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"The dichotomy between employee and self-employed is being eroded in employment law, so much so that today it appears meaningless". Discuss.

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Introduction

Question: - "The dichotomy between employee and self-employed is being eroded in employment law, so much so that today it appears meaningless". Discuss. Answer:- T his question requires to analyse the operation of laws governing the classification of employment relationships. Access to employment rights depends to a large extent on whether an individual is employed as an employee. The self-employed and a number of other groups (such as agency workers) tend to find themselves excluded from employment protection law. The answer will reflect how laws relating to the 'status' of employees and the self-employed work in practice, will identify the sources of uncertainty in the application of the legal tests of employment status and will evaluate to what extent the distinction has been eroded and the justification of maintaining the status quo. For a variety of reasons, which will be discussed below, it is important to determine whether a person is employed under a contract of employment. Before discussing the statutory definition of an employee and a self-employed, it will be appropriate to define the terms 'employee' and 'self-employed' generally. The term 'self-employed' means persons who provide services to another party under a contract for services, but are genuinely in business on their own account, in that they are partners in a business or the sole owner of their own business and may employ others1. On the other hand, an employee is an individual who is employed by another under a contract of employment and is not genuinely in business on his or her own account. By s.230 of the Employment Rights Act (hereinafter ERA) 1996: a 'contract of employment' means a contract of service or apprenticeship, whether express or implied, and (if it is implied) whether it is oral or in writing... 'Employee' means an individual who has entered into or works under ...a contract of employment'. This definition of an employee, although provided by statute, is not, however, helpful as it fails to define what is meant by a contract of service. ...read more.

Middle

The House of Lords reached a similar conclusion in Carmichael and Lesse v National Power plc18 , where it was decided that guides employed on a 'casual as acquired' basis were self-employed. Lack of mutuality of obligations has led to agency workers being classed as self-employed (Wickers v Champion Employment19), although McMeechan v Secretary of State for Employment20 and trawler men who entered separate crew agreements for each voyage were also deemed to be self-employed, despite the fact that they invariably returned to the same employer, again because of the lack of obligation to provide work or services. However, the position seems to have changed by the application of the recent case Motorola Ltd v Davidson21 where the court found that the requisite employment relationship existed given the practical degree of control exercised by Motorola Ltd over Davidson, and from the fact that Motorola Ltd had conducted disciplinary proceedings culminating in Davidson's dismissal without MC's (an employment agency) knowledge. T he question which must now be asked is: why is the distinction between employees and independent contractors important? A variety of rights and liabilities apply in respect of employees which do not apply to independent contractors. An employee pays insurance contributions which are a percentage of his earnings and the employer also makes a contribution. This gives the employee certain benefits in respect of unemployment, sickness and industrial injury as well as Sate pension rights. An independent contractor pays a flat rate insurance contribution, irrespective of earnings and has no rights to the benefits mentioned. Moreover, an employer must deduct tax at source for his employees and may be committing a criminal offence should he fail to do so (Jennings v Westwood Engineering22). The employer is under no such obligation in relation to independent contractors, although, in the building industry, the employer is required to deduct tax as if the workers are employees and the workers can then claim tax back if they are genuinely self-employed. ...read more.

Conclusion

However, there are arguments against the removal of the distinction. If non-employees have a broader range of statutory employment rights, employers might increase their demands on them or the degree of commitment they expect of them. This could reduce flexibility for these working people. Some atypical workers may enjoy a higher remuneration package than other workers because they do not have the same employment rights protection. Moreover, the elimination of the distinction would fundamentally change the nature of the relationship between certain work providers and working people28. Furthermore, it may reduce employers' willingness to offer atypical working arrangements and some rights, such as maternity rights and the right to unfair dismissal may increase administrative burdens on business. T o conclude, it is, therefore, possible to say that a high degree of uncertainty attaches to the legal criteria by which workers are classified. This means that the effectiveness of the law, in practice, may be called into question. However, it is important for both parties to know what the legal relationship is. On the part employer, he will then know the extent of his liability and on the part of the worker; he will know that rights he has, both in respect of his employer and in the wider context of welfare benefits and employment protection rights. It has also been made clear by above arguments that the existing classifications have become too rigid to deal effectively with the growth of non-standard forms of employment, that is to say, those forms of work which depart from the model of the 'permanent' or indeterminate employment relationship constructed around a full-time, continuous working week. The result is said to be the exclusion of certain groups of workers, whose status is unclear, from the protection of employment legislation29. However, my opinion is in support to maintain the status quo and consider the scope of new rights of the self-employed on a case-by-case basis because radical change of their status may require changing some key Acts of Parliament30 in order to redefine workers and it will impact adversely to the small-businesses and overall economy. ...read more.

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