8) Employment Law I i) Distinction between employee and independent contractor ii) Employment contract and duties of both employer

and employee Difference between an employee and an independent contractor The relationship between an employee and an employer is contractual. It is equally true that the relationship between a contractor and a contractee is again one of a contract. The key to distinguishing the difference between a contractor and an employee is; an employer and independent contractor is a contract FOR services and an employer and employee is a contract OF service. The difference between each type of person in reality is relatively easy to distinguish but there has to be a genuine distinction. The distinction is most easily seen as the differences between a chauffeur and a ta i driver! a reporter for a newspaper and a freelance "ournalist! a teacher in a school and a private tutor. These e amples are very clear but difficulties arise when considering! for e ample! bricklayers who may be self#employed and those who are employees There are occasions when the differences between the two concepts are unclear. The court primarily looks at two things; $ne is reality of the situation. This is considered despite the form of the arrangement. Ferguson v John Dawson and Partners 1976 % builder who was paid without ta and health insurance deductions and worked as a self employed contractor. &is employer could however dismiss him! controlled the work and provided the tools for the work. &e was in reality held to be an employee when in"ured. 'econdly! the courts consider the agreement between the parties. Massey v Crown Li e !ssurance The claimant originally an employee requested change in his terms to make him self#employed. Ta and health insurance payments were stopped from his salary but the "ob remained the same. &e claimed for unfair dismissal and the courts held that his claim would fail as he was not an employee based on the agreement between them. In addition! there are a number of tests that need to be applied to show the distinction between the ideas Control Test This was the earliest test. In this test! it is stated that the employer has the right to tell employees what to do and how to do it. $riginally the courts would only consider the level of (control) over a worker by an employer. Per or"ing Right#s $ociety Ltd v. Mitche%% & 'oo(er *c+ardie ,. stated that- (the ina% test) i there is to *e a ina% test) and certain%y the test to *e genera%%y a++%ied) %ies in the nature and degree o detai%ed contro% over the +erson a%%eged to *e a servant). Thus! if an employer could tell his worker not only what to do! but also how and when to do it! then the worker would be regarded as an employee employed under a contract of service.

This test was applied in; Mersey Doc(s and ,ar*our 'oard v Coggins & -ri iths +./ hired a crane with the driver coming from the harbor board. The crane driver was so harsh and always stated he would take no orders from anyone. Due to his negligence! a checker was in"ured and in claim against +./ for vicarious liability failed since the driver was not their employee. +./ had no control over him. The control test was the earliest and most simplistic of all the tests that have been developed by the courts! but it is was an inadequate test for meeting modern requirements in the workplace. In 0ictorian times! this may well have been the distinguishing factor. &owever! in the twenty#first century! it is not so applicable! as employees and their technical skills would make it difficult for employers to tell employees how to do and undertake certain tasks Integration test %s employment skills have become more specialist! technical and intricate! a new test became apparent which was the Integration test. The (integration) test sought to determine whether a person)s work was done as an (integral) part of the employer)s business. This meant that the employee became (part and parcel) of the employer)s organisation. E amples; 'urgeons or professional sportsmen! were not in reality sub"ect to the (control) of their employers as to the manner in which they carried out their work. .a%(er v Crysta% Pa%ace Foot*a%%. In this case the +ourt of %ppeal considered whether a professional football player could be regarded as employed for the purposes of a compensation claim. It was argued that he was not an employee because the manner in which he chose to play was not under the employer)s direct control. It was held that as he was bound to observe the general directions of the club! and! also the directions given by the +aptain during the course of the game! he was an employee even though he was also e ercising his own "udgement. Cassidy v Ministry o ,ea%th This involved highly skilled doctors. 1evertheless the doctors and nurses were held to be employees as they were under the direction of the hospital! even though the management may not be able to tell the doctor e actly what to do. %gain! in Cassidy v Ministry o ,ea%th! the surgeon and medical team became part of the establishment and in .hitta(er v Ministry o Pensions! a trape2e artist would normally have been regarded as an independent contractor. &owever! as the claimant was also selling programmes and acting as an usherette! she was deemed to be an employee. Multiple/ mi ed / economic reality test Today the Integration test does not really address the different types of employees! and thus the latest test is the Multiple or Mi ed Test. This is where a series of questions is posed and the answers will determine whether the person falls within the category of employee or self employed. The questions were set out in 3445 in;

Lori"er v ,a%% The +ourt of %ppeal laid down factors which indicate the reality of the status of the relationship between employer and employee Is the person performing a service or is the person working on their own account6 7ho controls the person i.e. who has the right to discipline the worker6 7ho provides the equipment6 7ho is responsible for the payment of ta ! 1ational insurance! pension! holiday payments6 7ho hires and fires the worker)s helpers and assistants6 Is the contract personal so that performance cannot be delegated6 7hat role does the person take in the management of the contract6 Is the work repeatedly done for one organisation6 This test was applied in; Ready "i/ed concrete 0south 1ast2 v Ministry o Pensions & 3ationa% 4nsurance % Driver provided his own vehicle! was responsible for its own repair! could nominate substitute driver; but vehicle was painted in company colors and the driver wore its uniform. *inistry of pensions claimed that the company should pay pension and health insurance for him since he was an employee; but courts disagreed and held him to be an independent contractor. !ther factors $ver time! the courts have also developed other factors to be considered including; Mutuality of obligations +ourts consider whether an employee can delegate all his obligations! whether there is restriction at place of work whether holiday and hours of work are agreed and whether both employers and employees share mutual obligations. O#5e%%y v 6rusthouse Forte P%c 1978 7orker was a regular casual working as a waiter when required. There was an understanding that she would accept work when offered and that the employer would give him preference over other casual employees. &E8D; there was no contract of employment because the employer had no obligation to provide work and the employee had no obligation to accept work when offered. There was thus no mutuality of obligations. Policy Considerations The courts may consider public policy in determining whether a person is an employee or independent contractor. E.g. tribunal may regard someone as an employee for purposed of unfair dismissal whereas ta authorities hold him as an independent contractor for ta purposes !ir i/ Footwear v Co+e There was an outworking arrangement where the claimant having been given training and supplied with necessary tools and materials worked five days a week making heels for shoes manufactured by the defendants and was paid on a piecework basis without deduction of income ta or 1I+. &E8D; working for 9 years five days a week resulted in the arrangement being properly classified as employment under a contract of service. Why differentiate between contract of service and contract for services?

There are several reasons why the distinction between a contract of service :employee; and contract for services :independent contractor; is important! namely it is important because Employment protection- There is much legislation! which confers protection and benefits upon employees under a contract of service. This provides for minimum periods of notice! remedies for unfair dismissal and for redundancy payments. The ma"ority of statutory employment rights apply only to full and part#time employees! and! not to self#employed independent contractors. Ta ation- 8iability for ta ation varies according to the status of being an (employee) or being (selfemployed). Deductions must be made by an employer for income ta under 'chedule E :known as <%=E; from salary paid to employees under a contract of service! whereas the self#employed are ta ed under 'chedule D and are directly responsible to the Inland >evenue for all due deductions. 'ocial security- Thirdly and directly related to the former reason! entitlement to many social security benefits is reserved almost e clusively to employees. The national insurance contribution rates payable under the social security legislation differ as between the employed :under a contract of service; and the self#employed! or independent contractor :under a contract for services;; and there are also differences in entitlement to benefits and statutory sick pay. ?urther! the employer may be required to pay a levy for industrial training purposes if he employs someone under a contract of service. 8iability in Tort- The employer is generally vicariously liable for the tortuous acts committed by his employees during the course of their employment! but such liability is severely restricted in the case of a contract for services # the employer will normally only be liable in such circumstances if he delegated performance to another. Duty of care- %gain! an employer)s duty of care towards! and responsibility for the acts of! employees is much greater than the duty to! and responsibility for! self#employed workers. Implied Terms- The implied rights and duties which apply in the employer@employee relationship under a contract of service would not apply to the same degree to a contract for services # this is important since it will affect such things as copyright and patents. Terms- %t common law! certain terms are implied into every contract of employment! but not into any other form of employment relationship. ?or e ample! the implied duty of an employer to protect his employees against reasonably foreseeable risks to their health! safety and welfare! the implied duty of an employer to maintain trust and confidence! employee claiming that she has been constructively dismissed due to breach of this duty! following her employer)s failure to investigate her allegations of se ual harassment. 'tatutory Duty- The statutory duty of an employer! under s.A of the $ccupational &ealth . 'afety %ct ABB9 to protect his employees so far as is reasonably practicable against risks to their health safety and welfare. Cankruptcy- 'hould their employer go into liquidation or become bankrupt! employees under a contract of service have preferential rights as creditors under the +ompanies) %ct for the payment of outstanding salary and redundancy payments! up to certain limits # alternatively by virtue of them paying class one national insurance contributions they can make a claim under the 1ational Insurance ?und. &ealth and safety- Coth employees and independent contractors are well protected under both the common law and statutory regulation governing employer)s duties and health and safety standards.

$n the importance of the distinction between employees and independent contractors! the recent trend is to have legislation which protects workers; a term which is greater than mere employees. This has reduced the importance of the distinction between employees and independent contractors. Disad"antage of employee o"er independent contractor The rights! duties and obligations attributable to the employment status of (employee) employed under a contract of service are e pensive to honour. The potential financial burden placed on an employer! in the event of accident or in"ury in relation to his employees is e tremely high. 'tatutory rights especially are e pensive for employers to honour. e.g. In the case of $i%as O*enge%e v 5P! 9:;;7< the plaintiff was awarded Dsh E million in damages for wrongful termination of employment. In Cenard >atemo v D<8+ FABB9)! the figure was 5EG!BBB@H. Due to the potential financial consequences of a worker being held to be an employee employed under a contract of service! in borderline cases involving the question of employment status! an employer will usually argue that a worker is not an employee but is instead a self#employed independent contractor. The latter only qualifying for very limited employment rights whilst undertaking work for an employer. T#E EM$L!%ME&T C!&T'(CT This is a contract of service or apprenticeship! whether e press or implied and if e press; whether oral or in writing. Ceing a contract! it must comply with general rules under the law of contract. )ritten or oral* %n employment contract may be written or oral# section G. &owever! section 4 of the Employment %ct provides that if a contract of service for three months or more shall be in writing. 'enior personnel may sign a contract which is specially drafted to include terms on confidentiality and restraint of trade; other employees may sign a standard form contract! e change letters with new employer or simply agree terms orally at an interview. 'ection 3B on employment particulars provides that the contract must state; # the name! age! permanent address and se of the employee; # the name of the employer; # the "ob description of the employment; # the date of commencement of the employment; # the form and duration of the contract; # the place of work; # the hours of work; # the remuneration! scale or rate of remuneration! the method of calculating that remuneration and details of any other benefits; # the intervals at which remuneration is paid; and # the date on which the employee)s period of continuous employment began! taking into account any employment with a previous employer which counts towards that period; and

any other prescribed matter.

Common Law Duties of the $arties Employee The employee has his main duty at common law as Fundamental duty of faithful service to his employer. %ll other duties stem from this principal duty. The duty e tends after employment where trade secrets are concerned. If employees disclose trade secrets to their new employers they will breach this duty. This duty is strict as seen in; Faccenda Chic(en Ltd v Fow%er 1976 +ustomer lists of a chicken selling business were not considered a trade secret when the sales manager set up his own competing organi2ation. 7orking for competitors is also a breach of duty to faithful service ,ivac Ltd v Par( Roya% $cienti ic 4nstru"ents Ltd 19=6 The claimant)s employees worked for the defendant competing company during their spare time. &E8D; even though the employees had not passed any confidential information! they were still in breach of their duty of fidelity to the claimants. &owever! facts of each case and nature of employments are considered in making the decision as to whether the employee has breached this duty or not. $ther implied duties arise from this general duty including; 3. To obey lawful . reasonable orders- he should obey employer)s instructions unless they are unreasonable. In Pe++er v .e** 019692 the defendants refused to obey instructions from the employer on planting in the garden. &e also swore at him. The employee was held to be in breach of duty to obey orders because they were lawful and reasonable. In Cresswe%% v. 4n%and Revenue 9197=< an employee was given an order or adapt to new work methods :computerised systems; I this was held to be a lawful and reasonable order. 7hat could constitute an unreasonable order6 # $rdering an employee into immediate danger. # $rdering an employee to commit an illegal act. # %ny order which requires the employee to do something outside the terms of his contract. $rders that are genuinely considered by the employee to be contrary to safety may be refused under the !ccupational+ #ealth and ,afety (ct -../ as amended! and under the Employment (ct -../; a dismissal for such a reason is automatically unfair. A. To maintain fidelity- In common with other agents! employees owe fidelity to their employers- this means that they must at all times show good faith in their dealings with the employer and on their employer)s behalf! and must# 1ot to make secret@undisclosed profit. # 1ot misappropriate his employer)s property. > To preserve confidentiality and can be enforced after the employment has ended if the sub"ect matter of the duty relates to a trade secret. ?idelity demands that he@she must disclose any defect in herself which might make her employment more ha2ardous! and must not make a secret profit from his employment or work

J.

5. E. M.

9. G.

for a competitor while working for his main employer. &e should not do anything which would harm the reputation of the company. 1ot to misuse confidential information- %n employee has an implied duty not to disclose confidential information. This can apply to e #employees as well. The greatest difficulty! however! is establishing what actually constitutes confidential information. *any contracts will have an e press term covering this area. &owever! even if there is no such e press term! an employee must not disclose trade secrets to a Jrd party nor misuse confidential information he has acquired in the course of his employment. # This implied duty may continue after his employment has ceased Faccenda Chic(en v. Fow%er 91976< The courts ruled that an employee must not only keep his employersK secrets whilst working for them! but also has a duty not to disclose trade secrets or sensitive commercial information after he has left. > It is not necessary for an employer to point out to an employee the precise limits of what is and what is not to be regarded as confidential to succeed in a claim for this breach of duty. &e must keep his employersK secrets! and this goes so far as to not reveal information about illegal or unethical practices by the employer Fso called Lwhistle blowingL) unless the revelation is to an enforcement agency such as the &ealth and 'afety E ecutive in the case of unsafe practices! or the Environment %gency or local environmental health department in the case of pollution issues. &ere the employee is protected against dismissal. 1ot to compete with the employer)s business- The employee may do other work in his own time. &owever the law imposes a duty not to do spare time work which competes with his employer)s and which may cause the employer)s business damage. 1ot to impede the employer)s business- The courts have interpreted the duty to obey lawful and reasonable orders as a duty not to frustrate the commercial ob"ectives of the employer i.e. impede his business. To e ercise reasonable care and skill :competence;- The employee must act with reasonable care in performing his duties. The standard of care will depend on the circumstances. It is generally accepted that a single act of negligence! unless it is gross negligence! will not "ustify summary dismissal. There are certain occupations such as airline pilots! however! where a single act of negligence in performing essential duties may warrant dismissal. To indemnify their employer for any damages incurred as a result of his negligence. <ersonal 'ervice- the contract of employment is a personal one and the employee must not delegate his duties without the consent of the employer.

Employer The overriding duty of employer is to maintain Mutual Trust and confidence between employer and employee. This duty has been breached when; % director called his secretary an intolerable bitch on a *onday morning# 4s%e o .right 6ourist 'oard v Coo"*es 1976. ?ailure to investigate a se ual harassment claim# 'race*ridge 1ngineering v Dar*y 199;. ?rom the overriding duty! other duties are implied including; 3. The payment of reasonable remuneration- This common law rule! however! can be varied by an e press or implied term to the contrary. Thus if the contract states that there shall be no

payment during a lay#off or in respect of short#time working! the employer will incur no obligation to pay. It is also incumbent on any employer to pay the employee that which has been agreed at the commencement of the contract or when there has been a variation of the payment agreement. A. To provide work! this is especially so where there is the reputation needed for future employment. In general! the employer will not be in breach of contract by failing to provide work! as long as wages continue to be paid. &e is under obligation to provide work only when; Employee is an apprentice Employee is paid in reference to work done. $pportunity to work is essential to the contract e.g. actors. There is work to be done and the employee is skilled for the work. If it denies the employee the opportunity to maintain his skills. J. To indemnify his employees) The employer has to indemnify the employees i.e. must reimburse employees against all e penses! losses and liabilities incurred in the e ecution of orders! or in the reasonable performance of the employment e cept where the employee has been negligent and@or has committed an unlawful act! or the employee knew the employer had no right to give the order. ?urther! an employer is vicariously liable for the acts of the employees. ?or an employer to be liable! the employee must be acting within the terms of his employment and not going off on a frolic of his own. Thus! in Li"+us v London -enera% O"ni*us Co the driver was racing even though forbidden to do so and the company was liable as he was acting in the course of his employment. Cy contrast! in 'eard v London O"ni*us Co"+any! a conductor was reversing a bus and the company was not liable as the conductor was acting outside his normal terms of employment. 5. <rotection against reasonably foreseeable risks to their health! safety and welfare- %n employer has to ensure the safety of the premises and the equipment under the $ccupational! &ealth and 'afety %ct ABB9. this happens in the following ways; Fi) 'afe plant . appliances %n employer has to provide and maintain! safe premises; a safe place of work; safe plant and competent workers. if an employer has given adequate induction into the work place and shown there to be a safe system of work and has done everything possible to ensure that it is a safe system then he may not be liable. Paris v $te+ney 'orough Counci% If the employer had given the plaintiff who could see through one eye a pair of goggles and the employee had not worn them they may not have been liable. &owever! they had not provided the claimant with goggles and so they were liable. %n employer may escape liability if there is found to be contributory negligence by the worker and also 0olenti non fit in"uria I (to the willing no harm is done) is a defence an employer can plead. %n e ample of this is the playing of a game of rugby where there is a trespass to the person when a person is tackled. Thus! the players enter the game willingly knowing that they are to be assaulted.

The employer may be able to plead that the employee had (gone off on a frolic of his own). This means that the employee has done something that is so far removed from that which he should have been doing that if there is in"ury either to himself or a third party he will be unable to claim damages. 'eard v London -enera% O"ni*us Co % conductor at his own insistence backed up a bus and in"ured the claimant but it was held that the defendant was not liable as the conductor was acting on a frolic of his own and not in the course of his employment. This may be contrasted with; Rose v P%enty % driver of a milk float against instructions gave lifts to children who helped on the milk round. $ne was in"ured and it was held the employer was liable as the driver was in the ordinary course of business. Fii) a safe system of workFiii) reasonably competent fellow employeeKsThe common law imposes duty to protect employees against reasonably foreseeable risks to their health! safety . welfare! which; # includes protection against psychiatric in"ury# is sub"ective # is not absolute If the employer fails to ensure the safety of the premises he may be liable both criminally and civilly in tort. &owever! if the employer has acted reasonably there may be a defence % recent Denyan case is; 1veready 'atteries 052 Ltd v $i"on 5inyua 9:;;7< e5LR 'imon had worked at Eveready)s factory as a machine operator between 3st 'eptember 34G4 and 5th ?ebruary ABBA. %s a part of his duties! he was required to clean a paper liner machine! a cell tapping machine and a cell assembly machine using compressed air and kerosene. &e would also sweep the room in which the paper liner machine was installed. &e claimed in court that in the performance of these duties! Eveready had neglected its statutory duty to provide a safe working environment so that his health had declined due to the inhalation of harmful concentrations of depolari2ing chemicals! fumes and dust. Nltimately! he was retired on medical grounds in ABBA at the age of J4 years. Eveready contested that case was that it had provided safety training and a system of work that was not only safe for all its employees but also above the safety standards prescribed by the government. In the &igh +ourt! 8ady ,ustice ,. 8esiit found that 'imon)s medical condition was due to his e posure to fumes and dust at his place of work and further! that Eveready had not taken practicable measures to protect him against the inhalation of those substances. 'he awarded 'imon the sum of Dshs. 5!JA9!G9A. &owever! Eveready appealed and on appeal! %ppellate ,udges Tunoi! $)Dubasu and /ithin"i held that 'imon had been supplied with marks and trained on safety! so the employer wasn)t negligent. It thus set aside the "udgment of the &igh +ourt.

E. To maintain mutual trust . confidence- The employer has a duty not to behave in such a way so as to damage the relationship of trust . confidence between him! all those who are his employee)s M. To provide a reference6 %n employer is under no legal obligation to provide an employee or an e #employee with a reference. &owever! in the event that an employer does choose to provide an employee with a reference! it must be accurate and fair. ?or if it is not! then he leaves himself wide# open to claims of defamation and breach of his implied duty to e ercise reasonable care and skill9. 1ot to disclose confidential information to Jrd parties about his employees) ,tatutory duties by the parties The employment act also provides several duties. Employer 0arious matters are implied into the employment contract by statutes. The statutory duties can be classified into the following areas; <ay *aternity >ights &ousing rights +asual employees &ealth and safety <ay The Employment %ct and the 8abor Institutions %ct FABB9) address this issue. 1"+%oy"ent !ct The employer must pay wages earned by an employee. It covers such matters as sick pay! annual leave pay and working hours and applies to all forms of full#time and part#time work. ?inally! 'ection AB of Employment %ct obliges employers to provide itemi2ed pay statement. La*or 4nstitutions !ct The national minimum wage is set for various professions. The minister for labor is given powers to increase or vary these rates in consultation with all stakeholders. This happens during labor days. *aternity leave >ights 'ection A4F3) of the Employment %ct provides that a female employee shall be entitled to three months maternity leave with u%% +ay. ?urther! on e piry of a female employee)s maternity leave! the female employee has the right to return to the "ob which she held immediately prior to her maternity leave or to a reasonably suitable "ob on terms and conditions not less favourable than those which would have applied had she not been on maternity leave.
&owever! for her to en"oy the maternity leave! she must give not less than seven days notice in writing in advance or a shorter period as may be reasonable in the circumstances of her intention to proceed on maternity leave on a specific date and to return to work thereafter. ?inally! no female employee shall forfeit her annual leave entitlement on account of having taken her maternity leave.

In addition! a male employees shall be entitled to two weeks paternity leave with u%% +ay# section A4FE)

&ousing rights 'ection J3F3) provides that an employer shall at all times! at his own e pense! provide reasonable housing accommodation for each of his employees either at or near to the place of employment! or shall pay to the employee such sufficient sum! as rent! in addition to the wages or salary of the employee! as will enable the employee to obtain reasonable accommodation.
The only e ception is if the contract of employment consolidates this into the normal pay. +asual Employees 'ection A defines Ocasual employeeP as a person the terms of whose engagement provide for his payment at the end of each day and who is not engaged for a longer period than twenty four hours at a time. 'ection J9 F3) of the Employment %ct provides that where a casual employee works for a minimum one month! the contract of service of the casual employee shall be deemed to be one where wages are paid monthly! rather than daily. % casual employee is entitled to one paid rest day after a continuous si days working period and such rest day or any public holiday which falls during the period under consideration shall be counted as part of continuous working days. ?urther! a casual employee who works continuously for two months or more from the date of employment as a casual employee shall be entitled to such terms and conditions of service as he would have been entitled to under this %ct had he not initially been employed as a casual employee. The Industrial +ourt has the power to vary the terms of service of the casual employee and may in so doing declare the employee to be employed on terms and conditions of service consistent with this %ct.

&ealth and 'afety The $ccupation! &ealth and 'afety %ct ABB9! designs this duty including the following issues; <rovide and maintain safe plant . systems of work. Ensure safe use! handling! storage and transport of articles@substances. <rovide adequate information! instruction! training and supervision. *aintain safe places of work and ensure adequate access in and out. <rovide a safe and healthy working environment.