Who is Covered by Employment Laws?

Introduction

Labour law in the United Kingdom has evolved over many centuries, adapting to the various developments and changes in the field that have occurred over time.[1] Two of the questions that keep recurring since the history of labour law is, ‘Who is covered by labour law? Who should be covered by labour law?’ The answer to the first question is quite straightforward since employees have been the major subjects of employment law for a long time. The second question, unlike the initial question, goes beyond looking at the current legal provisions as to who is entitled to labour law rights and seeks to identify the persons who, although not currently covered under labour law, they ought to be covered.[2] Today the labour market is changing and the rate of self-employment is rising[3]. There are also innovative forms of work that continue to challenge the established norms. This raises the question whether there are people who ought to be covered by employment law but are not covered due to the lack of flexibility of the law. [4] In the UK, casual workers are denied employment rights due to the claim that they lack on-going contracts of employment.[5] This is not a problem that only affects the UK. In Canada, for example, agriculture workers are denied the right to collective bargaining.[6] This essay argues that there is a need to extend employment law protection beyond employees to ensure that vulnerable workers are also protected. The essay suggests that this can be achieved by creating an intermediate group of dependent contractors to replace workers.[7] This will ensure that dependent contractors benefit from the employment rights that were previously restricted to employees. The paper further looks at the consequences of the introduction of such an intermediate group and particularly the problems that will be solved and those that will be created by the recommendation.

Who is Covered by Labour Law?

Currently, whether or not a person is covered under labour law is determined by that person’s employment status.[8] Establishing a person’s employment status is crucial because it determines the person’s eligibility for certain statutory rights. [9] There are three major employment statuses namely employer/employee status, worker and self-employed.[10] The law provides different rights to these three groups. Employees are the main subjects of employment law hence they have access to all the available rights whether provided in statute or common law.[11] Self-employed are considered to have the capability to look out for themselves hence no rights are provided except basic rights such as the right against discrimination. Workers are in the middle where they have access to some rights such as minimum wage and the right against wrongful dismissal.[12]

The question “who is an employee” is important in employment law because it determines if a person is entitled to a significant package of rights. Due to the ambiguity in defining who an employee is, courts have to distinguish between employees and those who are self-employed.[13]

The courts have over time developed several tests to determine whether an individual is an employee or an independent contractor.[14]

One of the tests that is widely accepted and applied is the control test. According to the test, an employee is an individual who is subject to the command of his master regarding the manner he or she should do the work assigned. [15]  The increased sophistication of industrial processes and the increase in the number of professionals in salaried employment such as doctors and engineers have, however, made the test insufficient. [16] In an attempt to modernise the control test, the courts developed the integration test where the focus is whether a person is fully integrated into the business of the employer or else remained independent and apart from such business.[17] Although the test has been useful in dealing with professional and skilled workers, its disadvantage lies in the fact that it does not define what is meant by ‘integration.’ [18]The failure to define the term ‘integration’ makes the test difficult to apply today especially in light of the changes in employment relationships. [19]

Other tests include the economic reality test a person is considered to be an independent contractor if the person is the one who bears the economic risk of the work being performed.[20] There is also the multi-factorial test where all the factors for and against a contract of employment are weighed to determine whether a person is an employee or an independent contractor. [21] Lastly, there is also the mutuality of obligation test where the court looks at whether the employer is required to provide work and whether the worker has a corresponding duty to accept the work when offered.[22] Although these tests are important in determining whether or not a person is an employee, they are insufficient.[23] The reason being is that the employment relationship today is changing and new relationships are emerging which challenge the traditional views regarding employment.[24] Today there are zero hour contracts where a worker is not obliged to accept work and the employer is not obliged to dictate minimum working hours. [25]In light of such changes, it is important for courts to apply several tests and factors when determining whether an employment relationship exists. A similar approach has been adopted in Canada where the courts have also acknowledged that whether a person is an independent contractor or an employee cannot be determined by applying a single test. [26]In Ontario Ltd v Sagaz Industries,[27] the Canadian Supreme Court held that there is no single conclusive test that can be used to determine whether a person is an independent contractor or employee.[28] Moreover, the court held that other than the level of control the employer has over the worker, other factors have to be considered such as whether the person provides his own helpers, the degree of responsibility for management, the degree of financial risk among others.[29] This shows that in light of the changes in the employment relationship, there is a need for courts to widen the scope of factors to be considered to ensure that fair decisions are made.[30]  

Who Should be Covered Under Labour Law?

Due to the changing labour practices, the legal dichotomy between an employee and an independent contractor is now too simplistic to cover the diverse workforce that exists today.[31] The employment law has for a long time focused more on differentiating employees and independent contractors that it has ignored the fact that there are more workers who need protection.[32] The Employment Rights Act 1996 defines a worker as any person who works or worked under an employment contract or any other contract where the person undertook to perform any work or services personally for another person who is a party to the contract and who is not a client or customer.[33] This means that all employees are workers but not all workers are employees. Based on the definition of a worker, therefore, for a person to be considered a worker there must be a contract, an obligation to perform work or a service personally and the services must not be provided as part of a business where the other party becomes a client. [34]

Workers are entitled to several rights such as the right to a minimum wage, the right to health and safety precautions, [35] the right to protection from unlawful deductions from salary and the wrongful dismissal among others.[36] Workers, however, do not enjoy the additional rights enjoyed by employees such as the right not to be unfairly dismissed, a right to written terms and conditions of employment, statutory maternity leave.[37] This is despite the fact that most of these workers have similar characteristics to employees only that they are regarded as casual workers. Due to the changing dynamics in the labour market and the diverse workforce which has emerged today, there is a need to ensure that more workers can enjoy the rights enjoyed by employees. [38] Today there are employees working under zero hour contracts and others working under relationships which are different from traditional employment relationships. [39]Such employees need the protection of the employment law. The reason being is that due to the unequal relationship between the employer and the employee. Since the workers also have an unequal bargaining power compared to employers, there is a need to ensure that more workers are protected under labour law.[40]

A recent review of modern work practices in the UK found that there is a need to provide a fair balance of rights and responsibilities for workers and employees.[41] The increasing casualization of the labour market has rendered many workers with employee-like characteristics unprotected.[42] As a result, it would be prudent to introduce an intermediate category of workers to be known as dependent contractors covering casual and independent relationships.[43] This approach would require the government to maintain the three-tier system of employment status but for those workers who are entitled to worker rights but who are not employees, a new category should be introduced to ensure that that they can also benefit from the protection of employment law.[44] The provision of benefits under employment law has for a long time been based on the selective approach as opposed to the universal approach where only those employees who pass the tests provided by law can enjoy the benefits.[45] The introduction of the dependent contractor category will change the approach to one that leans closer to universalism. This will ensure that workers in relationships that were not previously recognised as employer/employee relationships can now enjoy the rights guaranteed to employees. [46]

The need to expand the scope of the employment law protection to workers with employee-like characteristics has also been acknowledged in Canada.[47] In McKee v Reid Heritage Homes Ltd[48]the Court of Appeal in Canada held that case law had developed a dependent contractor category evidenced by economic dependency and exclusivity in the work relationship. The workers covered under the new category can enjoy the right to reasonable notice before termination or severance pay.[49] Recently in Keenan v Canac Kitchens Ltd the Court of Appeal confirmed the existence of dependent contractors and upheld a 26-month award for the failure to give notice of termination.[50]

In order to prevent negative effects on employees who are already covered under employment law, it is important that the introduction of the dependent contractor category be followed by a clear definition in law of which people fall under this category.[51] The definition should be such that it covers the more casual employment relationships that continue to increase today. All those people who are not employees and are also not independent contractors or self-employed should be covered.[52] In order to make the change work, it is important that courts put less emphasis on personal service or the issue of substitution in employment and instead focus more on the aspect of control. Employers include the aspect of substitution to deny casual workers employee benefits hence the tests for determining whether a worker is a dependent contractor should be developed to ensure that more casual workers are covered. [53]

The introduction of this category may overburden employers in terms of extending benefits to dependent workers. Despite this likely outcome, casual workers are in need of protection and this can only be achieved by ensuring that they also enjoy the rights enjoyed by employees such as the right to a termination notice or severance pay.[54]

Conclusion

Employment law has for a long time guaranteed the full protection of employees while leaving out other workers. Due to the changing trends in the labour market and in employment dynamics, it is important to protect more workers by ensuring that they can also enjoy employee rights contained in statutes. The introduction of the dependent contractors category will ensure that those workers who are in employee-like employment relationships but are not covered under employment law can enjoy the rights enjoyed by employees. A clear stipulation of the definition of dependent contractors will ensure that employers are not excessively burdened and that the employees who are already covered are not adversely affected by the change.  

Bibliography

Statute

• Employment and Rights Act 1996

Case Law

• Carmichael v National Power [1999] 1 WLR 2042 (HL)
• Keenan v Canac Kitchens Ltd [2016] ONCA 79
• Lane v The Shire Roofing Co. [1995] PIQR P417 (CA)
• Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173
• Market Investigations v Minister of Social Security [1969] 2 QB 173
• McKee v Reid Heritage Homes Ltd [2009] ONCA 916
• Ontario Ltd v Sagaz Industries [2001] 2 SCR 983
• Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497
• Stevenson Jordan & Harrison Ltd v McDonald and Evans [1952] 1 TLR 101
• Yemens v Noakes [1880] 6 QBD 530 CA
• McKee v Reid Heritage Homes Ltd [2009] ONCA 916

Books

• ACL D, Perspectives on labour law (Cambridge University Press 2004) 75.
• Barnard, C., EC Employment Law. Oxford University Press 2006.
• Bennett M, ‘Interpreting Unfair Dismissal and Redundancy Payments Law: The Judicial Reluctance to Disprove Employer Decisions to Dismiss’ Statute Law Review (2002)
• Bowers, J., A Practical Approach to Employment Law, (7^th Ed., 2005)
• Burchell B, Honey S and Deakin S, ‘The Employment Status of Individuals In Non-standard Employment’ (Unknown Binding 1999)
• Butlin, S.F. and Allen, R., 2018. Worker Status and Vicarious Liability: The Need for Coherence.
• Ciaran C, “Focus: Starting from Scratch: A Manifesto for UK Labour Law.” International Union Rights 23, no. 2 (2016): 10-13.
• Clarke L, ‘Mutuality of Obligation and the Contract of Employment: Carmichael and Another V National Power Plc’ Modern Law Review, Vol.63, Issue.5.
• Clayton, D. ‘Legal Update: Employment Law’ 21 Law Society Gazzette (2008)
• Coase, R. H. (1990). The Firm, the Market and the Law. Chicago: Chicago University Press
• Collins, H., 2010. Employment Law. Oxford University Press.
• Danny K, The gig economy: A Canadian perspective (American Bar Association 2017) 9.
• Davidov G, ‘who is a worker?’ 2005 Industrial Law Journal, Volume 34, Issue 1.
• Doug P, Key employment rights (House of Commons 2017).
• Duggan, M. ‘Unfair Dismissal’ 11 Employment Law and Litigation 6 (2007)
• Elwes S ‘Autoclenz Ltd V Belcher: Written agreements and the determination of employment statutes’ (2011)  
• Forde M, Employment Law (The Round Hall Press 1992)
• Freedland, M. ‘Constructing Fairness in Employment Contracts’ Industrial Law Journal (2007)
• Freer, A “The Range of Reasonable Responses Test – From Guidelines to Statute” (1998)
• G. Pitt, ‘Law, Fact & Casual Workers’ [1985] 101 Law Quarterly Review 2017.
• Greenfield, G 2001 ‘Core Labor Standards in the WTO: Reducing labor to a global commodity’,
• Guy D, “Setting labour law’s coverage: Between universalism and selectivity” [2014] Oxford Journal of Legal Studies 543, 550.
• G. Pitt, ‘Law, Fact & Casual Workers’ [1985] 101 Law Quarterly Review 2017.
• Holland, J. & Burnett, S., Employment Law, LPC Guide 2005
• Ian, S Smith and Wood’s employment law (Oxford University Press 2017) 44
• Kahn-Freund O, ‘Servants and Independent Contractors’. [1951] M. L.R 14.
• Kirwan B, Injunctions: Law and practice (3^rd edn, Roundhall University )
• Marson J (2013) ‘Anatomy of an employee’ Web Journal of Current Legal Issues, Vol.19, No.3 
• Matthew T, The Taylor review of modern work practices (UK Government 2017) 110.
• Murphy A & Regan M, Employment Law (2^nd Edn. Bloomsbury Publishing 2017)
• Nairns J, Employment Law for Business Students (4^th edn, Person Education Ltd, 2011) 
• Nyombi, C., 2015. A Response to the Challenges Posed by the Binary Divide between Employee and Self-employed.
• Osman C. and Brennan T., Employment Law Guide Butterworths (Fourth Edition): 2005
• Phillips G. and Scott K., Employment Law, (2004) Jordan
• Randy K, The gig economy: Dependent contractors, workers’ rights and the Canadian approach (Hunter Publishing 2018).
• Russell Tim, A guide to UK employment law (UK Government 2011).
• Sanders, A. ‘Expanding the ‘No-Difference’ Rule in Unfair Dismissal ’ Industrial Law Review (2007)
• Sargeant M., Employment Law, (2001) Longman
• Selwyn, N., Selwyn’s Law of Employment, (2004) Butterworths
• Simon H, “Contract, employment and the contract of employment” [2006] Industrial Law Journal 30.
• Smith I, and Baker A, Smith & Woods Employment Law (10th edn, Oxford University Press, 2010).
• Taylor S and Emir A, Employment Law an introduction (4^th edn, Oxford University Press, 2015)
• Tim R, A guide to UK employment law (UK Government 2011).
• Tucker, K. (ed.) ‘Discrimination in Employment’ Sweet and Maxwell, London (2004)
  Willey B, Employment Law In context (4^th edn, Person Education Ltd, 2012)

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[1] Forde M, Employment Law (The Round Hall Press 1992)

[2] Tucker, K. (ed.) ‘Discrimination in Employment’ Sweet and Maxwell, London (2004)

[3] Bennett M, ‘Interpreting Unfair Dismissal and Redundancy Payments Law: The Judicial Reluctance to Disprove Employer Decisions to Dismiss’ Statute Law Review (2002)

[4] Holland J., Burnett S., Employment Law, (2004) Oxford University Press

[5] Sanders, A. ‘Expanding the ‘No-Difference’ Rule in Unfair Dismissal ’ Industrial Law Review (2007)

[6]  Guy D, “Setting labour law’s coverage: Between universalism and selectivity” [2014] Oxford Journal of Legal Studies 543, 543.

[7] Selwyn, N., Selwyn’s Law of Employment, (2004) Butterworths

[8] Nyombi, C., 2015. A Response to the Challenges Posed by the Binary Divide between Employee and Self-employed. International Journal of Law and Management, 57(1), pp.3-16.

[9] Freer, A “The Range of Reasonable Responses Test – From Guidelines to Statute” (1998)

[10]  ACL D, Perspectives on labour law (Cambridge University Press 2004) 75.

[11] Osman C. and Brennan T., Employment Law Guide Butterworths (Fourth Edition): 2005

[12] Clayton, D. ‘Legal Update: Employment Law’ 21 Law Society Gazzette (2008)

[13] Butlin, S.F. and Allen, R., 2018. Worker Status and Vicarious Liability: The Need for Coherence.

[14] Coase, R. H. (1990). The Firm, the Market and the Law. Chicago: Chicago University Press

[15] Ciaran C, “Focus: Starting from Scratch: A Manifesto for UK Labour Law.” International Union Rights 23, no. 2 (2016): 10-13.

[16] Ian, S Smith and Wood’s employment law (Oxford University Press 2017) 44.

[17] Sanders, A., Expanding the ‘No-Difference’ Rule in the Law of Unfair Dismissal (2007) ILJ 355

[18] Greenfield, G 2001 ‘Core Labor Standards in the WTO: Reducing labor to a global commodity’,

[19] Burchell B, Honey S and Deakin S, ‘The Employment Status of Individuals In Non-standard Employment’ (Unknown Binding 1999)

[20] Marson J (2013) ‘Anatomy of an employee’ Web Journal of Current Legal Issues, Vol.19, No.3  

[21] Kirwan B, Injunctions: Law and practice (3^rd edn, Roundhall University )

[22] Davidov G, ‘who is a worker?’ 2005 Industrial Law Journal, Volume 34, Issue 1.

[23] Taylor S and Emir A, Employment Law an introduction (4^th edn, Oxford University Press, 2015)

[24]  Elwes S ‘Autoclenz Ltd V Belcher: Written agreements and the determination of employment statutes’ (2011)  

[25] G. Pitt, ‘Law, Fact & Casual Workers’ [1985] 101 Law Quarterly Review 2017.

[26] Willey B, Employment Law In context (4^th edn, Person Education Ltd, 2012)

[27] Clarke L, ‘Mutuality of Obligation and the Contract of Employment: Carmichael and Another V National Power Plc’ Modern Law Review, Vol.63, Issue.5.

[28] Randy K, The gig economy: Dependent contractors, workers’ rights and the Canadian approach (Hunter Publishing 2018).

[29] Murphy A & Regan M, Employment Law (2^nd Edn. Bloomsbury Publishing 2017)

[30] Sargeant M., Employment Law, (2001) Longman

[31] Nairns J, Employment Law for Business Students (4^th edn, Person Education Ltd, 2011) 

[32] Kahn-Freund O, ‘Servants and Independent Contractors’. [1951] M. L.R 14.

[33] Smith I, and Baker A, Smith & Woods Employment Law (10th edn, Oxford University Press, 2010).

[34] Freedland, M. ‘Constructing Fairness in Employment Contracts’ Industrial Law Journal (2007)

[35] Clayton, D. ‘Legal Update: Employment Law’ 21 Law Society Gazzette (2008)

[36] Duggan, M. ‘Unfair Dismissal’ 11 Employment Law and Litigation 6 (2007)

[37] Bowers, J., A Practical Approach to Employment Law, (7^th Ed., 2005)

[38] Simon H, “Contract, employment and the contract of employment” [2006] Industrial Law Journal 30.

[39] Russell Tim, A guide to UK employment law (UK Government 2011).

[40] Simon H, “Contract, employment and the contract of employment” [2006] Industrial Law Journal 30.

[41] Matthew T, The Taylor review of modern work practices (UK Government 2017) 110.

[42] Barnard, C., EC Employment Law. Oxford University Press 2006.

[43]  Tim R, A guide to UK employment law (UK Government 2011).

[44] Collins, H., 2010. Employment Law. Oxford University Press.

[45] Guy D, “Setting labour law’s coverage: Between universalism and selectivity” [2014] Oxford Journal of Legal Studies 543, 550.

[46] Phillips G. and Scott K., Employment Law, (2004) Jordans

[47] Randy K, The gig economy: Dependent contractors, workers’ rights and the Canadian approach (Hunter Publishing 2018).

[48]  Doug P, Key employment rights (House of Commons 2017).

[49] Danny k, The gig economy: A Canadian perspective (American Bar Association 2017) 9.

[50] Danny K, The gig economy: A Canadian perspective (American Bar Association 2017) 9.

[51]  Matthew T, The Taylor review of modern work practices (UK Government 2017) 36.

[52] Rose E, Employment Relations (3^rd  Edn, London 2008)

[53] Selwyn, N., Selwyn’s Law of Employment, (13^th Ed., 2004)

[54] Holland, J. & Burnett, S., Employment Law, LPC Guide 2005