The Methods Which UK Judges Use to Reach Their Decisions on the Issue of Employee Status - Essay Example

Employee Status Module Module Number: Academic Year: Seminar Essay Question: The methods which UK judges use to reach their decisions on the issue of Employee Status. Student Name/ Number: How UK’s Courts Determine Employee Status Courts can determine employee status by employing a number of tests when deciding such cases. These criteria include: control test, integration test, contract test and mixed test or multiple factor test. It is notable that UK’s courts usually apply multiple factor test and the control test over other tests in determining employee status in the country, with the latter test seeking the level of control the employer has either explicitly or implicitly over the worker1. This paper will analyze the current laws of the United Kingdom with regards to how they consider the employee status. Different case laws in which the determination of employee status featured will also be explored. Role of Employment Tribunals In the United Kingdom, employment status disputes are normally deliberated upon by duly constituted Employment Tribunals2. Such tribunals can explore a number of factors in establishing whether a valid employment contract exists between the employer and the employee3. Tribunals normally explore employment issues such as the level of control which the employee is subject to; their autonomy at the workplace; and whether the employee offered a service or services to the employer depending on their own statement. Also, the tribunals consider any ramifications as to whether the tasks performed were mutually beneficial to both parties to the contract, and if the boss owes a duty to the employee; and whether the employee knew and would accept the tasks provided to them4. EU Directive The European Court of Justice in the case of Steven Malcolm Brown v The Secretary of State for Scotland, C-197/86, 21 June 1988, attempted to resolve the issue of employee status by delivering a ruling which differentiates a worker from an employee. The Court defined a worker as an individual who pursues a legitimate and proper activity in a level that can be seen as marginal and subsidiary5. In addition, the main feature of the relationship between such an individual and his or her employer is that for a specified period of time the individual renders services under the supervision of another individual and earns wages in return6. An employment relationship, therefore, has fewer restrictions in terms the period within which the services should be rendered, the level of supervision, and the amount of remuneration that an individual stands to gain7. Control Test Initially, the control test was used by courts to differentiate between an employee and a contractor working on their own employment terms8. In light of this, the higher degree of duty an employee owed their employer, the more likely employment tribunals would decide that the individual was an employee. These factors encompassed the time, the workplace and the nature of the work. The control test is based on the concept that an autonomous contractor is expected and indeed does execute their duties self-sufficiently as compared to an employee who must conform to strict internal supervision9. The control test became prominent in the case of Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561 where the court ruled that the mere existence an employer’s right to control over an individual working within their organization would constitute real control, regardless of whether the employer put such powers into practice. The control factor, the court decided, met the thresholds of an enforceable employment contract10. In spite of the fact that control test is vital to the determination of the difference between an employee and a contractor, the court’s exclusive reliance on the test had been found to contain some pitfalls, which could only be eradicated by the consideration of other legal issues. In the case of Performing Rights Society Ltd v Mitchell and Booker Ltd (1924) 1 KB 762, legal proceedings were set up against the defendants for the violation of copyright laws by a jazz ensemble whose liability was based on the members working under an arrangement similar to self-employment11. The court invoked other issues such as the job involved, the liberty enjoyed by the members of the band, the significance of their contracts, the manner in which the damages would be settled; and above all, who retained the authority of dismissal, in establishing the employee status12. Integration Test Integration test is normally used instead of control test, especially when courts or employment tribunals want to establish why knowledgeable and skilled employees deserve a greater level of autonomy at their workplace13. The level of supervision needed within an integration test is based on worker’s performance and involves issues such as the working hours, where the workplace is located, and level of remuneration14. In the case of Stevenson, Jordan and Harrison v Macdonald and Evans (1952) 1 TLR 101, the court decided that under a contract of services, an individual’s employment status makes them part of the organization, and his or her work is executed as an imperative part of the business processes; whereas, in cases involving a contract for service the individual’s duty, even though supports the key operations of the business, remains merely accessory to the core of business15. Integration test reveals the higher the knowledge required of an employee, the less significant control is in establishing whether an employee is bound by a contract of services16. In essence, the organizational test is effective because it would be unfair for an organization to claims ownership of their employees’ assets if none of the company’s assets were used in their production17. Contractual Test To help differentiate between a worker and an autonomous contractor, courts normally examine every contractual term in order to establish which guides the relationship between the employer and the employee and which is relevant to those who are in self-employment18. This test for employee status is also known as the economic reality test in the sense that it examines whether the employee in his organization on their own account or delivers services for another business that is fully liable for any losses or gains achieved thereof. This encompasses issues such as liberty to seek the services of other employees, providing internal assets to help with the work and making individual businesses. When an individual is entitled to regular wage or salary, courts have construed such factors as those that apply to valid employees19. Conversely, the case of Carmichael v National Power plc [1999] UKHL 47 seems to have raised the bar on the contractual test and what employees can validly claim when the employer breaches such a contract20. The English case law was based on the contractual employment terms as enshrined in the Employment Rights Act 199621. In the case, tour operators had claimed that they received no contractual document in writing as required under section 1 of the Act and that they were dismissed unfairly by their employer, Blyth Power Stations in Northumberland. Their employment contract documents clearly stated they would be casual workers on the company’s power plants and their engagement with their employer would not be automatic. The House of Lords issued the verdict that the plaintiffs did not qualify to be employees under section 1 of the Act, because their contact with their employer did not constitute a mutuality of obligation, mainly because they were spending substantial period of time not guiding. In addition, their casual nature of work was compounded by the fact that on several instances their employer would call them up, only to refuse to work22. The ruling in the case of Carmichael v National Power plc notwithstanding, workers who settle their own insurance costs, income tax and who enjoy paid sick leave and vocations are expected to assume employee status. In the case of Express & Echo Publications Ltd v Tanton (1999) IRLR 367, the court was faced with the issue of whether a driver whose work is to deliver newspapers is relying on a contract of services or the more integrated contract of services. In arriving at the decision to categorize the driver as an individual whose engagement with the publisher was under the contract of service, the court formulated three important rules namely: the person was issued with a company truck and uniform; he was sent on a timetable set by the employer; and he was entitled to earnings billed per round he made as opposed to payment on a regular basis23. In addition, a substitute driver was sought within the six months period within which he was unwell. The tribunal established that the diver met the conditions set for one to claim an employee status, but on appeal, the judges said he was in self-employment because he could delegate his services to another person. Unfortunately, a contract of service normally requires whoever has entered into a contract with an employer to render the services on a personal basis24. Mixed Test The multiple test or mixed test provides another set of criteria used to determine employee status. In its application, courts and employment tribunals normally explore the worker’s freedom to delegate performance of a task to a colleague and the financial risks of the new arrangement, which usually breach the terms of a contract of service between and employer and his employee25. In the case of Ready mixed concrete v minister of pensions and national insurance (1968) 2 QB 497, the court was confronted with the issue of whether a worker delivering company concrete in his own truck, wearing company uniform, and paying for the vehicle maintenance as well as his own insurance costs had a contract of service or contract of services with his boss. The minister decided that the man’s work was being executed under a contract of service. But upon appeal, the Court said that the man was self-employed as a “small business man”. The court clarified the relationship between the man and the company was based on a mere contract of haulage. Agency Workers Agency workers have presented a whole new challenge to the traditional status of employees due to the existence of disconnect between a worker and an agency’s client who serves as the “employer”26. Casual, part-time, and short-term workers have conspired to pose a major challenge to an employee status in a business27. An agency contract exists where there is no formal contract binding the worker and the client business. The relationship is however guided by a contract signed between the worker and the third party (the agency) to execute out the task, which does not seem to be an employment contract per se28. Owing to the lack of a contract between the agency’s client and the worker, there is no employment relationship between the two parties by virtue of the lacking mutuality test and or control29. In the case of OKelly v Trusthouse Forte plc [1983] ICR 728, the English Court established that casual workers whose contractual terms placed no obligation upon their perceived employer to call, hire or retain them could not lay claims for unfair dismissal. The court said "mutuality of obligation" could not be established between the claimants and the defendant30. Conclusion Courts and employment tribunals of the United Kingdom face the issue of determining employment status on a case to case basis since the issue is not codified in law. In arriving at just, fair and reasonable decisions, judges normally line up a number of tests. Firstly, the Control Test is one of the criteria which is based on the level of employer’s supervision of the employee. Secondly, the Integrated or Organizational test explores the nature of services rendered by an employee and whether they are central to the running of the business or the services exist in isolation. Thirdly, the Mixed Test is based on the level of transferability of an employee’s functions to another and the financial risks that might arise from such an arrangement leading to a breach of contract. Lastly, the Contractual Test seeking the interpretation of the relationship between the parties to a contract in defining an employee status. Despite the importance of each of these tests, courts and tribunals should apply more than one test in any case seeking the interpretation of an employee status in order to arrive at the best solution possible. 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