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Employment rights, and management obligations

Structure: Issues, Legal rules and application

Part 1)


  1. Employee or Self Employed
  2. Employment rights of pregnant women
  3. Director’s duties and obligations
  4. Winding up procedure

Analysis and legal rules

The employment status of Doug would be determined by evaluating who has the responsibility for paying tax and National Insurance contributions, injury suffered by Doug whilst at work and any damage he may cause to others. It would also depend on what contractual rights Supa Ices Ltd (“SIL”) has in controlling the activities of Doug and whether he has any statutory rights such as unfair dismissal compensation or redundancy pay[1].

The advertisement states that SIL needs sales staff. SIL has essentially told Doug what work to do and how to do it, where to get the stock from, a price list and a uniform. SIL does not control the work to be done or provides the work. Doug is not paid a regular amount of pay at regular intervals, but he has to pay for the use of the van and equipment out of the sales he makes. It is not clear if he is allowed to send somebody else if he is unable to attend the ice cream van. If he is allowed to delegate, then he is self employed. If SIL gets someone else to run the van while he is sick then he would be classed as an employee.

In addition to this, tools are supplied by SIL for a price but Doug has to buy materials himself. The main tools, a van, and equipment are supplied by SIL but materials are not, however it is requirement that he must wear a uniform identifying him as representing SIL which could be interpreted as he being an employee of the company. In O’Kelly v Trust house Forte[2] it was held that casual staff, who were employed on a regular basis by the hotel, were in business on their own account and they had an opportunity to increase their profits as they would be at some risk of losing money as they are taking the financial risk. There does not seem to be any provision for sick and holiday pay. He is only allowed to sale the company’s own brand and not required to do any administrative duties therefore the presumption would be he has a contract for services and therefore he is self employed.

Doug, being a self employed having contract for services, will become one of the many creditors of the company if the company goes into liquidation. He would not have any rights as employee of the company. He would be treated as an unsecured creditor in the liquidation and as explained in the part 3) may get something back if there is anything left in the pot after paying preferential and secured creditors.

Part 2)

Ruth, being a pregnant woman in employment, has Statutory Rights such as to take time off work to attend ante-natal appointments without loss of pay. Section 55 of Employment Rights Act (“E R A”)1996, states that “every pregnant employee is entitled to time off with pay for ante-natal appointments she is medically advised to attend.” There is no requirement for qualifying service and no restriction on how much time off should be allowed. Therefore, SIL will have to pay her for attending these appointments, failures to do so would be breach of E R A. It is immaterial SIL has to pay somebody else to do her shifts.

Furthermore, while in hospital with pre-enclampsia she has been dismissed by SIL. Section 99 of the E R A makes any dismissal of a woman because she is pregnant automatically unfair and again there is no requirement of minimum qualifying service. Even when pregnancy makes a woman incapable of doing her job, however if there is some statutory restriction placed on her due to child birth, then she should be treated as suspended from work on full pay.[3]

In Web v EMO Air Cargo (UK) [4]Ltd 1994 ICR 727, a woman was recruited to take over a job of another employee, who was on maternity leave, then found herself to be pregnant. The woman employee was dismissed. She was unable to complain as she had too little service to complain of unfair dismissal as the law was then. She complained that she was dismissed because of her Sex as an equivalent man would not have been dismissed. She claimed sex discrimination. Although the employer tried to argue that a male employee would have been dismissed had he become incapable of work during the maternity leave. However ECJ ruled that, in the same circumstances a male replacement would not have become incapable of completing the contract and therefore the dismissal was unlawful sex discrimination. This was confirmed by the House of Lords.

Ruth has worked for the company for 4 years which qualifies her to make a claim for Unfair Dismissal at the Employment Tribunal and also claim for discrimination under the sex discrimination act.

Part 3)

The Insolvency Act 1986 (as amended by Enterprise Act 2002) has great effect on the day to day responsibilities of directors involved in running of a company. Under these provision the directors may be held personally liable for the debts of the company if they incompetently manage the company’s affairs whilst knowing the company is insolvent.

Debbie, the Managing Director, is aware of the financial crisis SIL is experiencing as the company is unable to pay its debts as they fall due[5]. Therefore she must seek professional advice immediately and must not keep writing cheques which would only increase the size of the debt. She could try to make informal agreements with creditors or consider selling the company as bank would be unwilling to extend the overdraft facility which is already over the limit. If Debbie fails to take any action then she may be responsible for Wrongful Trading under the provisions of Insolvency Law.

Section 124 of the Insolvency Act 1986 provides that an application to the court for the winding up of to company shall be by petition presented either by the company, or the directors, or by any creditor. Debbie being a sole director would pass an extraordinary resolution to the effect that the company can no longer continue in business and it is to be wound up. The liquidator of the company would realise the assets of the company and after paying preferential creditors and fixed and floating charge holders, if any, he would distribute the remaining funds amongst the creditors. In this case the Bank is likely to have some security for its debts and if so will get its debt paid in full.


  1. Employment Law by James Holland & Stuart Burnett, LPC , published by Blackstone Press, pages51 to 55, 17 to 20
  2. Business Law by Scott Slorach & Jason Ellis, Legal Practice Course Guides , 1999- 2000 published by Blackstone Press
  3. The Company Law Legislation, CCH New Law, 1999
  4. Cases & Materials on Employment Law by Richard Painter, Ann Holmes & Stephen Migdal, Blackstone Press Limited , published in 1995



[1] Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance 1968 2 QB 497

[2] 1983 ICR 728

[3] Section 66 Employment Rights Act 1966

[4] page 260, Cases & Material, on Employment Law by Richard W Painter, Ann Holmes and Stephen Migdal.

[5] This is known as Going Concern Concept

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