The Employment Rights Act - Essay Example

Employment Law Under what conditions are the employed considered employees thereby afforded protections under the Employment Rights Act of 1996? The term worker, even full-time worker, is broadly defined. The Employment Rights Act of 1996 (ERA) makes a distinction between employee and worker. An employee is an individual who works under a contract of employment. A worker is (loosely) defined as an individual who works under a contract of employment or works for a third party to the contract but not actually employed by the third party, an agency (temporary), or atypical worker1. Contrasting with standard or typical jobs of a full-time, permanent nature, atypical employment is more flexible forms of employment such as part-time, temporary and self-employed jobs. The complexity and ambiguity surrounding the definition of atypical workers has led to confusion regarding a clear definition. Those who consider themselves employees, and therefore have access to employment rights, may turn out not to be. Also, individuals may have expansive employment rights by law without realising it enabling employers to avoid their legal responsibility by exploiting their workers' lack of awareness about their entitlements under the ERA. In an attempt to clarify the distinction between classifications of those who work for others, the law, intent of the law and recent examples of litigation regarding employment rights cases must be examined. By enacting the ERA, the government deemed employers should be able to negotiate provisions with workers that allow them to meet the needs of their customers. Businesses need to be able to adjust to changes. The ERA structure is intended to aid employers by allowing different types of employment relationships that suit the needs of employers. Enacting this flexibility should enable businesses to become more competitive in national and international markets. At the same time, according to the Department of Trade, the Act should translate to a variety of working arrangements enabling more people to participate in work suitable to their individual circumstances2. By virtue of the ERA, employees have several rights not enjoyed by atypical workers. These include the ability to take leave for a wide variety of personal reasons, guaranteed wage payments, the right to protection of wages in the event of an employer’s insolvency, to seek representation, and to receive a written statement of dismissal among many others benefits. Temporary workers may be regarded as employees under certain conditions and thus qualified for provisions contained within the ERA. Employers fill long term assignments through employment agencies. When a worker employs through an agency for one company for more than a year, the question has arisen whether the worker is considered an employee and if so, who is the employer, the agency or the company (end-user)? These workers, under contract with a hiring agency, may be considered independent contractors and self-employed by the agency, but cases such as Royal National Lifeboat Institution v Bushaway, 2005 and Cable v Wireless v Muscat, 2005 demonstrate that certain provisions of employment may qualify a self employed, atypical or part-time worker to, by law, be considered an employee. Ms. Bushaway had been in a temporary position that became permanent. She claimed unfair dismissal against her employer, a third party, that hired her through a temporary agency. The tribunal had to decide whether Ms. Bushaway had been employed before she became a permanent employee. There was a contract between the end-user company and the agency and a contract between Ms Bushaway and the Agency. The tribunal decided that it had to look at how the arrangement operated in practice and to look beyond the written contracts in concluding Ms Bushaway was, in fact, an employee of the third party employer, Royal National Lifeboat Institution3. In a similar case, Brook Street Bureau (UK) Ltd v Dacas 2005, Mrs Dacas failed to appeal the decision that she was the end-user's employee and was arguing before the Court of Appeal that she was the agency's employee. The Court stated that her contract affirmed that she was not an employee of either. The court went further by saying tribunals should always investigate whether an implied contract of employment has arisen between the employee and the end-user (third-party employer). Lord Justice Mummery accepted that, in general, it would be surprising if the end-user did not have such powers of control or direction over a person such as to make it the 'employer'. In this particular case all the pointers were towards the applicant being an employee of the third-party4. The case of Cable and Wireless v Muscat, heard by the Employment Appeal Tribunal (EAT), followed the Dacas appeal decision. It served to further define the legal grey area of the long-time atypical worker. Muscat was a temporary employee forced by the end-user company to either become an independent contractor or lose his employment. He became his own company who was then contracted by the same company to do the same tasks. Muscat’s ‘company’ was now responsible for payment of national insurance and income tax. The end-user company sold to another that did not want to continue this arrangement5. Muscat's was requested to go through an employment agency. This agency had been contracted to supply temporary workers to the company. Muscat's service company entered into a contract with the agency which, in turn, agreed to provide Mr Muscat's services to the company. The contract between the service company and the employment business expressly stated that Muscat was not to be regarded as an employee of the company. Mr Muscat continued working as before under the direction of the company’s managers who, as before, continued to supply him with a mobile phone, a laptop computer and other equipment. Mr Muscat brought an unfair dismissal claim against the company when it stopped using his services later that same year. Using the decision in the Dacas case as precedent, the tribunal looked at the whole of the situation and was compelled to decide that there had been an implied contract of employment between Mr Muscat and the end-user company (Cable and Wireless). “The majority had felt that such a contract should be implied where a 'contractor', who is as a matter of commercial reality an employee of the end user, would otherwise be considered an employee of nobody.”6 Though Muscat won his decision and Dacas lost hers, after the decisions in these cases, it is almost inevitable that an employment tribunal will imply a contract of employment between a temporary worker and the end user client where the assignment is long term and where the worker is to all intents and purposes treated as an employee within the client's organisation. In the case of Dacas, Lord Justice Mummery made it clear that the judgment is intended to set the benchmark for future cases concerning agency workers7. The standard set by Dacas and Bushaway directs future tribunals to consider if the worker fits what would be a reasonable description of an employee, a long-term (over one year) worker under the direct, day-to-day control of a person third-party employer. In Bunce v Postworth Limited trading as Skyblue, 2005, the Court of Appeals upheld the tribunal’s finding that the agency did not exert sufficient day-to-day control to make the claimant, Bunce, an employee. Bunce, as in the case of Dacas, did not base his appeal against the decision that he was not an employee of the third party. The appeal to the EAT was concerned only whether he had been an employee of the agency, but the employment tribunal decided that he was not an employee of either the agency or third party employer8. Although Bunce lost his case, the decision gave clarity to employment status. Lord Justice Keene, giving the judgment of the Court, accepted that there may exist both an agreement governing the relationship between a worker and an employment agency and individual contracts in respect of specific assignments or tasks with the end-user. The control over Bunce's work was with the end-user or client, not the agencies. Bunce was not an employee in the eyes of the law but the case reinforced the concept that an employment agency is just that, not an employer. However, the user of an agency could be given that conditions merit. Keene stressed that the law in this area has always been concerned with who in reality has the power to control what the worker does and how he does it9. In a recent study, 86 percent of people surveyed perceived themselves to be employees and 13 percent thought their status self-employed. It was estimated that 30 percent of those who believed themselves to be employees had an employment status that had elements of uncertainty and was not completely clear10. In the Bunce decision, LJ Keene recognized that the general population, whatever their classification, may not know their correct employment status therefore their rights provided by law. “What is clear is that there is now a large and growing number of people in full-time or nearly full-time work who, because they work under agency arrangements, do not enjoy the full range of employment rights conferred under the legislation on those working under more conventional arrangements,” Keene said, “…this problem may in due course be regarded as a matter for legislation. It is not one capable of being overcome by judicial creativity. In the absence of such legislation, the state of affairs which I have described will persist.”11 The existing law and recent judicial interpretations regarding the distinction between an employee and a worker can be confusing to workers, employers, and judges alike. Keene suggests further defined legislation including additional modified rights for atypical workers. Such legislation would be compelled to further define categories of non-conventional employee groups. But, by definition, clarification would itself be ‘atypical’, a term used to describe the unusual, a grouping of terms that can’t be traditionally defined. The inability to precisely designate each category of agency, part-time or contract labour in an equitable-to-all manner, the burden of definition has been remanded to the court system in a case-by-case process of refining the laws. Another option is for legislators to broaden the law so that atypical workers would enjoy the same benefits under the ERA as their full-time colleagues. Some believe there is a case for giving them the same protection as employees. There are concerns that some working people are being barred from employment rights simply because of the type of contract they work under. These working people may, in practice, do the same type of work as employees and are economically dependent on one source of employment. Extending employment rights may guarantee protection for more atypical workers and increase working peoples’ willingness to take up atypical work, knowing their rights are secured. The numbers of atypical workers in the UK labour market remains surprisingly low and the extension of rights may increase the take-up of atypical work arrangements12. But, if all workers have a broader array of employment rights, employers might increase the degree of commitment expected of them, reducing time flexibility for some of these workers. In addition, atypical workers typically enjoy a bit higher pay compensation package than other workers because they do not have the same employment rights protection. Those in favour of extending employment rights argue that a more diverse range of people would be able to participate in the labour market and aid those in atypical working patterns to attain a better quality of life. Those workers not protected by employment rights afforded full-time employees typically consider their position vulnerable because they are often not protected from possible employment disadvantage if they need to take time-off for family-related causes including family emergencies. This discourages parents of young children from working some atypical work patterns or participating in the labour market. This in turn may reinforce the pay gap between men and women, as women are more likely to give up work after having a child. Extending certain rights would simplify the law and eliminate the present confusion over proper classifications for employers and workers and the courts. Extending rights to all workers may particularly help small businesses. According to the Department of Trade, the Government would welcome evidence of the potential benefits to working people and costs to business of an extension in the application of employment rights13. The working patterns of atypical workers even within one category such as home-workers vary so enormously, even if perfect employment definitions were established, businesses and tribunals would still be faced with very complex issues. It would be more difficult to understand complex new employment rules and to absorb the financial costs of implementing these changes. Difficulties caused by existing areas of vagueness are not enough to justify yet another legislative change, with its consequential detrimental effect on business and individuals, especially when it is very likely that one set of uncertainties will simply be replaced by another14. Opponents of extending employment rights say that by doing so, it may reduce employers’ willingness to offer atypical working provisions. The effect could be significant in certain sectors, such as in the temporary agency work, where there may be a high proportion of non-employee workers. In addition, there may be a risk that extending some rights to certain categories, such as agency workers, could lead to a reduction in demand for such working people15. There are two contradictory hypotheses concerning the potential upward mobility of atypical workers. One considers the bridging function of atypical work, suggesting that atypical employment contracts can serve as an entry route to the standard employment contract for labour market outsiders. The second suggests that atypical work leads to the segregation of atypical workers, with temporary and part-time workers segmented from mainstream labour16. Three-quarters of employers would recruit for a temporary job in the same way as a permanent one. About 20 percent of employers would rather hire a short term unemployed person in a temporary than in a regular job. The stepping stone premise is fostered upon the supposition that workers have more of a chance to enter the labour market via atypical jobs than via regular jobs with employers offering them regular jobs afterwards. Most employers say they promote atypical workers employment status after some time in a regular job17. In general the younger unemployed workers seem to find a job through temporary work more frequently than middle aged unemployed workers do. Younger employees also, in general, have a higher chance to gain regular employment once atypically employed. This, understandably, is also true for better educated workers. Further, studies find that atypical workers who have not maintained steady employment have a smaller opportunity to gain regular employment18. Atypical employment jobs are the major way by which people get back into the work force. But a study published by the Joseph Rowntree Foundation found that less than 25 percent of workers who had taken part-time jobs were later engaged in full-time work with that company. Only a minority find such flexible employment a stepping stone to permanent jobs. By 1995, most of them had ceased actively looking for work. Women with young children and older men encountered particular difficulties finding jobs, as did single people of either sex19. According to a study by Michael White and John Forth of the Policy Studies Institute, three in four of the jobs which previously unemployed workers found were temporary, part-time, self-employed, or at a substantially lower skill level than they held previously. Atypical jobs are the leading option chosen by unemployed job-seekers but these workers are more likely to remain in the type of job they initially entered or else fall back into unemployment rather than move to a better job. This is principally true of part-time employment. The routes out of unemployment which have the worst overall longtime financial consequences were part-time employment for both women and men, and temporary work for women. Single women and single men were less likely to find jobs in this flexible market. Atypical jobs are more flexible and diverse in nature offering a wide choice of employment but not the preference for most. Research suggests that it is a constraint rather than preference. Approximately one-third of the women and two-thirds of the men who enter part-time jobs have earlier stated that they were looking for full-time jobs20. The Department of Trade asserts that if individual companies and the economy as a whole are to reap the full benefit of the flexibility work can offer, then more types of job and levels of management must be opened to part-time workers, which will bring benefits to the employer21. Flexible jobs form a large section of the opportunities for the unemployed. A more encompassing set of employment policies could give opportunity for full-time, permanent jobs to become re-established while restrictions could endanger the job market. This research suggests that more needs to be done to help people in part-time or temporary jobs to become more upwardly mobile; but, as discussed earlier, employers might increase the degree of commitment expected of them, reducing time flexibility for some of these workers22. There is also a need to consider how the inequitable outcomes for women can be removed. Affordable childcare is vital if women in atypical jobs are to take advantage of any training and education opportunities offered away from their place of work. Budget constraints and the lack of explicit legislation further exacerbate the situation. References Agency Worker Not Employed by Agency. (5 April, 2005). Incomes Data Services, Ltd. Retrieved 3 January, 2006 from < http://www.idsbrief.co.uk/news/Bunce.htm> Aldridge, Lester. (11 July, 2005). UK Employment Law Update. MSI Legal and Accounting Network Worldwide. Retrieved 3 January, 2006 from Burchell, Brendan, Deaken, Simon and Honey, Sheila. (March, 1999). The Employment Status of Individuals in Non-standard Employment. University of Cambridge. Retrieved 3 January, 2006 from Control Factor Fatal to Employment Status Case. (n.d.). DCode Tax Law for Business. Elicitor Limited. Retrieved 3 January, 2006 from Controller of Her Majesty’s Stationary Office. (1996). Employment Rights Act. Crown publishing. Retrieved 3 January, 2006 from Department of Trade and Industry. (July, 2002). Discussion Document on Employment Status in Relation to Statutory Employment Rights. Retrieved 3 January, 2006 from EEF's response to the DTI's discussion document on Employment Status in relation to Statutory Employment Rights. (n.d.). Engineering Employer’s Federation. Retrieved 3 January, 2006 from < http://www.eef.org.uk/UK/whatwedo/hrlegal/submissions/2003/generic310320044.htm> Gash, Vanessa. (22-24 August, 2003). Bridge or Trap? The Transitions of Atypical Workers to the Standard Employment Contract in Denmark, France and the United Kingdom. Nuffield College. Retrieved 3 January, 2006 from Hawson, Keeble. (18 March, 2004). Employment – Agency Workers. LegalDay. Retrieved 3 January, 2006 from Price, Alan. (31 May, 2005). Queen Unveils Blair’s Third Term Plans. HRM Guide. Retrieved 3 January, 2006 from Utting, David. (May, 1998). Flexible jobs' cut unemployment - but do not often lead to permanent, full-time work. Embargo. Retrieved 3 January, 2006 from Ibid. Pathways through unemployment: where do they lead? Embargo. Retrieved 3 January, 2006 from Zijl, Marloes and Budil-Nadvornikova, Hana. (November, 2001). Atypical Labour: Flexible Labour from the social and employers’ point of view. Ranstad Holding. Amsterdam. Retrieved 3 January, 2006 from Read More