Employment Status in Employment Law

Introduction

The question of the Employment Status in one of the most difficult to answer in Employment Law. In the modern era this question is becoming more and more complicate due to the complex and variety, in constant growth of the atypical workforce situations. The variety of situations do not allow to clearly identify who is an employee, who is a worker and who is an employer; different degrees of in/dependency make things much more complicated to define. (Guy D.) What is the meaning of ‘employment’ required in law to be considered an employee and what types of workers are not. Many tests have been developed in order to clarify and determine the differences. Other categories of work relationships are then considered and examined particularly in order to see whether they are mutually exclusive with employment or whether they overlap.

The question is whether employment status is considered by the courts to be a question of law or one of fact.

The importance of employment status

Although some rights now extend to the wider category of worker, it is still fundamental to employment law to identify who is an employee and who is an independent contractor in that, most still require employment status and there are a number of employment rights accessible to the employees and not to the employers.

The statute provides only an outline distinction between the modes in which a person may sell labour. The ERA 1996, s. 230(1) defines an ‘employee’ as ‘an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment’ but other Acts contain different definitions. For example, the Sex Discrimination Act 1975, s. 82(1) refers to ‘employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour’. The Act therefore covers many workers who would be considered independent contractors under the 1996 Act. The correct category largely depends on conflicting tests established at common law over several decades. They were first formulated to decide on vicarious liability, that is, when an employer is liable to a third party for the torts of employees, a subject which is still troubling the courts today—see Lister v Hesley

Hall Ltd (2001); Balfron Computer Industries Ltd v Peterson (2001); Dubai Aluminium Co. Ltd v Salaam (2003). The distinction is now vital more generally since, for example, only employees qualify for social security payments, employment protection rights, protection of wages on their employer’s insolvency, the benefit of their employer’s common law duty of care, and protection under the health and safety legislation. The distinction is most important on a day-to-day basis for taxation, since employees are taxed differently from the self-employed.

The role of policy

The common law tests are the same for this multiplicity of purposes. Yet the policy considerations behind a decision under each heading differ. Thus, in determining vicarious liability, control by the employer of the employee causing the injury might be considered most relevant, in that policy would seem to dictate that the employer is in fact the real tortfeasor. By contrast, in respect of National Insurance contributions and tax, avoidance by the employee might be uppermost in the court’s mind. But it would clearly be unrealistic to expect the courts to take a totally policy-oriented approach, differing in each case. As Hugh Collins has pointed out, it is tempting to urge such a course on the courts, but an attempt to introduce this in the United States proved to be brief. The courts do require (and perhaps ought to have) a firm set of criteria to guide them. Collins himself suggests a rule that a contract of employment may be said to exist for the purposes of employment protection law if the worker performs services for another, referable to an agreement, unless that contract satisfies two conditions, namely that it is for the performance of tasks (not determined by duration) and that no ‘badges of membership’ of the firm’s organisation apply, such as adherence to a dress code (Collins, (1990) 10 OJLS 353 at p. 378).

It may be unrealistic for the courts to have different tests in the light of differing policy issues, but it is altogether another matter not to confuse the policy considerations in one context with those in another, and therefore to clearly delineate and constrict the apposite case law in any given instance. (See further Honeyball, (2005) Cambrian Law Review, 1.) But this is not so clear a distinction in practice as it might appear. This can be illustrated by the decision of the EAT in Hilton International Hotels (UK) Ltd v Protopapa (1990). The employee was claiming unfair dismissal. She needed to show that her resignation amounted to a dismissal by the employer because she was entitled to resign by reason of the employer’s breach of contract—a constructive dismissal. But the relevant conduct was that of her immediate superior only. The EAT held that the tests for vicarious liability in tort were correct here, although clearly within the context of a statutory claim.

Policy and definition

The existence of differing definitions and approaches shows that the issue is not a simple definitional one. The courts are not, and should not be, engaged on a voyage of lexicographical discovery for the correct definition of ‘employment’. Indeed, they never have been, despite appearances to the contrary. As Clark and Wedderburn

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point out, Victorian judges were able to reaffirm the master’s right to control his servant because the notion of control had been inherent in the idea of ‘service’

from medieval times (see Wedderburn, Lewis & Clark, Labour Law and Industrial Relations (Oxford: Clarendon Press, 1983, p. 147). The courts were intent on bolstering the employer’s control since this was in accord with their social and political principles. The position is similar today under statute. Definitions of ‘employment’ change, not because of differing conceptions, but because the term is used merely as shorthand to signify who in policy terms should be entitled or obligated, as the case may be, in the particular context in question. As the policy changes from Act to Act and context to context, it would seem that any attempt to provide a general definition or working test is doomed to failure. Indeed, Collins recognises this by restricting his definition to employment protection legislation. Since the term ‘employment’ is used in this functional way, the courts should be vigilant not to imagine that it is employment in the everyday sense with which they are concerned, or indeed, in the senses used in other legal contexts, but it is not clear that they are so vigilant.

Employer status

It is interesting to note that the focus is on the employee, or would-be employee, in all these approaches, with little attention paid to the employer. (See further, Deakin, (2001) 30 ILJ 72.) Indeed, Freedland has described the concept of ‘employer’ in employment law as in a ‘ramshackle’ condition—see Freedland, (2005) 58

Current Legal Problems 517. This emphasis on the employee can lead to a caricaturing of the employer which is at odds with small employers—see e.g. Fredman, (2004) 33 ILJ 299, who argues that duties fall on employers ‘because of the civic responsibility which attaches to those with power’.

With these observations in mind, let us now examine the various tests that have been constructed by the courts in determining who is an employee.

The tests of employment

Question of law or fact?

There was for a considerable period controversy as to whether the question of employment status was one of fact or law. The issue is an important one in practical terms because it is only, in general, on a question of law that an appeal can be made from an employment tribunal to the EAT (see ETA 1996 s. 37; TULR(C)A 1992, s. 291). Browne LJ in Ferguson v John Dawson & Partners (Contractors) Ltd (1976) was firmly of the view that it was an issue of fact and thus not open to challenge on appeal. More recent Court of Appeal authority suggests that the question is one of law but that it involves matters of degree and fact which are essentially for the employment tribunal to determine (O’Kelly v Trusthouse Forte plc (1983) ). In Nethermere (St Neots) Ltd v Taverna & Gardiner (1984) the Court of Appeal applied the administrative law authority of Edwards v Bairstow (1956) to the effect that the EAT could not interfere with a tribunal’s decision unless it had misdirected itself in law or its decision was one which no tribunal properly directing itself on the relevant facts could have reached (see also Warner Holidays Ltd v Secretary of State for Social Services (1983) ).

The House of Lords in Davies v Presbyterian Church of Wales (1986) considered that the Edwards v Bairstow principle was irrelevant. Lord Templeman said that ‘If the industrial tribunal erred in deciding that question (whether the applicant was an employee), the decision must be reversed and it matters not that other industrial tribunals might have reached a similar erroneous conclusion in the absence of an authoritative decision by a higher court’. This seems to make sense in principle, in that the policy behind non-interference with first instance decisions is based on the idea that matters which are peculiar to a particular case (such as facts which are personal to a particular party, or an event) are best assessed in that forum. But matters of fact which are relevant not just to the instant case, but are of wider application, seem in principle to be subject matter properly reviewable by a higher court in order to achieve a desirable uniformity and for this purpose should therefore be deemed questions of law, regardless of the meaning of that word in other contexts.

This, it is argued, sensible conclusion was later compromised by the questionable reasoning of the Privy Council in Lee v Chung (1990). It was held that Davies was exceptional in that it was concerned only with the situation where the relationship The concept of employment is dependent solely upon the construction of a written document. Where the relationship has to be determined by the investigation and evaluation of the factual circumstances in which the work is performed, the question is one of fact and degree. But it does not follow that adherence to the latter statement involves restricting Davies to the situation where there is a written document. A construction of a written document can be a question of fact within the meaning assigned to those terms in Davies, as it may involve evaluating matters relating to just the parties in the case and not applicable generally. Support for this view can now be found in the decision of the House of Lords in Carmichael v National Power plc (2000), particularly in the speech by Lord Hoffmann.

Furthermore, as Pitt has pointed out, treating the question as one of fact means that different tribunals may come to different conclusions on the same set of facts (see (1985) 101 LQR 217, and (1990) 19 ILJ 252). So a nationwide company may dismiss all its workers in a particular grade, doing the same work, with the possibility that only some of them may claim statutory employment protection as different tribunals may legitimately come to opposite conclusions as to employment status. It is surely not correct to argue that there has been no mistake by at least one tribunal, which it is within the competence of an appellate tribunal to correct. There are policy considerations here, as the approach adopted in Lee allows the burden on appeal tribunals and courts to be lightened, but it seems wrong that individual rights should be determined or denied by considerations of administrative efficiency. As McLean points out, it can only be hoped that a braver House of Lords emerges to overturn these authorities (see [1990] CLJ 410), but the wait continues.

Bibliography

Davidov, G. (2005), ‘Who is a Worker?’, (2005) 34 ILJ 57

Freedland, M. (2003), The Personal Employment Contract, Oxford: Oxford University Press

Freedland, M. (2005), ‘Rethinking the Personal Work Contract’, (2005) 58 Current Legal

Problems 517

Honeyball, S. (2005), ‘The Conceptual Integrity of Employment’, (2005) 36 Cambrian Law

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