The Employment Status of the Twenty Valeters - Article Example

Name: Tutor: Title: Employment Law Institution: Date: Employment law Task 1: The employment status of the twenty valeters The employment relationship between an employer and an employee is generally hierarchical, whereas relationships between companies are within comparison of a more equivalent nature. According to Fishman, (2011)1 dependent self-employed workers are the workers providing work or offer services to other people or organizations within the legal outline of a civil or commercial contract, but who actually are dependent or incorporated into the company for which they provide the concerned services. In addition, Price (2009)2 defines self-employed workers as workers who are economically reliant on a principal and within lasting legal subordination from their principal. There are three classifications of the employment law. One, according to the Employment Rights Act 19963, an employee is a person working under a “contract of employment”. Secondly, within the Equal Pay Act 19764, an employee is a person with “any other contract personally to carry out any work”. Lastly, British legislation classifies dependent self-employed workers through setting up a “worker” classification. For example, legislation regarding working time, minimum payments, part-time work and such things are applicable not just to employees but to all contracts where a person agree to personally do the work without operating a genuine business of their own. Basically, the legal tests utilized in determining the employment category depend on four aspects, control, integration, business reality as well as mutuality of obligation (Price, 2009)5. Control test concentrates on the autonomy of the worker while integration test focuses on the relationship between the worker and the employer, the routine rules in addition to disciplinary mechanisms utilized. Routine rules include occupational benefit schemes. Business reality tests risk allocation as well as economic reliance between the two parties involved in the contract. Generally, business reality test analysis where the economical risk is and how workers profit from carrying out their job. Types of analysis parameters include payment method, freedom to hire other people or workers providing their own working materials or tools. Lastly, the mutuality obligation refers to the formal proof of subordination within the contract. The test examines if there is any mutual obligation to offer services or work, or accept any work that is provided. In case there is no mutual obligation, it illustrates the relationship in existence is not an employer and an employee relationship, but a relationship between two independent parties (Price 2009)6. As a result, these parameters will be used in analyzing the relationship between CleanCars and the twenty valeters. Basically, an independent contractor is defined by the compensation method. An employee is paid regularly; maybe hourly, weekly or monthly while in independent contract relationship the payment method is different. In this case, valeters were being paid depending on the number of the vehicles they cleaned and not on a flat rate (Jefferies, 2001)7. Furthermore, when identifying an independent contractor, the worker provides his own tools, materials and equipment, and also the employer does not supply all the required materials to carry out the job (Fishman, 2011)8. This further indicates that the valeters were self-employed because they were responsible for buying their own materials and uniforms from the CleanCars, and hence the company was not providing the required materials to carry out the job. When the party that is hiring has control in the manner in which the work is performed and a product delivered, the relationship between the parties is employer/employee. In case the employee does not have any authority or control over how a party carries out his or her work but just gives the request outline, the relationship between the parties and the hiring party is, hiring party/independent contractor (Fox, 1979)9. In this case, even though CleanCars required that a valeter who decided not to go to work to give a notice for their absence, the company had no control regarding the way the valaters carried out their work. The company, CleanCars required all valeters to sign a contract having a substitution clause, allowing them to other people to work on their behalf and a “right to refuse work”. Since the valeters were at liberty of employing other people to work for them, they were self-employed. In addition, they signed a contract that stated that their relationship between them and CleanCars was that of client and independent contractor and therefore they were not employees of CleanCars. The tax liability of an employer is established by the level of the worker’s employment. If the worker is an employee, the employer is obligated to pay state and federal unemployment tax, social security tax as well as workers compensation to a state insurance fund. On the other hand, in case the worker is an independent contractor, the hiring party is not obligated to make such payments (Owens, Riley & Murray 2011)10. According to the agreement between the valeters and the CleanCars, the valeters were required to pay their own insurance and they were supposed to pay their own tax and National Insurance as well. In this case, CleanCars was not deducting taxes from the valeters but they were paying their taxes just an entity and therefore the relationship can be described as an employer/independent contractor relationship. If a person who works for an employer is not an employee under the English law, basically the employer is not obliged to hold back federal income tax that person’s pay. In the case of O'Kelly v Trusthouse Forte plc [1983] ICR 72811, it was held that a prerequisite for a contract is “mutuality of obligation”, between the involved parties. In this case, some waiters had been hired to carry out dinner functions at the Grosvenor House Hotel. They were hired during banqueting events, and within their contracts it was written that the waiters had no obligation to go and work and similarly the employer was not obligated to hire them during the banqueting events. The waiters tried to arrange for a trade union but were dismissed. Waiters argued that the dismissal was unfair since trade union legislation provided them with a right not to be prejudiced against as “employees”. On the other hand, the employers claimed that the unfair dismissal legislation (Employment Rights Act 1996 s 94) just covered up “employees” while this did not cover their state. The ruling was that the waiters weren’t employees since they were not obligated to go to work. According to the jury, Sir John Donaldson, the contract was devoid of “mutuality” and hence the contract could not be described as an employee-employer relationship. The legal effect was that they were “self employed” since the contract lacked “mutuality”. Accordingly, in the contract between the valeters and CleanCars, the valeters had the right to refuse to work and therefore in reference to the case O'Kelly v Trusthouse Forte plc [1983] ICR 72812, the valeters may be perceived as self-employed and not employees. However, even though the contract fulfilled the requirements of an independent contractor for the valeters, relative bargaining power of the valeters should be taken into consideration because they were ignorant of the contractual requirements. A good example is the case, Autoclenz Ltd v Belcher [2011] UKSC 4113. This case covered the scope of statutory rights’ protection for working persons. In this case, valeters who included Mr. Paul Huntington and Mr. Belcher worked for Autoclenz Ltd. British Car Auction had been outsourced through contractual agreements by Autoclenz Ltd to offer valeting services. Valeters working for Autoclenz Ltd claimed holiday payments as well as the national minimum wage rates. They had signed contracts that described them as self-employed. Paul Huntington worked had continually worked from 1991 until the hearing and apart for few weeks, where he worked for a competitor within 2002 to 2003. Within 2007, Autoclenz Ltd informed the valeters that they were supposed to sign new contracts that clarified that they weren’t employees but independent contractors, that they were supposed to provide their own working materials, and that there were not obligated to offer services and Autoclenz Ltd was not obligated to provide work to them. The valeters wore the company’s uniform for security purposes. Autoclenz Ltd asserted that the valeters were not workers because of the statutory designation of that term within the Working Time Regulations 199914 as well as the National Minimum Wage Act 199815. The ruling was that the valeters were employees and if they were not employees, they were workers. The jury’s ruling was that in spite of the contract describing the valeters as self-employed, they were employees. Autoclenz Ltd appealed but the Supreme Court ruled that in spite of the contractual stating that the valeters were independent contractors, were not obligated to work and such condition, the contract could not be handled as a commercial contract, since there could be an aspect of inequality of bargaining power. Therefore, relative bargaining power of the contractual parties should be considered when making a decision on if terms stated in written contract actually represent what was agreed and the true agreement is normally gleaned from all situations of the case, whereby the written contract is only an element. Accordingly, even if the contractual agreements indicated that the valeters were independent employees, relative bargaining power of the valeters should be considered, because the valeters were ignorant of the contract prerequisites and therefore the 20 valeters are employees of CleanCars and not self-employed. In conclusion, even though the 20 valeters were engaged under employment contracts and the clauses that stated that they were self employed, were not obligated to work, they had a right to refuse work as well as they could engage another worker, there was an element of inequality of bargaining power in the contract and therefore the valeters are employees of CleanCars. Task 2: Whether Jeff has a legitimate unfair dismissal case against CleanCars In order to establish if Jeff has a legitimate unfair dismissal case against CleanCars, it is necessary to first establish whether Jeff was an employee to the company or self-employed/independent contractor. According to the employment law, an employee is a worker who works under a contract for his/her employer, regardless whether it is a written or an oral contract. However, for one to qualify to be an employee, such a contract should involve the employer paying the worker regular salary/wages, the worker being given specific tasks to carry out, the worker being provided with the necessary tools to perform the job, the worker is controlled by the employer among other elements. On the other hand, a certain aspects define the worker as an independent contractor in every case; not being dependent on the business as the only source of the income, the worker works according to his/her pace established within the agreement, the worker is not eligible to the employer’s offered benefits and retains some level of control as well as independence. Whereas the independent contractor is his/her own boss, the employee depends on the business for stable income, gives up aspects of control and autonomy, is appropriate for some benefits and works in workplace restraint (Riley 2005)16. In this case, Jeff did not have any control on his employment activities nor was he independent in his undertakings within the company. For example, every time that Jeff was absent from work, he was required to present medical certificates and additionally CleanCars interviewed him about his absences and issued him with an oral warning; this indicates that the company had control over his independence at work. Jeff also had specific roles at CleanCars, which included counting all money received from the place where he managed. Nethermere Ltd. V Gardiner and Another [1984] ICR 61217 provides a reference for employee’s rights such as unfair dismissal. The case represents the proposition that if there is “mutuality of obligation” between the employer and the workers, the court will establish that the claimant has employment contract and is thus an employee. Therefore, the relationship Jeff and CleanCars was an employer/employee relationship (Price, 2009)18. Generally, a self-employed person is not qualified for unfair dismissal case and having established that Jeff was an employee of CleanCars, and not an independent contractor, the next step is to analyse whether the grounds of his dismissal were reasonable. Unfair dismissal Basically, there are various instances where dismissal can be termed as unfair and these conditions include: If the employer does not a valid reason to dismiss an employee If the employer fails to follow the proper process when dismissing an employee or if an employer acted unreasonably If an employee is dismissed for an automatically unfair reason, for example maternity leave or sick leave (Price 2009)19. For one to qualify for unfair dismissal rights, a person should have been in a continuous employment with the employer for a period of al least one year. Jeff had been working with CleanCars for two years and therefore he cannot be disqualified on these grounds. Circumstances for dismissal An employee can be dismissed if: If the contract under which the employee is employed by the employer expires If the employee is employed under a limited-term contract and the contract ends If the employee terminates the contract in situation where he/she is entitled to terminate it without notice due to the conduct of the employer. An employee shall be deemed as dismissed if: The employer gives a notice to end the employee’s employment contract During the period of the notice the employee provides the employer with a notice to end the employment contract (Price 2009)20. Potentially fair dismissal Capability: an employee can be dismissed if he/she is not in a position to carry out their job maybe because of illness or incompetence is potentially fair Conduct: an employee can be dismissed if he/she is involved acts such as in theft, fighting, taking drugs or being drunk while at work, being abusive, absentia without valid reasons and such Violating the law: any circumstance where continuing to provide work for the employ would be unlawful Some of considerable reason. Fair dismissal procedure Generally, employers are supposed to comprehensively investigate a case and offer employees a chance to explain their side of the situation before their dismissal. It is very important for the employers to follow a fair and a reasonable process before dismissing an employee (Riley 2005)21. In the case of Jeff, CleanCars suspected that he might be taking money and invited him for an interview. CleanCars did not investigate Jeff’s suspicions for stealing allegations and dismissed him immediately when he was unable to explain why takings were down. The money may have been lost when Jeff was absent from work due to illness and therefore CleanCars should have fully investigated him and only dismiss him if they had reasonable evidence that he was guilty of the loss of money. In addition, Jeff was not given any notice prior to his dismissal but was dismissed immediately. Employment law provides that before an employee is dismissed, he/she should be given prior notice before the dismissal. In addition, since Jeff is an employee of CleanCars and not an independent contractor/self-employed, he cannot be dismissed because he was absent from work due to illness or because he sought sick leave. Consequently, there are no grounds for Jeff’s dismissal because there was no evidence of Jeff’s misconduct since the misconduct was not comprehensively investigated and also because as an employer, CleanCars did not follow the correct procedure when dismissing Jeff and therefore CleanCars acted unreasonably in dismissing Jeff: This provides Jeff a legitimate unfair dismissal case against CleanCars. In conclusion, having established that the relationship Jeff had with the employer is an employer/employee relationship, the employer did not have the right to dismiss Jeff basing his absence to work because of his illness or without following the appropriate procedure in his dismissal. If a written employment contract is not available, some employment terms and conditions between a person and the employer are implied by the employment law. One of the obligations impacted on employers by the employment law include the duty of providing employees with reasonable notice if there is no fair cause for dismissal. According to the law, it is violation of equity; it is unfair to dismiss an employee without following the correct termination procedure or without establishing beyond reasonable doubt that the employee committed the misconduct. Again, an employer is only allowed to terminate an employment without any grounds if the termination is on reasonable notice and in this case, there was no reasonable notice whatsoever. Therefore, Jeff has a legitimate unfair dismissal case against CleanCars. Bibliography Texts Fishman, S., 2011, Working with Independent Contractors. Nolo, Austria. Fox, S., 1979, Management and the Law, Ardent Media, Sydney. Jefferies, B., 2001, Australian book contracts: print contracts, digital contracts, Keesing Press, Austria. N van der, W., 2010, Employment Law: An Outline, LexisNexis Butterworths, . Chatswood, N.S.W. Owens, R., Riley, J., & Murray, J., 2011, The Law of Work, Oxford University Press, Oxford. Price, R., 2009, Employment Law, in principle, Thomson Reuters, New York. Riley, J., 2005, Employee Protection at Common Law, Federation Press, California. Cases Autoclenz Ltd v Belcher [2011] UKSC 41 Nethermere Ltd. V Gardiner and Another [1984] ICR 612 O'Kelly v Trusthouse Forte plc [1983] ICR 728 Legislations Employment Rights Act 1996 s 94 Employment Rights Act 1996 Equal Pay Act 1976 National Minimum Wage Act 1998 Working Time Regulations 1999 Read More