Selwyn states that it is difficult to categorise working individuals because of the complexity of modern organisation, and despite the arrangements being convenient for those concerned, the lack of clear categories can hinder legal analysis.[1] Identifyin

The test for mutuality of obligations asks if the employer has an obligation to give work, and has the worker got a duty to take the work. In O’Kelly v THF, despite control being present, mutuality of obligations was missing. The workers had no duty to give notice, and they employers had no duty to provide work.  However, despite similar circumstances, in Nethermere v Taverna & Gardiner it was held that there was sufficient mutuality of obligation. Explaining, Stephenson LJ stated “There must, in my judgement, be an irreducible minimum of obligation on each side to create a contract of service.” This illustrates that there is a very fine line that needs to be drawn, proving the difficulty courts have in identifying employment status. In Carmichael v National Power PLC, the courts used the multiple test, but emphasising the individual’s lack of mutuality, they decided that she could not be an employee. Clark v Oxfordshire also shows the need for mutuality of obligations.

Express v Tanton involved the element of personal performance, asking can an individual substitute someone else’s labour for their own. If one can substitute, usually they are not an employee. If on the other hand they cannot, they usually are. However this is a difficult area, as shown by Peter Gibson LJ: “In my judgement, therefore, both the chairman and the Employment Appeal Tribunal erred in law.” Regarding the label of an individual, the courts have said that there is an element in the multiple test, but it is only used when all other factors are equal. In those circumstances, the label can be decisive but you need to look behind the label. For example, in Massey v Crown, the courts ruled that because the individual made a conscious decision to become self-employed, the label was to stay in place. In Fergusson v Dawson, the court discovered that the employers had created a sham self employed contract to save money. This illustrates the fact that although a label can be decisive, there is a need to look behind the label for the true situation. Ackner LJ expands on this in Young & Woods Ltd v West where he stated:

“It is by now well settled that the label which the parties chose to use to describe their relationship cannot alter or decide their true relationship; but in deciding what the relationship is, the expression by them of their true intention is relevant but not conclusive. Its importance may vary according to the facts of the case.”

The implementation of numerous types of tests to determine employment status emphasises the difficulty in identifying an actual employee.  The courts have the task of categorising working individuals into suitable groups, however due to the fast changing nature of employment, this task is colossal. Case law indicates that every case needs to be looked at individually in order to categorise someone as an employee. Distinguishing between the employed and self-employed is evidently a very difficult task, Deakin states: “The creation of a strict legal dichotomy between the employed and self-employed may have been a good legislative policy; but it is highly questionable whether this was ever really coherent as a distinction between two types of contract.” The courts should forget about trying to find a one-for-all test for distinguishing employees, and realise that every single case needs to be looked at individually.

If a working individual is not an employee, they could be within the category of workers.  Section 230(3) of the ERA and section 296 of the Trade Union and Labour Relations (Consolidation) Act define a worker. The definition makes it clear that an individual would be a self employed contractor if they are a client or customer to a professional person or business man; they would not be a worker. Johnson highlights the difficulty of defining a worker through legislation: “The introduction of legislation protecting those who have ‘worker’ status has led to the inevitable confusion and dispute over who exactly will be covered by this definition.”  The workers are in business for themselves, but they are sill undertaking a service for somebody else personally. Within the category of a worker, a person could be self-employed, an a-typical worker or an agency worker. This further complicates the task of categorising working individuals as each class has different rules derived from case-law. The following case law proves to be more enlightening than the legislation.

Byrne Brothers v Baird states that the work or services need to be performed personally in order to be categorised as a worker, however this presents problems. For example, you could hire a building contractor who agrees to build a garage for £1000. That person is not guaranteeing that they are going to complete the job personally, but on the other hand you could know a builder personally and specifically ask them to personally complete the job. In James v Redcats the court said you should ask what the dominant purpose of the service is, also noting that in order to differentiate between the different categories of working individuals, more “sophisticated analysis” is required. The case illustrates the difficulty of defining workers because it contrasts with the earlier case of Express v Tanton. In Express, the driver was held to be self-employed because he did not provide a personal service, whereas in James, he had a personal obligation, and so, was held to be a worker.  Broadbent v Crisp  stated that all employees are workers, but not all workers are employees. This demonstrates the extremely broad nature of the term worker.  Belcher v Autoclenz shows that if the three requirements of section 230(3)(b) are satisfied, the claimant will be a worker. Expanding on this, Cutts explains “This decision confirms that where there is a dispute as to the status of the written terms of a contract, the focus of the tribunal must be to discover the actual legal obligations of the parties.”

Another category of workers are the self employed. They include anyone who has a contract for service, and not a contract of service. A difficulty arises in distinguishing between a self-employed principle and contractor, as considered in Challinor v Taylor. A taxi driver who is self-employed could agree to personally drive a taxi for an owner of a pool of taxis. In this situation, the taxi driver would come within the category of a worker. With regards to the owner of the pool of taxis, if he decided to drive a taxi himself, he would not be working for anyone and so would be defined as a self-employed entrepreneur. The employment status changes depending on the actions of the working individual. Commenting on the previous case law and the recent case of Tilson v Alston Transport, Bird & Bird state: “The key in these cases is always – what is the reality of the relationship? The documentation alone will not decide the issue.” Again reinforcing the point that cases need to be examined individually, making it extremely difficult to place workers into well-defined categories.

There are other groups of workers to consider, as they too can be difficult to categorise. A-typical workers are no longer in the minority, adding to the confusion. It is now very common to be a casual employee or to work for an agency.  Davies comments on the difficulty of identifying the employment status of casual workers: “One of the most significant problems currently faced by casual workers is their inability to prove ‘mutuality of obligation’.”  This is shown in the cases Clark v Oxfordshire Health Authority and O’Kelly v Trusthouse Forte, where mutuality of obligation was lacking and so they were held not to be employees. Carmichael v National Power also demonstrates the need for mutuality.

Agencies are extremely popular in employment. There are three possibilities an agency worker can be: an employee of the end-user; an employee of the agency; or not an employee at all (worker or self-employed). Agency workers have proved to be very problematic when trying to work out employment status, Gardiner comments: “There is confusion in the workplace and considerable uncertainty in the law about the status of individuals who obtain work through employment agencies.” Mummery LJ agrees: “Recent cases demonstrate that there is confusion in the workplace and considerable uncertainty in the law about the status of individuals who obtain work through employment agencies.” In Dacas v Brook Street, Mundby J concluded that the current situation of the status of agency workers is “plainly most unsatisfactory.” In Dacas and Montgomery, it was held that the worker was not an employee of the employment agency because of lack of control and lack of mutuality of obligation. McMeechan v Secretary of State held that the employment agency was the employer. Elias J attempted to make the situation clearer in James v Greenwich Council, utilising a restrictive approach and suggesting that it is rare for an agency worker to be employed by anyone. However, this contrasted with Dacas where Sedley LJ argued that to be employed by nobody was “simply not credible.” James limits the scope of the courts and makes a significant shift in emphasis regarding the issue of implied contracts. These case judgements highlight the conflicting views of judges, and further illustrate the great need to assess every case individually.

Identifying an agency workers employment status is very difficult, it was therefore decided something had to be done. Agency worker numbers have increased phenomenally in the United Kingdom and Europe. The European Union issued a directive to combat the problematic area: The Agency Workers Regulations 2010. This will come into effect in 2011, and give agency workers the rights they deserve.

Selwyn is absolutely correct when he argues that working individuals are difficult to rationalise into well-defined categories.  Legislation is not helpful when identifying employment status, therefore the case law is our main guidance. Since the nineteenth century, the courts have introduced tests to work out if someone is an employee; this is outdated and no longer justified.  The ever expanding area of employment has proved to be a major difficulty when identifying employment status. The worker category is particularly broad, and includes the problematic casual and agency workers. I agree with Johnson, that workers are a hybrid class; it is a significant reason why working individuals are so difficult to categorise. Careful examination of the case law sheds light on one common theme; every case concerning employment status needs to be individually assessed using clear logic and common sense. The speed in which employment changes, the overlap between workers and employees, and the different employment relationships, are why it is so difficult to have well-defined categories for workers. Employment will continue to change, and with it the task of categorising working individuals will become even more considerable.

Word count: 2,486

Bibliography

Books

Selwyn, Norman, “Selwyn’s Law of Employment”, 16th edition, Oxford University Press

Articles

A.C.L Davies, “The Contract for Intermittent Employment”, ILJ 2007 36 (102)

Bruce Gardiner, “Status Unknown”, 157 NLJ 210

Simon Deakin, “Does the ‘Personal Employment Contract’ Provide a Basis for the Reunification of Employment Law?” ILJ 2007 36 (68)

Jane Johnson, “The hybrid class of employment”, 157 NLJ 728

O. Kahn-Freund, (1951) 14 MLR 505-8

Other Materials

J Cutts, (Penningtons Solicitors), “Employment Terms – ‘Self Employed or ‘Employed’” at  12/11/10

Bird & Bird, Employment Status – “Can Independent Contractors Have it Both Ways?” At  12/11/10

---