What is an Employee - Employment Law Essay

It has always been problematic to define an employee. The consequences of being an employee can have far reaching consequences for both employee and employer. Many employers use the wording “independent contractor” to avoid the responsibility that arises from the employer employee relationship. The brief will show that the courts look at the substance of the relationship and not what the parties call it. The brief will compare the position between Australia, the United Kingdom, Germany and France. The brief will also refer to the famous case of Bosman where the ECJ held that Article 48 of the EEC Treaty prohibits clubs from limiting the free movement of workers in the EU. The brief will endeavour to show that the result of who an employee is will be similar in these countries. The brief will further refer to the article by Cavalier and support the author’s proposed definition of employee.

Introduction

The determination of who is an employee is important for the purposes of determining who is responsible for tax and National Insurance contributions, injury in the workplace and damage caused to others. An employer is strictly liable for torts that have been committed by employees whilst carrying out their duty as employee. It further determines what contractual rights the company has to control the activities of the worker and what specific statutory rights the worker has acquired such as unfair dismissal compensation, redundancy pay and maternity rights. [1]

The first and most important question is therefore how one determines whether a worker is an employee, an independent contractor or a self employed person. The importance of the description is fully understood when one realises that most legislation that deals with rights in the workplace only refer to the rights of employees. [2]

Discussion

Australia

Team players who are remunerated for their services will in the great majority of cases be considered legally to be an employee of the club. [3] In Buckley [4] the court held that the fact that football is a sport does not mean that a man paid to play football is not engaged in employment. The position of a professional footballer in relation to his club is that of an employee of the club.

The courts in Australia have determined that it is irrelevant what the contract calls the person. If the contract or relationship is in fact one of employer-employee calling it something else does not change the nature of the relationship. [5] The courts adopted certain indicators in determining whether someone is an employee or an independent contractor. The most important factor is the control over the player such as the right to control when, where and how the player must provide the services. [6] Other factors the court will further consider are the manner of payment for the services, who supplies and maintains the equipment and the working hours. The courts also consider whether the person is entitled to holidays, whether income tax is withheld and the degree to which the person can delegate the performance of his duty to others. [7]

A player will only in exceptional circumstances be something other than an employee in Australia. In Hughes [8] we are faced with a unique situation in that the court held that Hughes was an independent contractor as the club could not tell him when he had to play and he was paid for the runs he scored and not in a manner of remuneration of an employee.

European Union

General

The classification of contracts of employment in the EU amongst Member States highlights the fact that various regulatory frameworks revolve around the concept of employment contract and employee. The technique that the Member States adopt to define the employment contract is similar between Member States. English French and German Law employ the same method to classify an employment contract.In Bosman [9] the ECJ decided the case on the basis that Article 48 of the EEC Treaty [10] provided for the free movement of workers in the EU and any prohibition of such free movement is against the said provision. In terms of the decision Bosman who was a minor league football player was determined to be an employee and entitled to freedom of movement. The court held that the club did not own the player as was popularly thought. The club owned the registration of the player.

England

In England there is a distinction between those who provide their labour under a contract of service (an employee) and those who provide their services under a contract for services (independent contractor). In the last mentioned the relationship is governed by the contract for services.

The Employment Rights Act 1996 provides a definition of employee and contract of employment but does not contain a definition of “self employed’, “independent contractor” or “contract for services”.The courts in England also do not rely on what the contract is called but look at the nature of the relationship between the parties. In Re Porter [11] the court said: “The parties cannot create something which has every feature of a rooster but call it a duck and insist that everybody else recognise it as a duck” It is clear that the courts will not take heed of the name of the contract but the actual nature of the relationship between the parties.

As is the case in Australia the courts have also laid down certain tests to ascertain whether someone is an employee or independent contractor. In the beginning the courts only applied the control test but it has now developed certain indicators which will determine the nature of the contract. The absence of one or more of the indicators does not make the contract one for the supply of services.A contract of service will exist if the contract complies with three conditions. The first condition is that the servant agrees that in consideration of a payment he or she will provide his or her own work and skill in the performance of some services for the master. Secondly, the person expressly or impliedly agrees that in return for the payment he or she will in the performance of the service be subject to the control of the other party to a sufficient degree to make the other person his or her master. Lastly the court held that the other provisions of the contract must be consistent with it being a contact of service. [12]

In Ready Mix Concrete [13] the company introduced a system of owner drivers who would be treated as independent contractors. Mr Latimer who has been in the employ of the company for many years entered into an extensive contract in the capacity as independent contractor. He purchased a truck that was painted in the colours of the company and he was entitled to employ substitute drivers. He was further required to wear the company’s uniform and to carry out the reasonable instructions of the company. The court applied the three principles set out above and held that Latimer was an independent contractor. Although some of the factors indicated a relationship of employment the court was of the opinion that the fact that Latimer owned the instrumentalities of the business (the truck) was the determining factor.

The matter was once again considered by the court in Tanton. [14] Tanton entered into a contract with Express to render services to the company as a driver. Clause 3.3 of the contract provided that if Tanton was unable or unwilling to drive the vehicle he will at his own cost appoint another driver. Tanton asked the employment tribunal to declare that he was an employee. The employment tribunal and later the EAT confirmed his position as employee but on appeal the court held that he was an independent contractor. The main reason for the courts finding was the existence of clause 3.3. The position of an employee was incompatible with finding someone else to do the work at the employee’s costs.

What one can glean from these two judgements is that the court put a lot of weight on the issue of control and the fact that the contractor did not have to carry out the work himself. He could decide who will carry out the work. In contrast to theses two decisions the EAT held in MacFarlane [15] that the contract was not one of an independent contractor. The EAT distinguished the case from the other two as the council was paying for the services of the alternate gymnastic instructor and the alternate instructor had to be chosen from the instructors on the list maintained by the council. I submit that the finding of the EAT was correct. The instructors were paid for the session and if one was unable to attend he or she had to roster with someone else that was on the council’s list.

In Hall [16] the court held that there are nine matters that must be considered to determine the nature of the relationship. The factors are firstly the contractual provisions between the parties and secondly the degree of control that the employer exercises is also important as a determining factor. Thirdly the obligation of the employer to provide work and the obligation of the person to carry out the work personally are further factors to consider. The court will examine who has to provide the tools, equipment, instruments and such items. The arrangements made for payment of tax, national insurance contributions, sick pay and VAT are all important factors in painting the picture of a person’s work activity. The court will further investigate to what extent the person can work for other employers. Factors such as fees, expenses and holiday pay all play a role. The court will further determine whether the relationship by which a person is a self-employed independent contractor is genuine or merely designed to avoid the protection that employment legislation provides to employees.

The Employment Rights Act 1996 defines and employee as someone who entered into or works under a contract of employment. The act further provides that a contract of employment is a contract of service or apprenticeship whether oral or in writing, express or implied. [17] The definition of employee does not assist in determining the distinction between employee and independent contractor.

In applying the indicators as espoused in the judgement of the court in Hall one can determine whether a sports player is an employee or independent contractor. As set out in the Australian judgments above, the player will be under control of the club for whom he or she plays. By looking at the factors individually the position in England will be as follows:

Most contracts between clubs and the player will contain detailed clauses pertaining to the relationship. The degree of control that the club will exercise will be far reaching. The club will be able to determine when and where the player will play and practice. It is expected of the club to provide work for the player as the club determines the fixtures. The player will not be able to delegate the duty to play for the club. Although the player will provide his or her own tools (such as boots) the club will provide the gear. The player will not be entitled to work for other employers. He or she is bound to play only for the club that the contract is with.

In England, from the matters considered above, the contract between the club and the player will, except in exceptional circumstances invariably be one between employer and employee.

France

The courts in France take similar circumstances into consideration when it determines the nature of the relationship between the parties. The factors that must be considered are the behaviour of the parties, the relationship between them inter se, the time and place of the activity, the fact that the provider of the service works alone or with the support of another, the ownership of the equipment and raw materials and the existence or absence of direction and control on the part of the person who benefits from the provision of the services and, lastly the terms of the remuneration. [18]

The rules in France are very similar to that in the UK and one should come to the same conclusion as in the UK when one determines the nature of the relationship.

Germany

There is no definition of an independent contractor in German Law. However the courts have held that each case must be determined on its own facts. The main factor that distinguishes an employee and independent contractor (free lancer) is that of factual and legal independence. A free lancer is not subject to directives or dependent on instructions from the employer and is independent. The employee must report for work at the times determined by the employer but the free lancer can determine when to work and where to work. The employee will be fully integrated with the employer’s organisation whilst the free lancer will not use the computers and tools of the employer. [19]

The issue of control is once again a main feature of the relationship. When one looks at the relationship between player and club, the player will also be classed as an employee under German law. The player cannot determine when and where he or she will play. The player must follow the directions of the club as to training, venues and times when to play. The club will also pay the player’s remuneration regularly and not only upon the completion of the work.

Conclusion

Some commentators simply state that the relationship of employer and employee will exist when pursuant to an agreement between the parties, one person who is the employee agrees to work under the direction of another (the employer) for compensation. [20] According to this definition of the relationship the persons referred to in the contractor driver cases above will fall under the description of employee. The definition provided by Glover falls short of a proper definition.

The idea of ownership of a player by a club has been dismissed in the Bosman matter and the ECJ held that the club was the owner of the registration not the player.

Cavalier proposes an interesting definition of the employment contract in European private law:

“An employment contract is a contract whereby a person performs services of some economic value for and under the direction of another person in return for which he receives remuneration” [21]

The definition concentrates on the control factor. The definition cannot be faulted. The Australian courts have adopted the control factor to determine whether the relationship is one between employer employee or that between two independent parties.

From the references in the world of sport one can also say that the same principles apply when the relationship is determined. If the player is controlled by the club and his or her payments received are in the nature of remuneration then the relationship will (all other things being equal) be that between and employer and employee.

Bibliography

Books

Glover Jnr. W. H., Sports Law Handbook For Coaches and Administrators (2009)

Holland J., Burnett S., Employment Law (2007) Oxford University Press

Wise A. N., Meyer B. S., International Sports and Business Law, Volume 2 (1997) Kluwer Law International

Cases

Buckley v Tutty (1971) 125 C.L.R. 125

Cam and Sons Pty Ltd v. Sargent (1940) 14 A.L.J.R. 162

Express & Echo Publications Ltd v Tanton [1999] EWCA 1050 available at as at 12 April 2010

Hall v Lorimer [1994] ICR 218

Hughes v Western Australian Cricket Association (inc.) (1986) 19 F.C.R. 10

MacFarlane v Glasgow City Council [2001] IRLR 7 available at as at 12 April 2010

Re Porter: Ex Parte TWU (1989) 34 IR 179

Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497

Stevens v Brodribb Sawmilling Co. Pty Ltd (1986) 160 C.L.R. 16

Union royale belge des sociétés de football association ASBL v Jean-Marc Bosman, Royal club liégeois SA v Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v Jean-Marc Bosman Case C-415/93 available at as at 13 April 2010

Zuijs v Wirth Bros. Pty Ltd (1955) 93 C.L.R. 561