Employment Essay Complete PDF

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Summary

“The legal tests for classifying employment relationships...are flawed and inefficient,
being based on outdated employment norms from the 19th century and the law of
contract arguably intrinsically unsuited to the analysis of increasingly diverse,
complicated and dynamic employment...

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The essay aims to explore the legal tests for classifying employment relationships. In evaluating each test, I hope to provide a conclusion as to whether or not I defend the postulation that these tests are in fact “flawed and inefficient … based on outdated employment norms from the 19th century”1.

A big issue that we have under employment law is the lack of guidance as to what constitutes to be an employee. However, section 230(1) of the Employment Rights Act (ERA) 1996 defines an employee as “… an individual who has entered into or works under … a contract of employment”. As a consequence of the lack of guidance, we must depend on various legal tests which have been established from numerous precedents. These tests include control, integration, economic risk, mutual obligation, label, and modern approach. With origins in the master-servant doctrine, the control test has dominated the debate over the concept of “employee”. This test is the oldest of all the factors and it looks at the extent to which the employer controls the place, time, and manner in which an individual carries out work. The question raised in this examination is whether or not the servant is subject to the master's command in terms of how the job should be done. The control test, on the other hand, has several flaws. The first is that it was created in the nineteenth century to distinguish between manual and professional workers. As stated by Bramwell LJ, in the case of Yewens v Noakes [1880]2, “A servant is a person subject to the command of his master as to how he shall do his work”3. As a consequence, a strict modern-day application may result in professionals being denied employee status. Furthermore, the control test entails a degree of personal supervision that is no longer common in today's workplace - Walker v Crystal Palace Football Club [1910]4. Nonetheless, it is a common occurrence in the assessment of job status. The right to influence, on the other hand, is frequently as consistent in the relationship between an employer and an employee as it is in the relationship between a customer and an independent contractor. A

1 Patricia Leighton & Michael Wynn, ‘Classifying Employment Relationships – More Sliding Doors or a Better Regulatory Framework’ (2011) 40 ILJ 5 2 [1880] 6 Q.B.D 530 (CA) 3 Yewens (n2). 4 [1910] 1 KB 89 (CA)

housewife arguably exercises the same level of influence over her gardener as a law firm has over its lawyers. Nevertheless, in modern working practices, the control test is insufficient due to the presence of highly skilled workers, making detailed control impossible. Due to their extra knowledge and experience which no other individual acquires, the professional may perform their duties based on their judgements. Yet, the issue arises when a third party is injured as a result of their workplace negligence. As a result, the integration test became essential. The integration test looks at whether the job is part of the contribution to the profit of the company. According to the test, if an individual is a member of an organisation and his work is performed as an integral part of that organisation, he is under a contract of service, whereas under a contract for service, although the job is done for the organisation, it is barely an accessory to it – as illustrated in the case of Stevenson Jordan and Harrison Ltd v MacDonald and Evans [1952]5. Furthermore, as in Cassidy v Ministry of Health [1951]6, this test proves to be useful in determining the professional’s position where there is no right of control over the method of performance. Overall, the integration test forms a secondary alternative, as a result of the inefficiency of the control test, and it slightly boosts the efficiency of legal tests which may be applied as precedent when aiming to establish employment relationships. However, Lord Denning’s failure to clarify what the term “integration” meant; the question arose as to what it meant. This further suggests a slight flaw in the integration test. This test is also hardly used today and, understandably so, it fails immediately when encountering the large, diffuse organisations which are prolific in the modern economy. It’s almost, for instance, as if a cleaner employed by a library is not considered an employee because their job is merely an accessory to the company’s key activities. As a result, the economic reality test was developed.

The economic reality test talks about economic risk. It looks at who bears the financial risk if something was to go wrong or gets broken, whether it’s on the individual who is working or the bigger organisation. It is also known for implying the 5 [1952] 1 TLR 101 (CA) 6 [1951] 2 KB 343 (CA)

nature of employment by taking into account a broader perspective and considerations such as the wearing of a uniform, availability of paid vacation and sick leave, the use of substitute labour, method of remuneration, etc. Cooke J, in the case of Market Investigations Ltd v Minister of Social Security [1969]7, established and considered three factors when determining the drivers’ status: 1. Does he provide his own equipment? 2. Does he hire his own helpers? 3. What degree of financial risk does he take?

In some sense, this test has rarely evolved from the outdated control test as the financial risks may still be deemed as some level of control over managerial obligations. Therefore, the economic reality test is arguably as inefficient as the control test as they both test for fairly similar factors. In addition, it does not play a significant role in the present-day tests of employment status. On the other hand, the outcome from the Market Investigations case had criticized the flaws from the threepoint test applied by MacKenna J in the case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968]8, specifically regarding the inconsistencies with the contract of service.

Further, the development of the mutual obligation test enabled the courts to determine the status of casual, or part-time, workers by examining the outcome of the existence of a contract of employment, in which both the employer and the employee must have obligations in respect of one another. For instance, the workers in Nethermere (St Neots) Ltd v Gardner [1984]9 were held to be employees due to the regular longstanding arrangements which portrayed the mutuality of obligations both to do and be provided with work to complete from home. This test is now the definitive test in determining employment status. The employment relationship cannot be said to exist without this. This test has two critical components: the first is that there must be a relationship whereby labour is provided in exchange for a wage; the second is that there must be a continuing obligation on the part of the employer

7 [1969] 2 QB 173 (HCJ) 8 [1968] 2 QB 497 (HCJ) 9 [1984] ICR 612 (CA)

to provide work and a corresponding obligation on the part of the employee to perform work. The label test essentially refers to the idea that the title (or label) attached to an individual may also be an indication of the employment relationship – Massey v Crown Life Insurance Company [1978]10. This test may certainly be perceived as inefficient with certain flaws. The flaws are mostly surrounding the contractual side of employment whereby employers may deliberately aim to avoid creating employment relationships, known as shams. This may be achieved through the use of inserting either a label, which may potentially be misleading or a certain type of clause into a written agreement, such as a substitution clause – such as in the case of Autoclenz v Belcher [2011]11. As a result of such flaws, this test, therefore, becomes unreliable and inefficient in establishing employment relationships. The modern approach simply refers to the process whereby the courts will consider each test and weigh them all up. This test essentially implies that no one single factor is determinative. However, there are three key conditions set out by MacKenna J in the Ready Mixed Concrete (RMC) case which must be satisfied for there to be a contract of employment. These conditions are as follows: 1. The employee “… agrees that, in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his … [employer]”12 2. The employee ‘… agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master …”13; and 3. “The other terms of the contract are consistent with its being a contract of service”14

10 [1978] IRLR 31 (CA) 11 [2011] UKSC 41 (SC) 12 RMC Case (n8). 13 RMC Case (n8). 14 RMC Case (n8).

This essay has recognised that the two most common, employment status tests are control and mutuality of obligations. In simple cases, they are relatively uncontroversial. They can also help in situations where a contract expressly identifies itself to be a contract for service but is a contract of services. However, increasingly several relationships cannot be adequately classified. Therefore, I defend the statement and agree that the legal tests evaluated within this essay are somewhat flawed and insufficient.

BIBLIOGRAPHY

JOURNALS Matthew T. Bodie, ‘Participation as a Theory of Employment’ (2013-2014) 89 Notre Dame L. Rev. 661 Patricia Leighton & Michael Wynn, ‘Classifying Employment Relationships – More Sliding Doors or a Better Regulatory Framework’ (2011) 40 ILJ 5

CASES Walker v Crystal Palace Football Club [1910] 1 KB 87 (CA) Yewens v Noakes [1880] 6 Q.B.D 530 (CA) Stevenson Jordan and Harrison Ltd v MacDonald and Evans [1952] 1 TLR 101 (CA) Cassidy v Ministry of Health [1951] 2 KB 343 (CA) Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173 (HCJ) Nethermere (St Neots) Ltd v Gardner [1984] ICR 612 (CA) Massey v Crown Life Insurance Company [1978] IRLR 31 (CA) Autoclenz v Belcher & Ors [2011] UKSC 41 (SC) Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 (QBD) LEGISLATION Employment Rights Act 1996...