Employment Law Flashcards
Determining employment status
Why is the distinction between employees and an independent contractor? (5)
- No statutory definition of who constitutes an employee (“contract of service)
- No definition of how to distinguish an employee from an independent contractor (“contract for services”)
- The distinction is important because an employee enjoys enhanced rights for example
- right to claim unfair dismissal, - right to strike action, - right to holiday pay, - maternity and paternity rights etc…). - It is also important because of liability issues (remember vicarious liability!)
Courts have developed a variety of different tests to determine whether works under a contract of service (employee) or a contract for service (IC)
Determining employment status: the tests and what questions raised (4,2,9,3,3)
the control test
- It requires the court to inquire about the extent of supervision
Questions raised:
- To what extent does the individual work under the direction of the employer? - To what extent does the individual have control over their own work? - Who decides what work is done, when it is done and where it is done - Is the individual required to obey the orders of the employer?
- The more evidence of control provided to the court or tribunal, the more likely it is to decide that an individual is an employee working under a ‘contract of service’
the integration test
Questions raised:
- How much is the work fully integrated into the core activities of the employing organisation? - Is the work performed done as an integral part of the business or is it only accessory to it? - Is the individual included within the remit of personnel policies such as disciplinary and grievance procedures?
The more integrated the individual, the more likely it is that he or she is working under a ‘contract of service’
The economic reality test
This tests looks at the relationship from the opposite angle
- It look for evidence of self-employment rather than employment
Questions raised:
- It asks, how far it can be said that the individual is ‘in business on his own account’
- What are the payment methods used?
- Is money transferred through a payroll or invoices sent by the individual?
- Is tax deducted at source?
- Who own and/or maintains the equipment that is used to carry out the work?
- Who has power to fix or approve the time of holidays?
- Are holidays paid?/ Is sick leave paid?
- Is the individual free to substitute to carry out the work in their absence?
- Does the individual take any personal financial risk, for example if work is completed late?
The more evidence of economic independence is found, the less likely it is that a contract of service exists.
The mutuality of obligation test
- Central idea to this test is that the individual concerned must be required to accept work that is offered by the employer
- If it is possible for the individual to turn down an offer of work and not suffer a detriment as a result, then mutuality of obligation does not exist
- If the individual who refuses an offer for work finds that no further such offers are made in the future, then mutuality of obligation probably does exist
This is because there is evidence that the employer, at least, expected the relationship to be ongoing
the multiple test
Ready Mixed Concrete v Minister of Pensions and National Insurance (1968)
The court found that the driver had enough freedom in performing his duties, such as choosing the vehicle and managing fuel, which indicated he was an independent contractor, not an employee
A contract of service exists if 3 conditions are fulfilled:
- The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some task for his master
- There is a sufficient degree of control
- the other provisions of the contract are consistent with its being a contract of service
The application of the Ready Mixed Concrete criteria
Case Law?
List (9)
Warner Holidays Ltd v Secretary of State for Social Services (1983)
This case concerned the status of some entertainers who worked at a holiday camp for the summer season, developed the economic reality test and they were deemed as employees, not ICs
In determining that they were employees, the court provided a list of contractual terms that should be considered at the third stage of the Ready Mixed Concrete test:
- Provision of tools
- Salary (whether regular or not?)
- Tax (who pays tax on earnings?)
- Benefits (e.g., sick pay)
- Who bears the benefit and burden of any profit/loss? (if remuneration is linked to the profitability of the purported employer, this can be evidence of self-employment)
- Hours of work (whether flexible or static)
- Exclusivity
- Mutuality of obligations to work/provide work
- Labelling (but note that labels in contracts are not conclusive)
Dismissal of Employees and Other Matters Relating to the Termination of Employment
3 facts
- An employee has a statutory right to a written statement of reasons for dismissal on termination of employment.
- An employee must give at least one week’s notice if employed for more than a month and “reasonable” notice if employed for less than a month.
- The parties cannot agree to reduce these minimum notice periods but can agree to extend them.
Wrongful Dismissal Claims
What does it have to be?
3 examples of it?
- Any dismissal in breach of the employment contract can potentially amount to wrongful dismissal.
- An example of wrongful dismissal that occurs often is when someone is dismissed without being given the notice they are entitled to under their contract of employment. Therefore, the manner of their dismissal breaches their contract.
- Another example of a dismissal in breach of contract might be if there are specific procedures of dismissal in staff handbook such as requirement to give verbal warning but such is not given.
- Another example is the dismissal of employees in temporary or fixed-term contracts before the end period of these contracts.
Unfair Dismissal Claims
1 fact
How long do they have to be there?
The tribunal will need to address the following three questions to determine the fairness of a dismissal:
- Claims for unfair dismissal are the most common type of claim to be brought before an employment tribunal
ERA s.108 states that is available to employees (full time or part time) with at least two years’ service (but there are exceptions to this)
The tribunal will need to address the following three questions to determine the fairness of a dismissal:
- Has the employee been dismissed?
The exception is where the employees alleges “constructive dismissal”
- What was the reason for the dismissal?
These fall into three categories:
- Potentially fair reasons for dismissal
- Dismissal for one of these reasons is capable of being fair, but the fairness or not depends on whether dismissal was reasonable in the overall circumstances. Reasons are: - Capability - Conduct - Redundancy - Statutory bar - Taking part in industrial action past 12 weeks of such action - Some other substantial reason
- Automatically fair reasons for dismissal
- There are two reasons for dismissal that are automatically fair (a dismissal for these reasons cannot be effectively challenged). - These are rare in practice. - Where the employee has taken part in unofficial industrial action (i.e. where the trade union does not abide by the procedures required by the Trade Union and Labour Relations (Consolidation) Act 1992). - Where the dismissal is for the purpose of protecting national security.
- Automatically unfair reasons for dismissal
- An employee who can show they have been dismissed for one of these reasons is automatically entitled to a remedy. - This is the case even if the employer had an understandable motive for the dismissal. - NB: Unlike ordinary unfair dismissal claims, claims for automatically unfair dismissals may be brought be employees who have not yet completed 2 years’ service - The automatically unfair reasons are: - Pregnancy/maternity (s.99 ERA) - Paternity or adoption leave (s.99 ERA as amended) - Health and safety reasons (e.g. refusal to work in an unsafe environment) - A “spent” criminal conviction - Refusing to work on a Sunday (betting or retail workers only) - A trade union reason (i.e. for belonging to one) - Taking part in official industrial action for 12 weeks or less - Making a flexible working request - Asserting a statutory right (e.g. asking to be paid the National Minimum Wage) - Following the transfer of the business (or a section of the business) to a new owner, where there is no valid organisational, technical or economic reason for dismissing the employee (there are certain rules under TUPE Regulations 2006 for such transfers)
- Did the employer handle it in a reasonable way?
The test is known as the “band of reasonable responses” test and gives employers considerable leeway.
If it is possible to describe the employers’ actions as being reasonable, the dismissal will be fair, and the employee will have no claim.
If not, however, the dismissal will be unfair, and the employee will have a claim and be entitled to a remedy.
There are three broad issues to consider:
- The procedure used in effecting the dismissal must be fair
- The consistency of the employer
- Whether dismissal was the appropriate sanction in the circumstances
Tribunals will also be able to adjust any awards made in relevant cases by up to 25 per cent for unreasonable failure to comply with any provision of the Code. This means that if the tribunal feels that an employer has unreasonably failed to follow the guidance set out in the Code they can increase any award they have made by up to 25 per cent. Conversely, if they feel an employee has unreasonably failed to follow the guidance set out in the Code they can reduce any award they have made by up to 25 per cent’.
Potentially fair reasons for dismissal: Capability
There are three possible issues here:
This reason concerns the employee’s ability to do their job.
There are three possible issues here:
- Lack of qualifications:
- An employee may not have the right qualifications for the job. But the employer should be able to justify requiring them
- Incompetence:
- An employee may not be competent, making a series of small errors or a major one
But the employer should be able to justify dismissal as the appropriate response compared to giving a warning and/or ensuring proper training
- Poor health:
- An employee who is frequently off work sick may become too much of a burden on the employer
- If the employer has considered all reasonable steps to help the employee, and these have failed, it may be fair to dismiss them.
- This will depend on the size and resources of the employer.
Potentially fair reasons for dismissal: Conduct
What are the two types of misconduct?
A dismissal for misconduct is potentially fair.
Misconduct falls into two categories:
- Ordinary misconduct
It is not usually fair to dismiss for a first instance, but more likely to be fair for repeated misconduct after warnings. - Gross misconduct
An employer is usually entitled to dismiss an employee for a single instance of gross misconduct as long as the employer takes reasonable steps to ensure that the employee is in fact responsible.
Dismissal for Gross misconduct
Definition of gross misconduct?
What should they do (2)
Case Law
Defined in the ACAS code of practice
’23. Some acts, termed gross misconduct, are so serious in themselves or have such serious consequences that they may call for dismissal without notice for a first offence. But a fair disciplinary process should always be followed, before dismissing for gross misconduct.’
The employer should take all reasonable steps to discover whether the employee has actually committed misconduct.
If these steps are taken and the employer honestly believes the employee has committed misconduct, the dismissal will be fair.
Burchell v British Home Stores (1980)
- The employer believed the employee was guilty
- The employer had reasonable grounds for believing that
- The employer had carried out as much investigation as possible in the circumstance
Potentially fair reasons for dismissal: Redundancy
What does ERA state
3 times you can use this
Where there is an apparent dismissal for redundancy, an employee may make a claim for unfair dismissal on the basis that: (3)
Case Law
Redundancy
If the employee’s job is redundant, it may be fair to dismiss them so long as redundancy is the real reason for dismissal and proper procedures are followed.
This is defined by the Employment Rights Act 1996 (s.139):
- When a business is closing
- When a workplace is closing
- Where there is a reduced need for employees to do a particular kind of work
Where there is an apparent dismissal for redundancy, an employee may make a claim for unfair dismissal on the basis that:
- The dismissal was not in fact for redundancy
- The employer has failed to pay the proper redundancy payment
- The manner or procedure of the redundancy was unfair
The case of Murray v Foyle Meats (2000) gives the test for redundancy:
- Has the employee been dismissed?
- Has there been a reduction in the need for employees to do the particular kind of work?
- Is the dismissal wholly or mainly because of this reduction?
Redundancy Procedure
Law does not specify procedure that employers use to effect redundancies.
However, it is important for employers to have procedures in place that should contain two main elements –
1) consultation and 2) fair selection criteria (see ACAS advice on redundancy)
Consultation should include (see also here):
- Reasons for redundancy
- Why certain individuals have been selected over others
- Possible ways of avoiding redundancy
- Possible alternative work
Selection a two-stage process is generally required
- Identify those “at risk” of redundancy to establish a “pool” of candidates who then should be consulted.
- Select from the pool using a fair method of selection (see also here ACAS advice on redundancy)
Potentially fair reasons for dismissal: Statutory bar
Potentially fair reasons for dismissal: Some other substantial reason
Statutory bar
- If it would be unlawful to employ the person, then he/she may be dismissed fairly.
- However, an employer should check whether it would be possible to keep the employee on with other duties.
- Taking part in official industrial action
After 12 weeks of striking (or other official action) an employee may be dismissed
Some other substantial reason
- The business is being reorganised in a way that doesn’t fit the definition of “redundancy”.
- Third party pressure, for example if a major client refuses to work with an employee
- An employee is causing distress or a bad atmosphere in the workplace, causing other staff to consider leaving.
Constructive Dismissal
What is the definition?
What does this make it?
What is the purpose of this type of dismissal?
Therefore?
As a result…?
Constructive dismissal is defined in the ERA S.95(c) as situation which:
“the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct”
- It is therefore a resignation and not a dismissal, but one which take place because of unacceptable conduct on the part of the employer concerned.
- The purpose of this type of dismissal is to make sure that employers could not effectively get around the requirements of unfair dismissal law by treating any employees they wanted to fire so badly they would resign without the need to be dismissed
- Therefore, resignations which occurred in such circumstances would be treated by the tribunals as if they were dismissals and that they would be subject to the same scrutiny as would potentially unfair dismissal.
- As a result, only those who can bring claims for unfair dismissal (i.e., employees with over two year’s continuous service) are entitled to bring claims of constructive dismissal.
Remedies
For wrongful dismissal?
For unfair dismissal? (2)
Compensation?
Wrongful dismissal: damages based in breach of contract (usually low). No other remedy available.
Unfair dismissal/Constructive dismissal:
Reinstatement: An employee who is reinstated can go back to his previous job as if he had never been dismissed. For obvious reasons, this is very rarely awarded
Re-engagement: A tribunal can order that an employee is re-engaged by the employer, but this is not necessarily into exactly the same job or on the same terms and conditions. Job has to be comparable to the old one. Not a very common remedy
Compensation:
Basic award: (same for redundancy pay)
Compensatory award: The maximum compensatory award is (currently) £93,978 where the effective date of termination is on or after 6 April 2022. There is an additional cap of 52 times the claimant’s weekly pay, which will apply if this is lower than the overall cap of £93,978
* there is no maximum if the dismissal is automatically unfair (such as for health and safety reasons or whistleblowing)
