the court was obsessed with the certain level of control on when and how the work is done. But the said obsession became myth in Cassidy v Minister of Health [1951] 2 KB 598 as control test is inadequate test in a current industrial culture. During the medieval period, the concept of control has been emerged from the thought of ‘service’, hence it was observed by Clark and Wedderburn that the Victoria judges preferred the command and control test. The scope of control was emphasized in Gould v. Minister of National Insurance (1951) 1 CLC 6485 when an issue was raised as to whether the stage artist is liable for National Insurance contributions as an employee or self employed person. The performer had agreed to perform for one week on a standard contract which consisted of him agreeing to attend all rehearsals, to abide by all management rules including using inappropriate gestures and language and to accept management instructions. As the determining factor was the degree of control implemented, the judge concluded that the management had no control over an artist’s performance and were only eligible to enforce rules that would harm the audience and not affect the working of the theatre. The artist’s performance depended on the skill, personality and creativity of the performer therefore; the contract was a contract for services only

b) This was then followed by the Integration Test.

Whether the work is an essential part of the assignment or purely an addition to accomplish the aim of the assignment, this was presented in Stevenson, Jordan and Harrison Ltd. v McDonald and Evans [1952] 1 TLR 101.The Integration Test was pioneered by Lord Denning. this approach is not silent from the academic outcry, where Winder mentioned that the problem of this test was due to the failure of Lord Denning in clarifying the meaning of ‘integration’ for the sake of clarity This approach is not silent from the academic outcry, where Winder mentioned that the problem of this test was due to the failure of Lord Denning in clarifying the meaning of ‘integration’ for the sake of clarity [4] .this approach is not silent from the academic outcry, where Winder mentioned that the problem of this test was due to the failure of Lord Denning in clarifying the meaning of ‘integration’ for the sake of claritythis approach is not silent from the academic outcry, where Winder mentioned that the problem of this test was due to the failure of Lord Denning in clarifying the meaning of ‘integration’ for the sake of clarity

c) The Court of Appeal initiated a test called mutuality obligation which was supported by O’Kelly and others v Trusthouse Forte Plc [1983] IRLR 369, it was alleged that in absence of mutuality of obligation on both parties and the intention of the parties which was based on the customs and practices within the industry not to create an employment relationship, the claimants’ argument that they should be considered as a group of employees had been dismissed. In Ready Mixed Concrete (South East) v Minister of Pensions and National Insurance [1968] 2 QB 497, Mckenna J laid down 3 conditions which needed to exist if there was a contract of

Whether the employee provided services in consideration of wages.

The employer has the right control over the servant or employee.

All other provisions needed to be kept consistent with a contract of service.

Market Investigations v Minister of Social Security [1969] 2 QB 173 witness the extension of the test “in business of own account” and also affirmed that control was no longer or important factor in establishing of an employee within their workforce. It also suggested that, individual aspect that exists externally on the terms of the contractual relationship should be considered as the type of relationship with the engager in an order of an engagement to be considered. The Privy Council has assented on this set of formula in Lee v Chung and Shun Chung Construction and Engineering Company Ltd [1990] IRLR 236.

The court of appeal held in the case of Nethermere (St Neots) Ltd v Taverna and others [1984] ICR 612 that home workers are treated as employees only if the work is given on regular basis and there was a strong ingredient of control by the employer and also there is a mutuality of obligation due to the term of the relationship. Similarly Dacas v Brook St. Bureau [2004] IRLR 423 highlighted [5] that the client end user can be the employer of an agency worker, provided mutuality of obligation and control exist, in Muscat v Cable and Wireless Plc [2006] EWCA Civ 220 the Court of Appeal also approved the same. The strategies applied are much appreciated by critics. The Courts should consider the benefit and interest of the workers before thinking about the enterprises in the opinion of McKendrick. Russell not only supported this approach suggested that by employing and initiating the economic reality test, no party will be able to hide the true nature of relationship and anticipated that this test should be re-considered in the UK Employment Law

The employees, workers and self employed had to face another issue which was created by the court while implementing the rules while trying to generate a complete regulation. The rights were intentionally preserved to settle on the classification depending on particular case by the judges. The Court of Appeal has described it in the case of Young and Wood Ltd v West [1980] IRLR 201which predicts to approve the courts wide margin of discretion. O’Kelly v Trust House Forte Plc [1984] 1 QB 90 made it very clear that the question of employment status is one of the laws with blend of question of fact for the course discretion. Pitt came to the conclusion that the different tribunals would come to different solutions even if they are presented with the same question if they had to treat the question as one of the facts.

To conclude it can be understood that these are the three key problems in categorisation of employment status of employee, worker and self employed person. The government has to decide and address this challenge by setting and passing a new legislation. The legislative regulations which doesn’t support the changes in employment sector. The management is responsible for making superficial employment contracts and initiating cost cutting methods. The judges have failed in setting up the limitations due to the beginning of various tests and their motive and intentions to maintain their judgements to understand these notions.