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Status of an Employee
There are many different tests in order to determine the status of an employee. Some of these tests consist of control test, mixed test, integration/Organisation test, multiple factor test and the control test being the first of its kind to decide the status of an employee. and the strength of control the employer has over the employee within a work force. In this essay I will be analysing Cooke J's quote to see whether it is an accurate statement of the test for deciding who is an employee. I will also be looking at the emerging contempory categories of workers and supporting my analysis with relevant cases in determining a status of control an employer has over an employee in today's contempory society.
In the early days the main test in determining the status of an employee was the right of control over how a job was done. However, during the 1940's and 1950's, control had begun to loose its significance as the main test as control was divided into other areas such as what the job involved, where it had to be don't and how it had to be done.
During the 1960's, Ready mixed concrete 1967 and Mackenna J. laid down three conditions which needed to exist if there was a contract of service. They suggested that there needed to be some sort of consideration in return of personal service and the master had to have the right control over the servant. All other provisions needed to be kept consistent with a contract of service. Market Investigations followed in 1969 and introduced the ‘'in business on own account'' test and also confirmed that control was no longer a decisive factor in determining the status of an employee within their workforce. Market investigations also suggested that personal factors that exist outside the terms of the contractual relationship should be considered as the type of relationship has with the engager in order for an engagement to be considered.
The Employment tribunal can consider many factors in determining whether a contract of employment does exist between two parties. The tribunal look at factors such as the amount of control the employer had over the employee such as obeying orders and the amount of working hours. This also includes looking at how independent the employee was within a workforce in terms of using their own equipment at work and whether the individual is in business according to their own account. The tribunal also look at implications as to whether there was any type of mutuality of obligation between the two parties, and if the employer is expected to provide any sort of work to the individual and is the employee expected to accept and perform the work which was provided.
Originally, the first test used in the 19th century to distinguish between an employee and a self employed contractor was the control test. The higher level of control an employer had over a worker, the more likely the courts would suggest that the worker is an employee. This test took organisational factors into consideration such as the extent of control the employee had over the employer. This included the time, location and manner of the work carried out. The control test represents the idea that an independent contractor is more likely to carry out their work self sufficiently rather than an employee, but however, workers who are under close supervision and monitoring are more likely to be classed as employees.
The extent of control was emphasised in Gould Minister of National Insurance (1951) when an issue was raised as to whether an artist performing should pay national insurance contributions as an employee or a self employed person. The performer had agreed to perform for one week on a standard contract which consisted of him agreeing to attend all rehearsals, to abide by all management rules including using inappropriate gestures and language and to accept management instructions. As the determining factor was the degree of control implemented, the judge concluded that the management had no control over an artist's performance and were only eligible to enforce rules that would harm the audience and not affect the working of the theatre. The artists performance depended on the skill, personality and creativity of the performer therefore, the contract was a contract for services only.
However, even though control is seen as an imperative approach is distinguishing between an employee and independent contractor; other factors also play a significant role. In Performing Rights Society Ltd v Mitchell and Booker Ltd (1974), the defendants were sued for the breach of copyright by a jazz band whose liability depended on the band members being their employees, which they were alleged to be. The Judge concluded that the task involved, the freedom given, the importance of the contract amount, the way it was going to be paid and the powers of dismissal all play a momentous role in determining the status of an employee.
In 1969, Cooke J. Stated in the Market Investigation case: ‘'The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor'' Cooke J. states that control is not the only factor in determining the status of an employee in an organisation. There are many other factors that need to be considered and taken into account.
During the late1940's, Integration/Organisation test was used instead of the control test to explain why professional and skilled workers had a large degree of independence of how they carried out their work. The control required within an integration/organisation test depends on the circumstances of a workers performance for example the working hours, location of the job, and rate of pay. In the case Stevenson, Jordan and Harrison v Macdonald and Evans (1952) Lord Denning claimed, that under a contract of service or employment, a worker is employed as being part of the organisation and more widely integrated within the business but however, under a contract of services work done for a organisation is not integrated within the business. Integration test shows the more skills required from a worker, the less important control is in determining whether a worker is under a contract of service. Also, the case showed the greater the integration within the business, the more likely the worker will be an employee of the business. The case showed a dispute between two publishing companies where the author's employers sued due to the copyright claiming that the educational text was not produced within the organisation and therefore did not belong to the employer. The court of appeal suggested that the material was not produced internally which did not belong to the employer. Lord Denning therefore concluded that if a worker plays a role with an internal part of the organisation, he is part of the employer's organisational control.
To help distinguish between an employee and an independent contractor, courts now look at every term within a contract to see which applies to an employment relationship and which applies to a self employed. This test is called the Economic reality test and assesses whether the worker in his business on his/her on account or works for another organisation who takes full responsibility of the profit and loss. This includes factors such as freedom to hire others, providing own equipment and investing in own business. If a workers receives a monthly salary or a weekly wage it is more likely to be considered that there an employee even though some cases such as Carmicheal & Another v National Power plc, does not show this as an important indicator. Workers who pay their own National Insurance, Income tax and who are also eligible for sick pay and paid holidays are more likely to have a strong status and be considered as employees. In the case Express & Echo Publications Ltd v Tanton (1999) the point at issue whether a newspaper delivery driver worked under a contract of service or contract of services. There were 3 factors which suggested the driver was engaged under a contract of service. This included the driver being provided with a van, uniform and on a run fixed by the provider and paid for every round instead of hourly/weekly/monthly. The worker also provide a substitute when he was ill over a 6 month period. The tribunal found that the worker was an employee but however, the court of appeal claimed the worker was self-employed as he did not have to personally provide his services so therefore did not engage under a contract of service.
Mackeena J adopted a new approach in determining the status of an employee called the mixed test or sometimes known as the multiple test. This approach thrives to focus on the right of a worker to assign performance to another worker and the risk of financial performance of the worker such as profit or loss which usually negate the contract as a contract of service. I.e. the worker is regarded as an employee. In the case Ready mixed concrete v minister of pensions and national insurance (1968), the point of issue was whether a man delivering concrete in his own van was engaged under a contract of service or services. The minister concluded that the driver was working under a contract of service. But however, in the court of appeal MacKenna J claimed that he was running his own business and was a ‘'small business man'' but not a servant. It was said the contract was therefore a contract of carriage but not of service.
The emerging contempory categories of agency workers such as casual, temporary and part-time have played a controversial role in determining the status of an employee in an organisation. An agency contract is one where there is no of contract between the client and the worker but however, the worker contracts with a third party to carry out work for a client of the agency. As there is no contract between the two parties, the worker cannot be an employee of the client. Also, the contract between the worker and the agency will not usually be a contract of employment. Casual workers, temporary workers and part-time workers are all in a position where the employee or third party agency does not have to give the individual work to carry out as there is no mutuality of obligation between the two parties which therefore means there is no employee control. In many cases in recent years the primarily issue before the courts was that the employee had to establish some sort of ‘'global'' contract to meet a minimum qualifying period.
The case of O'Kelly and Others v Trust House Forte plc (1983) concerned the status of certain members working as kitchen staff in Grosvenor house hotel in Central London. Mr O'Kelly and some other casual catering staff claimed that Trust House Forte had unfairly dismissed them with no explanatory reason even though it was made clear in writing that the employers were under no obligation to provide the workers work, and the employees were under no obligation to perform the work. However, in this case, the hotel always had plenty of work for casual staff and also maintained a list of ‘favoured' workers who were known as ‘regular casuals'. The treatment of these casuals workers were barely distinguishable from employees as workers on the list were even granted 2 weeks holiday pay each year.
The main issue arisen within the case was whether O'Kelly and the other casual workers were employees working under contracts for service or independent contractors working under contracts for services. The tribunal therefore needed to take into consideration that Mr O'Kelly was one of the wine butlers and worked from little as 3 hours to 57 every week along with other factors which pointed to a contract of service which consisted of whether Trust House Forte plc exercised control over the workers and paid the casual workers in weekly arrears. Other factors which the tribunal needed to look at were I f he workers were part of the THF organisation whilst they were working and if they provided them with adequate clothing whilst at work. The tribunal also needed to consider the capital that was not invested into the business.
To come to a decision, the industrial tribunal looked at factors that were not inconsistent an factors that were inconsistent with a contract of service. The tribunal came to a decision that there was no mutuality of obligation between the parties and the casual workers were independent contractors were carrying out the work and supplying services on their own account. O' Kelly and the workers had no further evidence for unfair dismissal and therefore engaged under contracts of services as there was no contract of employment.
Carmicheal & Another v National Power plc was another case which involved category workers having no contract of employment and working on casual basis. On November 15th 1988 Mrs C applied for a job as a tour guide. The duties consisted of the supervision of visitors on tour routes, answering and explaining questions to visitors and also giving short presentation on how electricity is made and transmitted. Mrs C applied and agreed for an employment opportunity which was ‘'casual as required basis'' which meant there was no contract of fixed working hours and payment was made on an hourly rate. Mrs C's duties and responsibilities consisted of supervision of visitors on tour routes, answering and explaining questions to visitors and also giving short presentation on how electricity is made and transmitted. Mrs C worked from 4 hours in 1990 to 25 hours in 1995. The House of Lords decided, that there was no sort of mutual obligation between Mrs C and National power as this was vital within an employment of contract. Mrs C was required to work ‘'Casual as required'' therefore National powerhouse were under no obligation to provide any work, the same way Mrs C was under on obligation to perform the work.
The Employment Rights act 1996 (s 230) describes an employee as an individual who has entered into a contract or who works under a contract of employment whether the contract is for a service or an apprenticeship. This can be either express or implied and therefore does not necessarily need to be in writing in order to be contract. The main difference between an employee and an independent contracter or a self employed worker significantly affects the rights and legal obligation and such as protection, social and security and taxation rights between the two parties. The main differences include statutory individual employment protection rights which include redundancy compensation, unfair dismissal, and guarantee payments, rights to written statements of contract terms, minimum notice periods and maternity rights. These rights are only available to employees with in workforce and an employer's duty of care towards an employee includes a higher level of responsibility than with an independent contractor.
Overall, in conclusion it can be argued that Cooke J's quote is an accurate statement of test for deciding who is an employee, as the control test is no longer a valuable source as there are many other factors which the control test does not consider when determining the status of an employee. As shown in some of the relevant control test cases, control test only looks at factors such as the duty to obey others, the discretion of the hours of work and the monitoring and supervision whilst at work. As the mixed test is the most contempory test used in this modern society, control test fails to look at similar factors such as whether the workers providing services offer their own equipment, hirer their own workers, the level of responsibility they will take for financial profit or loss and the degree of responsibility for management. As Cooke J claims, all the factors from the tests need to be considered in determining status employee and therefore the control test is no longer a valuable test.
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