Employees and Independent Contractors

Question 1

How was the law historically referred to between employee and employer?

Answer 1

As the law of master and servant

Question 2

Who are independent contractors?

Answer 2

• Those who are self-employed
• Those who worked under a contract for services
• Contractors may be under a contract to work for a business button under the same conditions as an employee

Question 3

How is an employee defined in law?

Answer 3

s.230(1) of the Employment Rights Act 1996 defines an employee as someone who enters into or works under a contract of employment

Question 4

How is a contract of employment defined in law?

Answer 4

s. 230(2) of the ERA 1996
- A contract of employment is a contract of service or contract of apprenticeship, express or implied, and either orally or in writing

Question 5

Does the legislation explain what a contract of service is?

Answer 5

NO
- the legislation is extremely vague and therefore the common law determined tests to define what a contract of service is

Question 6

Stevenson, Jordan and Harrison Ltd v Macdonald and Evans 1952

Answer 6

• In this case Lord Denning distinguished between who was an employee and who was an independent contractor using the so called ‘integral test’

Question 7

What was Lord Denning’s distinction of employees and independent contractors in the Stevenson case?

Answer 7

” 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; whereas under a contract for service, his work, although done for the business, is not integrated in to it but only an accessory to it”

Question 8

Why may Lord Denning’s integral test not be deemed useful?

Answer 8

INTEGRAL TEST IS OUTDATED IN MODERN LABOUR MARKET

• Increasingly inappropriate as many companies employ flexible workers who have no real permanent relationship with the business
• It only really applies to highly skilled workers

Question 9

Provide an example of why the integral test is not suitable in modern society?

Answer 9

• Historically hospitals would employ cleaning staff, as well as supervisors to ensure cleaning was done
• This under the integral test would of course be an integral part of the business as hospitals must be clean to function efficiently
• In todays society hospitals outsource cleaning to other companies, meaning they are not employees of the hospital
• If we were to apply Lord Denning’s integral test it would imply these cleaners were employees of the hospital when in fact they are not
• The fact cleaning of the premises is now outsourced does not make the work any less integral to the business

Question 10

Market Investigations v Minister of Social Security 1969

Answer 10

MULTI-FACTOR APPROACH
IN BUSINES OF HIS OWN ACCOUNT TEST

• In this case Cooke J believed that a multi-factoral approach must be taken to determine employment status
• To do so as well as control and personal service he stated that other factors were important to weigh up
• Such as who supplies the equipment, what financial risk the worker takes, (if any) how far the worker profits
• Cooke J summarised this as “is the person who engaged himself to perform these services performing them in business on his own account”

Question 11

Ready Mixed Concrete v MPNI 1968

FACTS

Answer 11

MULTI-FACTOR APPROACH WHERE ALL FACTORS WERE EQUIVOCAL (personal service)

• Drivers owned lorries and responsible for maintenance but bought on hire purchase from subsidiary and had to paint company colours
• Company could instruct when repairs were needed and where to be done
• Lorries only for use in RMC business
• Drivers could delegate work to another but RMC could insist on personal service
• Driver had no fixed hours and could choose routes but had to be available when required and obey reasonable orders
• Paid by results (typical of employee and self-employed)

Question 12

Ready Mixed Concrete v MPNI 1968

DECISION

Answer 12

• Mackenna J held there to be three conditions to a contract of service:
  1) Employee undertakes to provide work or skill to employer and in return receives a wage
  2) Employee is subject to the employer’s control to a sufficient degree
  3) As well as other conditions of the contract being sufficient with a contract of service e.g. things such as ownership of assets, financial risk and opportunity to profit would not be consistent
  HELD
• Nothing inconsistent that the drivers were independently running their own small business

Question 13

What is the problem with the decision in Ready Made Concrete v MPNI 1968?

Answer 13

• The judge made his decision on the basis that their was nothing inconsistent with the drivers running their own small business
• if he had asked the question as to whether there was anything inconsistent with this being a contract of service he would probably have found nothing inconsistent there either
• The fact that there was a provision for substitution in the contract may have shifted the courts opinion, yet the clause was largely theoretical considering the company could insist on personal service

Question 14

Express and Echo v Tanton 1999

Answer 14

ILLUSTRATES THE PROBLEMS BETWEEN RMC AND MARKET INVESTIGATIONS

• In this case the COA reversed the decision of the EAT that drivers were employees
• The court relied on the decision in Ready Mixed Concrete and held personal service was an essential feature of a contract of employment and because of a substitution clause that personal service was lacking
• Lord Justice Peter Gibson stated: “ a person who works for another and is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer.

Question 15

What are the main problems with the decision of Express and Echo v Tanton 1999?

Answer 15

• Prior to this case both RMC and Market Investigations was cited as the correct approach in distinguishing between employment and independent contractors
• The main problem here is that if the court had adopted the approach of Market Investigations “in business of his own account” they would likely have deemed the driver to have been an employee
• The COA favouring of RMC likely meant this would be the first consideration for tribunals and courts in the future meaning companies could avoid employee protection by inserting substitution clauses in to contracts
• In some cases workers may even incur more risk despite having almost no independence

Question 16

What did the case of McFarlane v Glasgow City Council 2001 attempt to do?

Answer 16

MITIGATE THE DECISION OF ECHO AND EXPRESS

• The case attempted to provide conditions on substitution clauses
• The reason for this was to try and prevent substitution clauses from negating the personal service condition
• In this case a gym instructor was able to choose a replacement when was unable to work
• However, he had to choose from a council supplied list of people and the council paid them directly
• The EAT distinguished this case from Express and Echo therefore minimising the exploitation of businesses

Question 17

Lane v Shire Roofing 1995

Answer 17

EXPANISION OF CONTROL TEST: WHO’S BUSINESS WAS IT

• In this case Lane was a self-employed worker who found it hard getting work so undertook jobs for others
• Shire roofing hired Lane to work on large roofing contract at daily rate of £45
• The company re-hired him for another job
• lane fell from his own ladder after rejecting company equipment
• He claimed damages
• At first instance Lane deemed to be an independent contractor and therefore company could not be in breach of duty of care
• Reasoning based on the fact he had own roofing business, was self-employed for tax and was under no supervision
  HELD COA
• Erred in not finding Lane to be an employee
• Element of control significantly important here
• The court broadened the question to who’s business was it? This required court to assess many control aspects as well as financial risk
• in this case it was deemed to be the business of the roofing company and therefore the owed him a duty of care

Question 18

Why does Lane v Shire Roofing 1999 indicate a problem with how it was decided?

Answer 18

• The court decided to give more weight to the factor of control because of health and safety
• The argument could be made that it is just as important in other employment protection rights
• Is it unfair to have different tests for different contracts of employment dependant on what is at stake

Question 19

Quashie v Stringfellows 2013

Answer 19

MUTUALITY OF OBLIGATIONS

• Stringfellows took on lap dancers as independent contractors
• The club exercised a high amount of contract over dancers
• They decided what shifts dancers would work, stipulating what they should wear and required adherence of their disciplinary procedure
• Quashie was paid by customers of which Stringfellows would deduct commission, as well as other amounts such as fines
• Personal service was essential and she could not substitute work to a replacement
• Quashie claimed for unfair dismissal but the company argued she was not an employee and thus not within the jurisdiction of the tribunal to hear this claim
  HELD
• COA reinforced decision of ET that she was not an employee as there was no mutuality of obligations
• That being there was no obligation on part of the company to pay her
• Further, Quashie held the financial risk of not being paid as she was paid by customers

Question 20

What is the problem of Quashie v Stringfellows 2013?

Answer 20

• Negating MOO’s are another way in which companies are avoiding employment protection
• This case demonstrate two of the fundamentals of a contract of service (HIGH CONTROL, AND PERSONAL SERVICE)
• However, the payment arrangement which also benefitted the business, meant the MOO was negated

Question 21

What benefits are to be gained if a person can establish themselves as an employee?

Answer 21

• Protection under vicarious liability
• Employer will owe a duty of care
• Right to receive written particulars
• Provides the right to claim for unfair dismissal
• ## Will obtain basic worker rights such as NMW, holiday and sick pay

Question 22

Yewans v Noakes 1880

Answer 22

• This case established what we may now call the control test
• The Court of Appeal held that a servant is defined as a “person who is subject to the command of his master as to the manner in which he shall do his work.” per Lord Justice Bramwell
• the Court held that the man was not a “servant” or an employee of the building owner as the owner had no right to control the man’s work and manner in which it was done.