When is an employee an employee?
April 23, 2008
Whilst the terms ‘employee’ and ‘worker’ may mean the same for many people, employment law distinguishes between the terms, and there are different rights relating to the two groups. An example of a major difference is that ‘employees’ may make a claim to an employment tribunal for unfair dismissal, whereas a worker may not. Employees also have a right to a contract of employment, parental rights such as statutory maternity leave and pay, rights connected with belonging to a Trade Union, and many other rights that workers do not have. It is important to understand how the two can be distinguished, and that simply saying that someone is not an employee, or even denying the fact by failing to provide a contract of employment, may not be enough to prove to a tribunal that the person was ‘self employed’ and not employed by you. This is a particularly common issue with companies using specialists on a consultancy basis, or contractors, for example on a building site, and the topic is quite closely related to the recent developments in the laws relating to agency worker rights.
There have been many cases that have had to determine a person’s status within a company, in order for them to be allowed or restricted from making claims relating to employment rights, one of the most famous being Carmichael v National Power in 2000, which went all the way to the House of Lords. This case looked at whether employees who worked on a casual basis as and when required were ‘employees’ and therefore entitled to a contract of employment (they eventually lost). Whilst it is perhaps not something for the HR Team to consider every day, it is nevertheless an important aspect of employment law that can bring expensive and time consuming consequences for the unprepared organisation.
To determine whether a person has ‘employee’ status in a case where this is being argued by either party, an Employment Tribunal (ET) would need to determine if the claimant works under a contract of service (employee) or a contract for services (self employed contractor), if this is not specifically stated in writing. This would be done by applying a number of tests, looking at different areas of the employment/working relationship to determine exactly how the company and person were contractually bound. The rest of this article will look at aspects of control and integration, and the next one will look at financial factors and what is called ‘mutuality of obligation’.
Control
This looks at how much the employee is under the direction of somebody at the company. This is the oldest way the courts tested for employee status and was used in a case in 1880. Normally, the more skill a person has in their role, the less likely they are to be under the instruction of someone else, although this isn’t one of the strongest ways to test the relationship.
Integration
An individual who is integrated into the business is more likely to be an employee. The ET would consider how integrated the claimant was/is, which could look at the length of service between the parties and the level of work provided. In one case (Franks v Reuters) the claimant indirectly worked for the defendant through an employment agency for over four years on a permanent basis and was therefore considered fully integrated. A key aspect of this test is whether the employee’s work is integrated into the organisation’s work, or is an accessory to it; so if an employee is only used as and when required, e.g. to fill in during holiday time, then they’re more likely to be an accessory to the business (but if they did this on a regular basis for a long time then they would probably be considered integrated).
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