ACCA F4: Chapter 4 - Employment Law

1 Employed versus self-employed - Employee (under a contract of service) - Self employed (independant contractor) (Under a contract for service)

1 Employed versus self-employed - the control test - employees are subject to control by their employer as to how, where and when they do their work: Yewens v Noakes (1880). (Note, however, that this test is inappropriate for skilled workers.) - the integration test – someone is regarded as an employee if their work is an integral part (i.e. part and parcel) of the business and not merely an accessory to it. (Note, however, that this test has become difficult to apply as a sole criterion.) - the economic reality test (or multiple test) – under this test the court takes all the surrounding factors into account.

1 Employed versus self-employed - control - provision of his own equipment - whether he hires his own helpers - degree of financial risk he undertakes - degree of responsibility he bears for investment and management - the extent to which he has an opportunity of profiting from sound management in the performance of his task - whether there is a regular method of payment - whether the person works regular hours - whether there is mutuality of obligations.

1 Employed versus self-employed Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance & Others (1968) Facts: The driver of a lorry had a contract with a company under which he drove his lorry only on company business, obeyed instructions of the foreman and wore company colours. He provided his own lorry which he had obtained from the company on hire purchase and which was painted in company colours. He could employ a substitute driver. He was paid on the basis of mileage and quantity of goods delivered. He paid the expenses of repair and maintenance of the lorry and his own national insurance and income tax. The Minister of Pensions claimed that he was an employee and the company had therefore to make the employer’s national insurance contributions. Held: Although the employer exercised some control over his work, the other factors were not consistent with there being a contract of service. In particular, the fact that he owned his own equipment and was operating at his own financial risk to a degree (i.e. was ‘a small businessman’) meant that he was an independent contractor.

1 Employed versus self-employed 1) An example of this test in operation may be seen in Walker v Crystal Palace Football Club (1910) in which it was decided that a professional footballer was an employee of his club on the basis that he was subject to control in relation to his training, discipline and method of pay. 2) With developing technology and specialisation, the control test became inappropriate as employers would hire people for particular skills (e.g. a chemical engineer), of which the employer did not have sufficient knowledge or skill to instruct as to the manner in which they carried out their work.

1 Employed versus self-employed An example of the application of the integration test may be seen in Whittaker v Minister of Pensions & National Insurance (1966) in which the court found that the degree to which a circus trapeze artist was required to do other general tasks in relation to the operation of the circus in which she appeared, indicated that she was an employee rather than self-employed. As a consequence, she was entitled to claim compensation for injuries sustained in the course of her employment.

1 Employed versus self-employed Market Investigations Ltd v Minister of Social Security (1968) Facts: A market research interviewer worked on and off under a series of contracts whereby she interviewed for a company in accordance with interview instructions issued by the company. She had to complete the work within a specified period, but otherwise had no specified hours of work. There was no provision for holiday or sick pay and she was free to work for others while working for the company. Held: The company did have some control over the manner in which she did her work and the terms of the contract were consistent with a contract of service. The court emphasised that she did not provide her own tools and took no risk. She was therefore not ‘in business on her own account’ and was an employee and not an independent contractor. The court also emphasised that there was ‘no exhaustive test compiled, nor strict rules laid down’ as to the factors which identified a contract of service.

1 Employed versus self-employed O’Kelly v Trusthouse Forte Plc (1983) Facts: A wine waiter was called a ‘regular casual’ because he was given work when it was required in the banqueting hall. He had no other employment and it was generally accepted that he would be offered work in preference to others when work was available, and that he would accept such work when offered. Held: He was an independent contractor because there was ‘no mutuality of obligation’ in that the company was under no duty to offer him work and he was under no duty to accept it. However when at work he wore a company uniform, did not use his own equipment, did not share in the profit and had no investment in the business (aside from his time as a waiter).

1 Employed versus self-employed 1) Generally such people will be paid by the number of pieces they produce and will supply their own equipment. Their position is ambiguous and many consider themselves to be self-employed, but the law does not always take this view. 2) Nethermere (St Neots) Ltd v Taverna and Gardiner (1984) Facts: Two women, who sewed trousers at home, let the company know when to deliver the material and collect the finished garments. They rarely refused work, but did give warning if they did not want it, e.g. going on holiday. They submitted time sheets and were paid at the same rate as the workers in the factory. The company relied on the work they produced. The company provided the machines. Held: They were employees because, by the giving and taking of work regularly over a continuous period of time, they had built up a mutuality of obligation (i.e. the company to provide work and the women to accept it).

1 Employed versus self-employed - employees receive statutory protection (e.g. unfair dismissal/redundancy) - there are implied terms in a contract of employment (e.g. duty of obedience) - an employer is vicariously liable for the acts of employees when they act in the course of the employer’s business. The employer is not liable for the acts of independent contractors - on the insolvency of the employer, an employee is a preferential creditor, whereas someone who is self-employed ranks as an ordinary unsecured creditor - employees receive their pay net of income tax and national insurance under the PAYE system. Independent contractors are taxed under the trading income provisions - certain state benefits (e.g. statutory sick pay) are only available to employees

2 The contract of employment - express terms - terms implied by the courts - terms implied by statute.

2 The contract of employment Express terms are those agreed by the parties themselves. The agreement may be written or oral.

2 The contract of employment The Employment Rights Act 1996 (ERA 1996) requires an employer to provide an employee with a written statement of certain particulars of their employment within two months of the commencement of employment. It includes: - pay rates and interval (i.e. weekly, monthly, etc.) - job title - hours of work - place of work - length of notice - details of disciplinary or grievance procedures - date of commencement of employment The statement is not a contract unless both parties agree and it is called a contract. It is strong prima facie evidence of the terms of the contract, but is not conclusive. Any change must be notified by written statement within one month.

2 The contract of employment - Duty to obey lawful and reasonable orders - Duty of mutual co-operation (or the duty to perform the work in a reasonable manner) - Duty to exercise reasonable care and skill - Duty of good faith – a duty to give honest and faithful service - Duty to render personal service

2 The contract of employment Pepper v Webb (1968) Facts: A gardener refused to plant the plants where instructed by the employer Held: He was in breach of the duty of obedience and this, coupled with the fact that he was rude and surly, justified his summary dismissal.