To determine if an individual is an employee, the courts examine the contract of employment. Section 230 (1) ERA states that an employee is one who has a contract of employment. The definition of contract of employment is found under section 230 (2) ERA. It is defined as a 'contract of service'. There are three minimum requirements for a contact of service. They are control, mutuality of obligation and personal service.
When determining if an individual has been working under a 'contract of service' the aforementioned will be examined by the courts. When doing problem questions that involve determining if an individual is an employee or not you will need to discuss these elements. You should discuss them with reference to the relevant case law. The main case law you will need are below. The information should help you understand the main facts of the cases, the decisions reached in court, and the reasons given for the decisions.
Control: Is the person carrying out the work subject to the organisation's control?
Relevant case: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968) 2 QB 497.
Facts: Latimer's contract with Ready Mixed described him as an "independent contractor", despite him having to put the company colours on his truck and wearing a company uniform while he was working. Additionally the lorry could only be used Ready Mixed purposes.
Decision and Ratio: Latimer was said to be self-employed and not an employee. The court examined the level of control exerted by the company over Latimer, and found there was insufficient for him to be classified as an employee. The court stated that a contract of service exists if (1) the servant 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 master, (2) he agrees 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, and (3) the other provisions are consistent with its being a contract of service.
Mutuality of Obligation: Does the employer have an obligation to offer work and does the worker have an obligation to accept the work?
Relevant case: Nethermere (St. Neots) Ltd v Taverna & Gardiner (1984 ICR 612, CA)
Facts: Gardiner was one of a number of outworkers engaged by a company, Nethermere (St Neots) Ltd. Using machines provided by the company, these part-time outworkers sewed trouser flaps and pockets. There were no fixed hours and they were paid according to the work they did and were not under obligation to accept any particular amount of work.
Decision and ratio: The workers were employees. The court reiterated the point that rhere must be an obligation on the employer to offer work and on the worker to accept.
Relevant case: Camichael v National Power plc (2000) IRLR 43
Facts: The tour guides in this case worked only as and when required, and had the right to turn down work offered.
Decision and Ratio: The court decided they were not employees. Absence of mutuality of obligation means no contract of service exists.
Personal service: Can the person carrying out the work substitute workers? If so, to what degree?
Relevant case: Express and Echo Publications Ltd v Tanton (1999) IRLR 367
Facts: Tanton had worked as an employee but he was made redundant . After re-engagement as a driver on what the company intended to be a self-employed basis he was sent a document which included a clause that permitted him to substitute workers. He did not sign the document, but he did occasionally substitute workers.
Decision and Ratio: The contract was not one of a contract of employment. The right of a worker to substitute workers is inherently inconsistent with a contract of employment.
Relevant case: MacFarlane v Glasgow City Council (2001) IRLR 7
Facts: Some gym instructors worked under a contract that permitted them to provide a replacement when they were unable to work. This list of substitutes was kept by the council.
Decision and ratio: The gym instructors were employees. Limited substitution does not necessarily contradict a contract of service. This case was distinguished from Express and Echo Publications Ltd v Tanton (1999) because in Tanton's case substitution could be made at any time, but in MacFarlane's case substitution could only be made if the gym instructors could not attend work. This substitution power was limited to a replacement from Glasgow City Council's register, at times the council arranged the substitutes without the approval of the workers objecting and it was the substitutes were paid directly.
Relevant case: Autoclenz Ltd v Belcher and Ors (2011) UKSC 41
Facts: There was a substitution clause in the valeters' contracts. This substitution clause was never invoked. Additionally, there was an expectation that the valeters would undertake any work given to them, and they did comply with this requirement.
Decision and ratio: The valeters were employees. Inequality of bargaining power between parties is a defining element in a contract of service. If the practices taken between parties are not reflective of the contract signed, the court will disregard the contract.