Lecture 9 - Employment Law Flashcards
define contract for service
contract for service under employment law is distinct from a contract of service
A contract for service typically refers to an agreement between a business and an independent contractor or self-employed individual. Unlike employees under a contract of service, individuals under a contract for service do not work under the direct control or supervision of the employer. Instead, they have greater autonomy in how and when they perform their work.
Case law of Ready Mixed Concrete Ltd v Minister of Pensions and National Insurance (1968)
Ready Mixed Concrete Ltd v Minister of Pensions and National Insurance (1968):
This case established criteria for distinguishing contracts for service from contracts of service, focusing on control, integration, and mutuality of obligation.
Facts: Ready Mixed Concrete Ltd engaged drivers to deliver concrete using vehicles owned by the drivers. Each driver entered into a written agreement that described them as independent contractors, not employees.
The drivers were required to wear company uniforms and paint their vehicles in the company’s colors.
The drivers bore financial risks and costs, including buying and maintaining their vehicles. However, they were also subject to specific instructions about how they conducted their deliveries and followed company policies.
Issue: The central question was whether these drivers were employees under a contract of service or independent contractors under a contract for service, specifically for determining liability for National Insurance contributions under the National Insurance Act 1965.
The court found that the drivers were not employees, and their agreements constituted a contract for service.The judgment by Justice MacKenna introduced a three-stage test to determine whether a worker is under a contract of service. This test is now widely referred to as the Ready Mixed Concrete Test:
- Mutuality of Obligation:
There must be a mutual obligation for the worker to perform work and for the employer to provide work and pay for it.
In this case, there was mutuality of obligation because the company provided work and expected the drivers to complete it. - Control:
The employer must have a significant degree of control over how, when, and where the work is performed.
While the company exercised some control (e.g., specifying uniforms and vehicle branding), this was insufficient to establish an employment relationship because it did not extend to the manner in which deliveries were carried out. - Other Factors Consistent with Employment:
The overall relationship must align with a contract of service, considering factors such as financial risk, provision of tools, and independence.
The drivers owned and maintained their vehicles, bore financial risks, and were able to profit from their efficiency, which indicated they were independent contractors.
Why is the distinction important in practice?
Employee:
Pays tax under PAYE and Class 1 NICs
Has legal protection as regards statutory redundancy/unfair dismissal /wrongful dismissal
Has rights as a preferential creditor in Insolvency
Employer is generally liable for tortious acts of employees in the course of their employment discuss Morrisons see technical article
Does not have to register for VAT
Self-employed person
May have to register for VAT
Pays tax under self-assessment
Pays Class 2 and Class 4 NICs
Limited protection under the term ‘worker’‐ normally relating to Health and Safety
Takes out insurance
What are the 3 essential elements for a contract of service?
This element refers to the reciprocal obligations between the employer and the employee:
Employer’s Obligation: The employer is obligated to provide work (or at least pay) to the employee.
Employee’s Obligation: The employee is obligated to perform the work as agreed.
Importance:
Without mutuality of obligation, there is no employment relationship. For example, casual workers or freelancers might lack this element because they can choose when to accept work, and employers are not required to offer it consistently.
Control refers to the employer’s right to direct and supervise the work performed by the employee. It includes:
What Work is Done: The employer determines the tasks the employee is required to perform.
How Work is Done: The employer has the authority to specify the manner and methods of performing the work.
When and Where Work is Done: The employer can dictate working hours and location.
Importance:
A high degree of control suggests an employment relationship, while limited control might indicate an independent contractor arrangement.
Personal service means that the individual is required to carry out the work themselves and cannot freely delegate or substitute someone else to perform the tasks on their behalf.
Relevance to Employment:
In a contract of service, the worker must personally perform their duties, reflecting their status as an employee.
Employment Contract
Just like any other contract:
Offer and acceptance
Consideration
Intention to create legal relations
It is normally written but doesn’t have to be.
Normally offer comes from the employer.
Consideration is a promise for a promise.
Employment is a business/commercial transaction so the intention to create legal relations is assumed.
Everything is negotiable but must comply with the law e.g., minimum wage/restraint of trade.
Indeed, employer has obligations prior to employment beginning for example not to discriminate.
Prescribed Particulars/Principal Statement
The Prescribed Particulars or Principal Statement refers to the written statement of key terms and conditions of employment that employers are legally required to provide to employees under employment law. This requirement is essential for transparency and ensures that employees understand their rights and obligations in the workplace.
Even though a contract can be oral s1 of the Employment Rights Act states that within two months of the beginning of employment the employer must give to the employee a written statement of prescribed particulars which must include:
Job title
Names of employer and employee
Date employment began
Whether any service from previous employer forms part of the employee’s continuous period of employment
Pay‐scale or rate and intervals at which paid
Hours of work including normal working hours
Any holiday and holiday pay entitlement
An employee can choose to take a concern over having not been given a written contract before an Employment Tribunal to obtain confirmation regarding the terms and conditions of their employment.
If an employer fails to fulfil their legal requirement to provide an employee with a written statement, an Employment Tribunal can penalise them for their non-compliance. The employee will be awarded between two to four weeks’ pay, capped at £643 a week from 6th April 2023 If a written statement has not been provided because of an exceptional circumstance, a penalty may not have to be paid.
Employment contract terms
- Implied terms are terms of the employment contract that are not necessarily set out in writing or were agreed upon verbally.
As implied terms are not clearly written anywhere, implied contractual terms will only be implied if they meet certain criteria. These are:
‘Business efficacy’ test- this is where a term is implied to make the contract workable. An example of this is the ‘duty of mutual trust and confidence’, as, without this implied term, the contract of employment can’t work
‘Officious bystander’ test- if a term is so obvious or assumed it will be implied into the contract. For example, an implied term that the employee will not steal from the employer is an obvious term that doesn’t need to be expressly written down
Custom and practice- aterm can be implied into the contract by virtue of the custom and practice at the workplace or within the industry. An example of this could be where a business closes for a trading holiday and gives staff paid holiday
Terms implied by statute- some legislation will automatically give employees minimum rights that the employer can’t negotiate. If the contract of employment attempts to lower or doesn’t expressly give these rights, legislation will automatically imply them into the contract. An example of this is the employee’s right to astatutory minimum notice periodorequal pay clauses
what are the Statutory Rights of the Employee
Statutory maternity pay
Paternity leave and pay Adoption leave and pay
Flexible working for parents and carers National minimum wage
The Working Time Regulations 1998
Employment – Notice
It is a matter of negotiation between the employer and the employee as to how much notice is to be given by either party to terminate the contract. In the absence of express provision, common law requires that either party gives reasonable notice. Additionally, statute lays down certain minimum payments which apply.
Length of continuous employment Statutory minimum notice
1 month to 2 years 1 week
3 years to 12 years Not less than 1 week per year of contious employment
12 years+ Not less than 12 weeks
Employment Rights Act 1996
key piece of UK legislation that consolidates and clarifies the rights of employees and workers. It sets out a comprehensive framework for employment law, providing protections and entitlements that govern the employment relationship
The Act aims to:
Protect employees from unfair treatment.
Define the minimum rights of employees and workers in key areas such as pay, dismissal, and workplace conditions.
Provide a framework for resolving employment disputes
Redundancy
Redundancy occurs when an employer decides to reduce the workforce because a particular job or role is no longer needed. This can happen for various reasons, and redundancy is considered a form of dismissal in employment law. It is distinct from dismissal for misconduct or poor performance, as redundancy is typically not the fault of the employee
Dismissal is caused by redundancy when the employer has ceased to carry on the business in which the employee has been employed or the business no longer needs employees to carry on that work.
To claim redundancy an employee must have at least two years continuous employment since reaching the age of 18.
At the outset of the redundancy the onus is on the employee to show that they have been dismissed which is done by showing one of:
The contract of employment has been terminated by the employer with or without notice
The contract is terminated by the death of the employer or the dissolution or liquidation of the firm
The employee terminates the contract in circumstances that he or she is entitled to because of the employers conduct i.e., constructive dismissal
Unfair and wrongful dismissal
A dismissed employee may be able to sue the employer for either unfair or wrongful dismissal. These are quite separate matters. Unfair dismissal is a statutory remedy which gives the dismissed employee a right to a fixed payment.
An employee who sues for wrongful dismissal is simply suing for breach of contract.
From a practical perspective,an employee is likely to pursue an unfair dismissal and wrongful dismissal claim in tandem. However, this will have implications on the value of any awards as an employee wouldn’t be entitled to double recovery for the same loss
Wrongful Dismissal
- All contracts of employment give the employee an entitlement to a certain amount of notice after one month in a job. If an employee is wrongfully dismissed, without having been given this notice, the contract will have been breached and the employee will therefore be entitled to damages. Wrongful dismissal is not a great deal of use to many employees because their notice entitlement is not long enough to result in a large payment.
- If an employer wrongfully dismisses their employee, they will be liable to pay damages to put them back in the position they would have been in had the contract been terminated in accordance with its terms. Therefore, damages will reflect the net value of wages and any other contractual benefits to which the employee would have been entitled had they beenallowed to work out their notice.
The damages recoverable in an employment tribunal for wrongful dismissal is capped at a statutory maximum of £25,000. However, if the value of the employee’s claim is worth more, there is no such cap in the civil courts, and they could pursue their claim there
Unfair Dismissal
Employees covered by the statutory provisions for unfair dismissal have the right not to be unfairly dismissed
Breach of this right allows an employee to bring a claim for unfair dismissal to an employment tribunal
Reasons for dismissal are either automatically unfair or potentially fair
Remedies include re-instatement, re-engagement and most usually compensation
– your employer must act reasonably in treating ‘the reason’ as a reason for dismissal and follow a proper process before dismissing you. It may be that there are alternatives to dismissal, depending on the size and resources of the employer
Two years continuous employment is the qualifying time for a claim unless the reason for the dismissal is automatically unfair (pregnancy).
The employee must show that she is a qualifying employee and that she has in fact been dismissed.
Dismissal for the purposes of an unfair dismissal claim occurs in a termination by the employer or in a constructive dismissal
Automatically unfair reasons for dismissal:
- Pregnancy or pregnancy-related illness
A spent conviction under the Rehabilitation of Offenders Act 1974
Trade union membership or activities
Taking steps to protect himself or others where he believes there to be serious and imminent danger
Seeking to enforce statutory rights
Making a protected disclosure under the Public Interest Disclosure Act 1998
Western Excavating v Sharp
a landmark decision in UK employment law that clarified the concept of constructive dismissal. It established a clear test for when an employee can claim constructive dismissal under the Employment Rights Act 1996
Mr. Sharp, an employee of Western Excavating, was dismissed for poor timekeeping but later reinstated after an internal appeal.
Following reinstatement, he asked for an advance on his wages, which the employer refused. He subsequently took a break for lunch and was docked pay for the time he was absent.
Frustrated by the treatment he received, Sharp resigned and claimed constructive dismissal, arguing that the employer’s conduct forced him to leave.
Claim:
Sharp argued that the employer’s refusal to grant the wage advance and docking his pay constituted a breach of contract, amounting to constructive dismissal.
The court found that Western Excavating’s actions (refusal to provide a wage advance and docking pay for absence) did not amount to a breach of contract.
Sharp’s frustrations with the employer’s behavior were not sufficient to establish constructive dismissal because:
The employer had acted within its contractual rights.
The conduct was not sufficiently serious to undermine the employment relationship
Conclusion:
In Western Excavating v Sharp, the court rejected Sharp’s claim because the employer’s actions did not amount to a fundamental breach of contract
