Orthodox Law Principles - Essay Example

THE GOVERNING OF THE EMPLOYMENT STATUS BY ORTHODOX LAW PRINCIPLES To understand what effect the principles of orthodox contract laws should have on sham self employment arrangements, and to what extent, we should first understand the terminology that is used therein so as to critically analyze the topic and deduce the extent to which these principles should govern the employment status (Bosse, 11) There is the acknowledged lack of an accepted definition of the term ‘sham employment’ or ‘sham employment’. There are different scholarly definitions that have been arrived at based on different criteria and rationale. A take on it would in the shallowest of arguments call it a ‘disguise’ or a ‘facade’ that has been evidently put up to hide or to conceal the real underlying factor. Lockhart J. defines it as; “... Something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive.” As such, sham self employment arrangements are done to disguise an individual as self employed while they are not. This could be done for a myriad of reasons. These reasons could be known to both the employee and the company or the employee could be oblivious of them; this is an unusual case though. Mostly, the employers stand to gain though at times it benefits the employees too. It is an employment strategy to defraud the authorities especially on tax related grounds. There is an arrangement to engage workers as independent contractors where the parties want to create an employment relationship disguised from the real deal with adaptations that do not genuinely reflect their intentions (Waddams, 33) Disguising the employment status could be done in a number of ways. It happens even under written contracts where it is common knowledge to both the employee and the employer and could also happen if a worker is hired on a more or less informal basis to provide their labour, and simply assumes or is told that they are a contractor. Mostly there is interposition of an entity that contracts with the business rather than the worker in his personal capacity. This allows drafting faulty contracts due to the absence of the contractor to review the terms therein provided for (Burne, 23) Businesses sometimes do not register their workers as employees. This benefits both the business and the workers who are treated as self employed in terms of income tax and insurance remittals. However, the business stands to gain more since it can dismiss workers at will due to the ‘open’ contracts and the employees lack of protection and rights. Most businesses will pass that their employees have been contracted for provision of services and consultancy rather than employment. These are sham contracts. These contracts are chosen by immigrant workers in most countries who are desperate for jobs and do not have proper immigration papers or required skill to seek permanent employment. It is easier for them since they try to avoid the authorities. Many would not find the problem with sham self employment but it favours unfettered freedom to engage and dismiss workers as contractors when they are indeed employees. Many view a negation of this as a denial of workers choice of being self employed or not. However,in their own interests, strengthening contracting laws also provides the entitlements that they forego obliviously. Those that argue for the sham self employment are the businesses that want to engage workers as contractors and still control them as workers. It is more profitable for them and as such their arguments are based on self interests not the workers welfare. The freedom to choose whether to be a contractor or a worker should be constrained. There is no provision that permits employees to voluntarily or otherwise, obliviously or otherwise work for lesser than award wages and forego their right. It is therefore unlawful even though the employee consents to it. Beyond detecting the arrangements and doing much to secure the rights of the workers, there should be additional sanction for entering such arrangements betond fines and civil penalties (Hotch,54) There are fundamental flaws in the orthodox contract law principles that determine the extent to which the law can govern these sham self employment arrangements. The laws can be easily manipulated and bent to favour desired results. Arrangements can be structured so that a person is to all practical intents and purposes working as an employee in the face of the law, yet is not treated so. Workers should have the right to choose their businesses and hire out their services as contractors at will. However, if their self employment is genuine, there should be implications to suggest the same. The main challenge is identifying those that are in sham self employments and having them treated as employees (Painter and Holmes, 10) The commercial contract law has hence; due to its flaws been termed as a “perception of a loose grouping of pragmatic considerations given a superficial veneer of coherence by reference to a substantively empty concept of interpretation.” Its contents, suggestions and desired results are not in rhythm. The will theory of contract details that it should invoke human freedom and allow a beneficial deal to be created while restraining the same freedom since the terms of the contracts should be upheld. Such is the self contradiction that flaws it and provides room for sham self employment. According to Charles Fried, the conferring of rules in the law of contracts means that it allows individuals to enter agreements of their own choice on their own terms. Its is a moral obligation that we intentionally invoke. It therefore is hard for the existing laws to govern the extents of the sham self employment all the way under such provisions. There are cases in which the orthodox contract law principles can be used to govern the sham agreements however they are exhaustible. These doctrines include; Consideration, illegality, frustration, duress and exceptional statutes like unfair contract terms. However the orthodox account is not favourably in tandem with the modern rules as it is seemingly old fashioned hence cannot coincide with the existing values. The rights and protections afforded to employees cannot necessarily be extended to ‘dependent contractors’. This is because, while many dependent contractors can fairly be regarded as disguised employees, this is not invariably true. The orthodox laws of contract principles are therefore limited in governing the sham employment on this front. Some contractors may quite clearly be running their own business, yet be in the habit of working for only one client at a time. They could as well secure a major contract that for a while occupies all of their time and attention. Telling the difference between the genuine and sham contractors has no outline criterion and as such the principles of the contract law are incapacitated. This does not suggest that it is inappropriate for certain rights and protections to be afforded to contractors, whether dependent or independent. For example, it is entirely fundamental and reasonable that an organisation comply with health and safety obligations in relation to anyone who it engages to perform work, whether as an employee or contractor (Beale, Bishop and Furmston, 134) There are solutions that have been put forward as remedy for the issue. Among them are the statutory provisions that deem certain types of worker to be employees, or allow industrial tribunals to do so. This is a suggestion that is may be both too broad and too narrow in its scope. A provision that deemed all plasterers (for example) to be employees would plainly be too wide, in that some plasterers are genuinely self-employed. But at the same time, a deeming provision operates by reference to a class of worker, when in fact any type of worker can be disguised as a non-employee. This adds to the notion and genuine concern that the orthodox contract law principles cannot govern the sham employment as such (Burne, 17) The law provides for unfair contract provisions that rely on the individuals sourcing litigation in the courts; which is just expensive for them. Very few cases therefore make it to the courts over the years. The employees who are swindled in unfair contracts are generally not expected to be well of and financing litigations as private parties against businesses that should have more resources at their disposal is hard. As such, most choose the easy way out of it which is remaining silent. The law will therefore not be in a position to work cases of businesses that do not enlist their workers as employees as very few are willing to take cases of lesser remuneration or such before the judicial system (Painter and Holmes, 48) The easiest way would be a redefinition of the term ‘employee’ so as all workers are treated the same unless they genuinely run personal registered businesses. If such provisions would be made, they would not entirely be a redefining factor of the far that contract law provisions extend but just a reprieve to the situation (Hotch, 109) With or without action on successful disguise of employment arrangements, sanctions an still be imposed on persons or businesses that are found responsible for disguising employment as independent contracting. These provisions may be used in circumstances where the employer has misled or dismissed an employee from duty. Since current laws draw no penalty to being party to sham; only payment of the normal entitlements associated with employment. The concern is whether the provisions should be expanded to capture the notion of being a party to a sham arrangement. Many feel this would extend the mandate of the orthodox contract law principles on the sham arrangements but scholarly material has suggested otherwise. An ABCC inquiry found that if simply being a party to a sham arrangement triggered liability, workers could find themselves facing civil penalties, as they would be regarded as a ‘party’ to a sham arrangement. This would be inappropriate, as it is usually the employer who decides the form of relationship between it and its workers. Even if, as sometimes happens, it is the worker requesting to work as an independent contractor, it is usually the employer that prepares the contract, often in consultation with its professional advisers. Employers too are generally in a better position to understand, or at least obtain advice on, the true legal position. Accordingly it is the employer, if anyone, who should be held responsible in the event that the arrangement is found to be a sham (Bosse, 67) Secondly, it is important that the sham arrangements provisions be aimed at those who attempt to disguise employment as independent contracting, rather than those employers who genuinely try to establish an independent contracting relationship with their workers. Given the uncertainty surrounding the application of the tests for employment to particular fact situations, employers can sometimes quite unwittingly, and without any criticism of their conduct, find themselves a party to a ‘sham’ arrangement. It would be inappropriate to penalise all employers in this situation, regardless of their culpability – especially since there are in any event likely to be adverse consequences from a finding of employment status, such as a liability to make superannuation contributions, provide (or pay out) leave entitlements, and so on (O’Sullivan and Hilliard, 78 ) In conclusion, the flaws of the law have limited the extent to which orthodox contract principle should govern the employment status in the context of sham self employment arrangements. It would require restructuring of the current laws and a redefinition of terms to extend their mandate and hopeful deal with the sham self employment once and for all (Waddams, 35) References Waddams, Stephen, (2011) Principle and Policy in Contract Law, Cambridge university press Beale H, G, Bishop W. D., Furmston M. P., (2007), Contract, Oxford University Press Burne, Nicole, (1998) Principles on Company Law, Routledge O’Sullivan Janet and Hilliard Jonathan, (2012) The Law of Contract, Oxford University Press Painter, Richard and Holmes, Ann, (2012) Cases and Materials on Employment Law, Oxford University Press Hotch Janet, (2000) Classing the Self Employed, Regents of the University of Minnesota Bosse, Claire (2011) Extension Protection by Labour Law, Kluwer Law International, Read More