Unraveling Employment Status

Introduction

The Taylor Review of Modern Working Practices July 2017 observed that if one knows and understand their employment status, it serves as the gateway through which they can access their statutory rights. and critical insight for those who are seeking law dissertation help. This is a relevant observation given that Section 230(1) of the Employment Rights Act 1996 (ERA 1996) defines an employee as the person who has ‘entered into or works under a contract of employment’.

The determination of the type of contract seems to be crucial given that the ERA 1996 provides for rights based on the status of the employment. In this context, this essay will analyse the nature and form of the contract of employment in regard to employment status by analysing relevant laws to include the National Minimum Wage Act 1998, the Maternity and Parental Leave etc. Regulations 1999 and the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

Employment status – the form or the substance that defines the rights.

An employee has additional employment rights and responsibilities that are not applicable to workers. Examples of some relevant provisions of ERA 1996 are maternity leave, paternity leave, parental leave; and adoption leave. The ERA 1996 clearly differentiates the level of rights and overlapping rights between an employee, worker and other temporary workers. For instance, both the employees and workers have rights not to suffer unauthorised deductions. However, the right to guaranteed payment for an employee is only available to employees. A temporary worker under a fixed terms of contract can access the rights of an employee when they become permanent employees after over 4 years of employment.

Recognising the position of the employment relationship is necessary to understand the rights a person possesses while working for somebody. The status of an employee is determined by whether a person has an employment contract. Section 230(1) of the Employment Rights Act 1996 states that an employee is a person that has or works under an employment contract. This definition does not seem to be adequate. The problem seems to be further complicated by the definition of a worker. A worker a person who works under a contract of employment. They can also work under other express or implied contract where they personally perform the the work or services without any client and customer relationship. These definitions seem to have left the question opened to the tribunals or the courts to determine based on the facts of whether the contract is of service or for service.

1. Good Work, ‘The Taylor Review of Modern Working Practices July 2017’(2017) 35 accessed 17 November 2021 .
2. The Employment Rights Act 1996, Section 230(1)
3. Ibid, Section 72.
4. Ibid, Section 80A.
5. Ibid, Section 76.
6. Ibid, Section 75A.
7. Ibid, Section 13.
8. Ibid, Section 28(1).
9. Norman M. Selwyn and Norman Selwyn, Selwyn's Law of Employment (Oxford University Press 2006).
10. The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, Section 8.

An employee contract is a contract of service and regarding a self-employed person, it would be a contract for service, the person would be a self-employed person. There are multiple tests that the courts and tribunals apply to determine the nature of the contract of employment. The mutuality of obligation test requires the employer to have a duty to provide work and an individual under the obligation to accept the work. This is supported by the ruling in the case of Kickabout Productions Limited v HMRC. The Upper Tribunal emphasised on the sufficient control over the claimant’ time and place of work and the material contractual rights over what he did; the rights to terminate the contract on 4 months’ notice; and rights to suspend the claimant in case of misconduct in case of the presence of a continuing obligation to provide work. Thus, the test of the right of control is also used to determine the employee status that impacts the access to the rights as an employee. In Yewens v Noakes, Bramwell LJ determined the employment status when he stated that “A servant is a person subject to the command of his master as to the manner in which he shall do his work”.

The determination of the employee status may be a difficult task. However, it impacts a person’s entitlement to the level of rights defined as worker, an independent contractor or an employee. As seen earlier, this is particularly relevant to the current area of focus as there are levels of rights as per the status. The Taylor review recognises the power imbalance between the employers and individuals. This often leads to abuse of labour laws in terms of wages, working conditions and other such associated rights. The review found that the current employment status framework and the rights of whether a worker, employee, contractor or self-employed are difficult to understand. For example, the power imbalance can make individuals on zero hours contracts unsure of their rights, and empowers an employer to restrict work opportunities for them given the fear of retribution, loss of earnings and a general insecurity of income. Thus, it also pushes their status to the test for an ‘employee’, which is often met with their inability to determine whether they have the necessary continuous employment, as provided under Section 210 and 211 of the Employment Rights Act 1996, to assert entitlements. The outcome is, thus, detrimental to individuals in regard to their access to employment rights.

1. Steven, Jordan and Harrison Ltd v Macdonald and Evans [1952] 1 TLR 101..
2. Section 230(3)(a) of Employment Rights Act 1996.
3. Ibid, Section 230(3)(b).
4. Steven, Jordan and Harrison Ltd v Macdonald and Evans [1952] 1 TLR 101.
5. Kickabout Productions Limited v HMRC [2020] UKUT 0216.
6. Yewens v Noakes (1880) 6 QBD 530, 532.

The need of the hour is, therefore, to consider multiple factors to enable determination of employment rights. This also means that determining the employee status is crucial in claiming employment rights. In such circumstances, tests such as the integration test play an important role. This test has been applied in many cases. In Cassidy v Ministry of Health or Jordan and Harrison Ltd v Macdonald and Evans, the determining question held was whether an individual is employed as part of the business; their work forms an integral part of the business; or their work are merely an accessory to the business. The test of economic reality, which is commonly known as the multiple tests, also helps in that regard. Accordingly, it is irrelevant as to whether a person is self-employed or in an employment relationship. The focus is on the substance, including whether the person uses their own resources, is under complete control of another, has the right to substitute or delegate to another worker, or is assigned by another agency. Thus, the multiple tests will require to determine whether there is a contractual duty to provide personal services; a sufficient degree of control; and contractual terms consistent with the service.

1. Good Work, ‘The Taylor Review of Modern Working Practices’ (2017) accessed 17 November 2021 .
2. Ibid.
3. Ibid.
4. Cassidy v Ministry of Health [1951] 2 KB 343.
5. Stevenson, Jordan Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101.
6. Richard Benny, Malcolm Sargeant, Michael Jefferson, Q and a Employment Law 2008 And 2009 (Oxford University Press 2008) 5.
7. Jenifer Ross, Employment Law Essentials (Edinburgh University Press 2014) 27; see cases – Ready Mixed Concrete Ltd v Minister of Pensions [1968] 2 QB 497, Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173, Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 3 All ER 817.

The courts do not have specific formulas to determine an employee status. They consider the reality of the working relationship irrespective of any written documentation. The key consideration is the substance of the relationship. In the case of Uber BV and others (Appellants) v Aslam and others (Respondents) where the Uber drivers are held to be ‘workers’ for purposes of the National Minimum Wage and paid holidays. This decision also demonstrated that the use of the distinction between ‘workers’ and ‘independent contractors’ is a fragile platform to determine the rights at work. Thus, the rights of workers (limb (b) worker) are applicable those people working in the gig economy. For example, non-employees pay lesser tax as they receive deductions for business expenses, including vehicles and running costs. They also pay 9% and not the standard 12% in National Insurance Contributions. These benefits may outweigh the rights that they might have received had they been given an employee status. Some examples are that Section 86 of the Employment Rights Act 1996 provides the option of serving notice period or payment in lieu, which is offset by extra NICs for a person working between 1 month and 33.3 weeks; benefit of sick pay as provided under the Social Security Contributions and Benefits Act 1992 (SS151–155); paid child care leave under the Employment Rights Act 1996 (SS71–75) and right to expected pay when no work is available.

The employment status differentiates the rights of a person in a wage-work relationship. The ERA 1996 is the evidence. In addition to the mentioned sections that categorised the rights of the employees and workers, there are other provisions that clearly demonstrate the differences. For example, Section 44(1) provides that employees are protected for the act of the employee failure on their part to act regarding the preventing or reducing health and safety risk at work if such acts are designated to them by the employer. This liability principle is different in regard to the workers. Section 44(2) limited the liability of the worker for the steps they took or for leaving the premises in case of an imminent and serious danger. Similar differentiation could also be seen in Section 47C(1) and Section 47(5) where former protects the employee against detriment action for their an act or failure to act regarding childbirth, pregnancy, maternity, and parental leave, the latter provides that such protection is not extended to the workers.

1. Alan Bogg, Jennifer Collins, Jonathan Herring and Mark Freedland, Criminality at Work (Oxford University Press 2020) 199.
2. Uber BV and others v Aslam and others [2021] UKSC 5 on appeal from [2018] EWCA Civ 2748.
3. Sandra Fredman and Darcy Du Toit, ‘One small step towards decent work: Uber v Aslam in the Court of Appeal’ (2019) 48(2) Industrial Law Journal 260-277.
4. Ibid
5. Ibid
6. Devonald v Rosser & Sons [1906] 2 KB 728.
7. Section 4(1)(a) of the Employment Rights Act 1996.
8. Ibid, Section 44(1A).

In view of the challenges associated with defining employee status, the Taylor review recommended relabelling intermediate workers as dependent contractors; tax levels for both employed and self-employed should be at closed to being equal; and introduce ‘soft’ rights including the right to request a direct contract or fixed hours. The recommendation of the review and the discussion and case laws mentioned so far present a different perspective of looking at the current issue in hand. Employee status has been given too much of a focus. As seen with the multiple tests, the determination is of facts, which is mostly the terms of the services and the services itself. The decided cases are evidence of this aspect. Thus, when the Taylor review recommended relabelling ‘worker’ status, which is like rebranding minimum wage as a living wage, it does not change the law. This is seen with Section 23 of the Employment Relations Act 1999 that enables the government to pass orders to provide employment status to more people. Similar deduction can be made regarding the right to request direct contract or fixed hours when the employers have strong conflicting monetary incentives. These are instances of the lack of enforcement of the law, which can be said for Section 23 mentioned above and for agency work, zero hours’ contracts and self-employment contracts that are used to avoid providing employment entitlements.

The determination of the employee status impacts a person’s entitlement to the level of rights defined as worker, an independent contractor or an employee. Unlike the worker or the independent contractor, an employee has access to parental, maternity, adoption, and paternity leaves. The determination is of facts, which is mostly the terms of the services and the services itself. The decided cases are evidence of this aspect. Thus, whether there is a formal employment contract or not, the courts will decide based on the prevailing facts and the nature of the services.

1. The Employment Rights Act 1996, Section 47C(1) and (2).
2. Ibid, Section 47C(5).
3. Ewan McGaughey, ‘Uber, the Taylor Review, Mutuality and the Duty Not to Misrepresent Employment Status’ (2019) 48(2) Industrial Law Journal 180–198.
4. Ewan McGaughey, ‘Uber, the Taylor Review, Mutuality and the Duty Not to Misrepresent Employment Status’ (2019) 48(2) Industrial Law Journal 180–198.
5. Ibid
6. The Maternity and Parental Leave etc. Regulations 1999, Section 13; The Employment Rights Act 1996, Section 76.
7. Ibid; Section 72 of the Employment Rights Act 1996.
8. The Employment Rights Act 1996, Section 75A
9. Ibid, Section 80A.

The courts and tribunals have filled the gap in the employment laws arising from lack of a clear and uniform definition of an employee. The case laws have so far included such persons within the scope of the relevant legislation. Because of this, basic protections are also extended to workers other than employees, for example the three categories are entitled to national minimum wage.

The number of cases and tests being applied to the different working relations indicates that defining an employee status means translating the working relationship in categories for assigning the individual rights.

Conclusion

The perception of a clear employer–employee relationship has become a blur. This has impacted the assignment of legal duties and responsibilities in the working relation. Most important, it has made the definition and implementation of an employment contract difficult. The status of employment surely defines the entitlement to statutory employment rights. It is the substance irrespective of what a formal written documentation states.

The reality of the relationship, the terms and the kind of services provided define the employee status and the rights associated with it. Thus, it is not the formal employment status, but the nature of the relationship and the services that impact the assignment of the rights.

1. Massey v Crown life Insurance Co 1978 IRLR 31.
2. Peter Mctigue, ‘Beyond the contractual veil: agency workers, employee status and commercial reality’ (2007) 16 Nottingham LJ 54.
3. The National Minimum Wage Act 1998, Section 1(1).

Take a deeper dive into Understanding Unfair Dismissal under the Employment Rights Act with our additional resources.

Bibliography

Legislation

The Employment Rights Act 1996

The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002

The Maternity and Parental Leave etc. Regulations 1999

The National Minimum Wage Act 1998

Cases

Cassidy v Ministry of Health [1951] 2 KB 343.

Devonald v Rosser & Sons [1906] 2 KB 728.

Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 3 All ER 817.

Kickabout Productions Limited v HMRC [2020] UKUT 0216.

Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173,

Massey v Crown life Insurance Co 1978 IRLR 31

Ready Mixed Concrete Ltd v Minister of Pensions [1968] 2 QB 497,

Steven, Jordan and Harrison Ltd v Macdonald and Evans [1952] 1 TLR 101

Uber BV and others v Aslam and others [2021] UKSC 5 on appeal from [2018] EWCA Civ 2748.

Yewens v Noakes (1880) 6 QBD 530

Books

Benny R, Malcolm Sargeant, Michael Jefferson, Q and a Employment Law 2008 And 2009 (Oxford University Press 2008)

Bogg R, Jennifer Collins, Jonathan Herring and Mark Freedland, Criminality at Work (Oxford University Press 2020)

McGaughey E, ‘Uber, the Taylor Review, Mutuality and the Duty Not to Misrepresent Employment Status’ (2019) 48(2) Industrial Law Journal 180–198.

Ross J, Employment Law Essentials (Edinburgh University Press 2014)

Selwyn NM and Norman Selwyn, Selwyn's Law of Employment (Oxford University Press 2006)

Journals

Fredman S and Darcy Du Toit, ‘One small step towards decent work: Uber v Aslam in the Court of Appeal’ (2019) 48(2) Industrial Law Journal 260-277.

Mctigue P, ‘Beyond the contractual veil: agency workers, employee status and commercial reality’ (2007) 16 Nottingham LJ 54