Accountancy Resources
The Provision Of Employment Rights In English Law
Employees enjoy greater protection and employment right than the self-employed but who counts as an employee is a complex matter with limited statutory guidance.
English employment law traditionally provides right only to employees, but who is an employee in the traditional sense does not fit with the current working practices in many businesses. Those who work on a contractor or self-employed basis may be surprised to find the law regards them as employees in certain circumstances, while “employees” of a company may find they are, in fact, contracted workers with limited employee rights.
The Oxford English Dictionary defines “employee” as “a person employed for wages or salary” but in the modern world, this definition is rudimentary at best. In a legal sense, “employee” has a complex definition that sees people on temporary contracts or even the self-employed being “employees” in some regards. Determining who is and is not an employee for the purposes of determining their employee rights is no longer a question of whether or not they are paid a wage or salary for the work they do.
Although English law makes it clear that only employees are protected from unfair dismissal, for example, there is no statutory definition of employee. The Employment Rights Act 1996 defines an employee as “an individual who enters into or works under a contract of employment”, but goes no further. It has therefore been left to the courts to define who is, and who is not, an employee.
When determining whether an individual is an employee, courts and tribunals look at a number of factors, the principle of which is the master-servant relationship. Central to this is the difference between a contract of service, which employees will have, and a contract for services, which contractors may have.
For a contract to be a contract of service, three requirements must be met. Firstly, the employee must be obliged to undertake the work himself, rather than delegate it to another party. This was confirmed in Express and Echo Publications Ltd v. Tanton [1999], where the Court of Appeal ruled that allowing for a replacement driver to be sent prevented the contract being a contract of service.
Secondly, there must be a “mutuality of obligations” requiring that an employer provide work for an employee to undertake, and that the employee undertake it. In Carmichael and Leese v. National Power plc [2000], the House of Lords stated that “there can be no contract of service where there is no mutual obligation”.
Finally, the employee must agree to be “subject to the control of the employer”; which embodies the master-servant relationship. The case of Ready Mixed Concrete (South East) Ltd v. Ministry of Pensions and National Insurance [1968] determined that to be an employee, an individual must be “subject to an employer’s supervision” and also carry out their duties as directed. In other words, to be an employee, one must generally be in the control of the other party. This raises complex issues for highly-skilled workers such as doctors and pilots, who may not be under the direct control of their employer in regard to how they perform their duties but who may still undertake work provided for them.
The three requirements for a contract of service are the main focus of any decision on whether an individual is an employee but they are by no means the only factors a court or tribunal will take into consideration. The decisions in Market Investigations v. Minister of Social Security [1969] and Lane v. Shire Roofing Co. Ltd [1995] provided a list of other considerations which may be taken into account regarding the status of highly-skilled professionals.
Whether the individual provides their own equipment; hires their own assistants; and can profit from “the sound management” of their work will be taken into account as evidence of independence of working. The degree of financial risk taken on by the individual and their “degree of responsibility for investment and management” will also enter into the considerations. Each of these factors demonstrates a certain degree of independence from the employer and thus a break in the master-servant relationship. As a rule, the greater the degree of independence (such as providing one’s own tools, team, and training), the more likely the courts will rule that an individual is employed on a contract to provide services and will therefore not be an employee.
All employees work under a contract of service. They undertake work provided by an employer and work under supervision, for little or no financial risk. Employees are protected from unfair dismissal, while individuals working on a self-employed basis are not. The self-employed may, however, still resolve disputes under claims for breach of contract, but their protection under employment law is far more limited.
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