The tasks which people carry out and the contexts in which they do so daily become so much more numerous, more diverse and more sophisticated that no one test or set of tests is apt to separate contracts of service and contracts for services

Integration

This test involves the courts looking at whether the services or work carried out under the contract is done as an integral part of the employer’s activities or organisation and determines whether the individual is “in business for himself” or in other words, “operates their own enterprise”. Should the answer be yes, then it is one of an independent contractor. Matters considered include who determines how the work is to be carried out, whether the individual can delegate tasks and method of payment i.e., by invoice or payroll. If the individual displays a high proportion of independence from the alleged employer, the likelihood is they will be regarded as an independent contractor.

In the post war case of Stevenson, Jordon, and Harrison Ltd v MacDonald and Evans an attempt at developing an alternative method of testing employment status to the control test, Lord Denning deemed the test dependent on the workers integration into the organisation.

 He said in the case: ‘… under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business but, under a contract for services, his work, although done for the business, is not integrated into it but only accessory to it.’

Advantages of the integration test over the control test are that skilled workers such as surgeons, who have a great deal of independence, would still be considered as employees. However, the vast increase of part-time workers who are less well “integrated” in the company than full time workers has produced a new varied group of workers that makes it even more complicated to conclude their employment status.

Even though the intentions of the parties may be that of an independent contractor, an examination of the real nature of the relationship may well find that the contract is that of an employee.    

Multiple

 

This approach looks at the whole relationship. The object is to allow the Courts to enquire into individual circumstances and ask questions with the purpose of considering all relevant matters in order to identify the existence or non-existence of common features in an employment relationship. It is a modern method of combining the above tests to decide whether a worker is employed under a contract of service or a contract for service. It involves the court asking a selection of different questions as a way of establishing employment status, on the balance of probabilities. The variety of factors that can be measured is never-ending but it will generally include the level of control applied by the employer that can be calculated by the level of supervision and training supplied and the provision of equipment and materials. Payment of income tax, National Insurance, statutory sick pay and statutory maternity leave are also considered in this method. E.g. if the worker does not pay income tax and National Insurance then it indicates that the person is self-employed and deals with his/her own tax payments. The workers opportunity to work for other employers can also be a major factor as it more commonly leans toward the contract of service as can workers having the ability to delegate work to a third party. What is clear is that there is no singular decisive test that can be applied in order to determine the exact identity of the contract, however, in some cases there are so many factors on each side of the equation making it very difficult to reach a fair judgement.

The multiple test was effectively established in 1968 in the case of Ready-mixed Concrete (South East) V Minister of Pensions and National Insurance when an owner-driver of a vehicle used exclusively for the delivery of a company’s ready mixed concrete was engaged under a contract of service or a contract for services. The Minister decided that Mr Latimer was employed under a contract of service but, on appeal to the High Court, MacKenna J held that he was running a business of his own. In summing up MacKenna J said that Mr Latimer was a “small business man” and not a servant.

“A contract of service exists if three conditions are fulfilled:

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 task for his master.

He agrees, expressly or impliedly, that in the performance of that service he will be subject to the others control in a sufficient degree to make that other master.

The other provisions of the contract are consistent with its being a contract of service”

In Carmichael and another v National Power plc, the House of Lords holds that two women who accepted a company's written offer of employment as tour guides "on a casual as required basis", and then worked as guides on invitation when they were available and chose to work, were not employees under contracts of employment. The issue of whether they were or were not employees did not turn solely on the construction of the documents; and even if it had, there was no obligation on the company to provide casual work or on the women to do it.

The case of Montreal v Montreal Locomotive Works illustrates this test better. This case concerned the contract of a lorry driver who was buying his vehicle from the company on hire purchase. When deciding whether the person was employed or self employed, the court looked at the following ‘multiple of aspects’ of the drivers responsibilities; having to have the lorry ready for the company use at all times, it had to be painted in the companies colours, he could substitute for another driver whenever he wanted and his accounts were prepared by the companies accounts department. The factor that the court gave emphasis on when deciding, was the fact that the driver had the power to substitute himself for another when he pleased, therefore, the court ruled, because of this, that he was self employed.

All the relevant factors need to be considered, and as long as the employment tribunal takes these into account, their decision will be, a question of fact and their finding cannot be challenged unless they concluded which could not be reasonably obtained by any other tribunal.

The only thing that is certain is that if there is control, no delegation and a mutuality of obligation the court should find a contract of employment.

Economic Reality

The application of this test is similar to that of integration. The Courts will enquire into who profits from the individual’s labour, who bears the financial or legal risks and whether the alleged employee provides services to other organisations.  

The authoritative formulation of this “fundamental” test is that of Cooke J in Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173. Cooke J asked:

“Is the person who has engaged himself to perform the services performing them as a person in business on his own account? If the answer to that question is ‘yes’ then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service”.  

The President of the Methodist Conference v Parfitt

In the case of The President of the Methodist Conference v Parfitt the issue arose as to whether there was a Contract of Employment between the Applicant and the Methodist Church. The claimant tried to declare that he as a minister of the Methodist Church who had been received into full connection had a contract of employment with the church. The court held that the detailed arrangements between a minister and the Church, set out in the church’s rule book, and the high degree of control to which a minister was subject, indicated the Applicant was employed by the church under a contract of service

On appeal to the Court of Appeal, it was held that a correct appreciation of the spiritual nature of the relationship between a minister and the Methodist Church, showed that the arrangements between the minister and the Church, in relation to his stationing throughout his Ministry and the spiritual discipline which a church was entitled to exercise over the minister in relation to his career were non-contractual. Lord Dillon said: "the spiritual nature of the work to be done by a person and the spiritual discipline to which that person is subject may not necessarily, in an appropriate context, exclude a contractual relationship under which work which is of a spiritual nature is to be done for others by a person who is subject to spiritual discipline. On any view the spiritual nature of the work and the spiritual discipline under which it is performed must be very relevant considerations when it has to be decided whether or not there is a contractual relationship." However: "Nonetheless the courts have repeatedly recognised what is and what is not a contract of service and I have no hesitation in concluding that the relationship between a church and a minister of religion is not apt, in the absence of clear indications of a contrary intention in the document, to be regulated by a contract of service. I do not doubt that there probably are binding contracts between the Methodist Church and its ministers in relation to some ancillary matters, such as the compulsory superannuation scheme and the obligation, of which Mr. Parfitt told us, on trainees to repay a proportion of the expense of their training if they do not remain in the ministry for at least 10 years. These however are no part of the contract of service, either on reception into full connection or on appointment to a circuit, which Mr. Parfitt seeks to set up.”

To 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 legislation. 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 Parliament in order to redefine workers and it will impact adversely to the small-businesses and overall economy.

References

Busby, Clark, Paisley and Spink. Scots Law: A Student Guide 3rd Edition

Taylor and Emir. Employment Law an Introduction

Auchie, Lauterbach, Little, McFadden, McFadzean, McManus and Ross. Introduction to Legal Obligations

WestLaw

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