In Hillyer v Governers of St Bartholomew’s Hospital, the court held that nurses were not employees of the hospital when carrying out theatre duties as they took instruction from the surgeon not the hospital authority. This judgement was heavily criticised, and effectively brought the end to the single factor control test.
Organisation Test
In Stevenson, Jordan and Harrison v MacDonald and Evans, Denning LJ suggested a more up-to-date test. An employee “is employed as part of the business and his work is done as an integral part of the business”, whereas an independent contractor “is not integrated into [the business] but only an accessory to it”. In Bank voor Handel en Scheepvaart v Slatford, Denning LJ added to the test in that is was “whether the worker was part and parcel of the employer’s organisation”. It was applied in Whittaker v Minister of Pensions, where a trapeze artist broke her wrist following a fall. It was held that she was an integral part of the circus business and thus an employee. The lack of definition of integration and organisation would bring about unsatisfactory results, and so with more complex cases being brought, the courts needed a more decisive test.
Multiple Test
The complexity of the employer employee relationship has forced to courts to look at a range factors in deciding employee status. The test began in Ready Mixed Concrete v Minister of Pensions and National Insurance. The issue in the case was whether the company would be liable for the National Insurance contributions of its workers. Obviously, it would only be so liable if the workers were employees. The workers drove ready mixed concrete lorries, which they had purchased from the company. Their agreement stated that the workers must obey all reasonable orders, maintain the lorry according to company rules, and only use the lorries on company business. They were painted in company colours, and the drivers had to wear uniform. These criteria suggested close control, and hence that the drivers were employees.
However, there were no requirements as to the hours of work or when they took holidays. They would incur all running costs of the lorries. They could have more than one lorry and could delegate their duties to a substitute driver. Also, the drivers were paid, subject to an annual minimum payment, according to the amount of concrete they delivered. MacKenna J identified three criteria for a employment contract to subsist. Firstly, the employee agrees to provide his own work and skill in consideration of a wage. Second, there is an element of control exercised by the employer. Thirdly, other provisions in the contract are consistent with it being a contract of service.
On the facts, MacKenna concluded that the drivers were independent contractors, mostly because of
the final limb of the test was not satisfied. The fact that the drivers could delegate their duties was crucial as this is not something seen in employment contracts. The test has now been accepted by the courts.
The first limb of the test can be seen from Lord Thankerton’s adapted control test in Short v J & W Henderson. Adrian Williams argues that the inclusion of “or other renumerartion” can be criticised in that it doesn’t distinguish between the regular salaries paid to employees and the lump generally paid to independent contractors.
The second test is merely a restatement of the control test. In Market Investigations v Minister of Social Security, Cooke J observed that “control will no doubt always have to be considered, although it can no longer be regarded as the sole decisive factor”.
In that case, Cooke J considered the third limb of the test. The question to be determined by the court was whether a person was in business on his own account. That case concerned an interviewer who carried out market research part time. She could do the work at whatever time she wished, provided that it was done within the given time. It was held that she was an employee. Cooke J outlined a number of factors that tend to show that a person is in business on their own account. These include whether they provide their own equipment, whether he hires helpers, what degree of financial risk he takes, whether he stands to make a profit from sound management of the task. This is the so called entrepreneurial test.
However, this still leaves the question of what factors indicate employment. However, “perhaps no exhaustive list can be compiled of the considerations relevant to determining the question”. Indeed, “the object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture… and making an informed, considered, qualitative appreciation of the whole”. Selwyn however has formulated a list of factors any tribunal should consider, many of which have been noted above.
It is submitted this amount of judicial flexibility could be considered a bad thing. It allows the fact finder to choose the factors they think to be important. For example, in the Ready Mixed Concrete case, MacKenna chose to consider the power to delegate, despite the fact that it was never actually used. The courts need to consider all factors available to them to make an informed decision.
In the majority of cases though looking at all the factors available, the court should be able to answer the question. Homeworkers though are a particular group that can cause difficulties.
In Airfix Footwear v Cope, it was held that the worker was an employee because work was provided on a regular basis and in reality the employer decided on the “hows and wheres” of doing the job.
In Nethermere v Taverna, the Court of Appeal held that it was the mutuality of obligation between the employer and the worker, that is the obligation to provide work and to provide skill respectively. Selwyn calls this the irreducible minimum legal requirement for the existence of a contract of employment. This can be seen in O’Kelly v Trusthouse Forte, where a casual worker was held to be self-employed because there was no obligation on the employer to provide work and no obligation on the worker to offer his services. While this wasn’t the sole deciding factor, it was clearly an important one. In Carmichael and Leese v National Power, tour guides that were ‘casual as required’ were again self-employed because the irreducible minimum of mutual obligation had not been satisfied. In Carmichael the Court of Appeal held that there was an implied term in to contract to provide a reasonable amount of work and for the workers to do a reasonable amount of work. However, the House of Lords overruled the decision because of the absence of mutuality.
Adrian Williams argues that the courts have attached a “disproportionate weight to the mutuality of obligation” criterion. He argues any unscrupulous employer could surreptitiously insert an unconditional delegation clause into the contract resulting in the worker not being protected by employee legislation. He arrives at this conclusion because of the decision of the Court of Appeal in Express & Echo Publications v Tanton. In that case the worker was a driver whose contract had a clause in which, should he be unable or unwilling to perform the services, he should arrange at his own expense another suitable person. All other factors appear, to me at least and to the EAT, to show that Tanton was an employee. Despite this, the Court of Appeal held that the right to appoint a substitute as “inherently inconsistent” with being an employee. This case does tend to show a heavy reliance on the “irreducible minimum” of personal service in employment contracts. The EAT distinguished Tanton on the facts in McFarlane v Glasgow City Council. Gymnastic teachers had the right to arrange a substitute, but only where they were unable to attend. It would not be possible for the instructors to never turn up, as would theoretically be the case in Tanton. A similar result occurred in Bryne Brothers v Baird, where such a clause was held not to prevent a worker being classed as an employee. Thus, while McFarlane and Baird have limited the argument, it is still submitted that too much weight is attached to the mutuality of obligation test.
However, as Selwyn points out, there is no one single factor that can be by itself conclusive. Thus, in McMeechan v Secretary of State for Employment, the fact that there was a weekly wage, a power of dismissal and a grievance procedure led the Court to conclude that the worker was an employee. Likewise, in Motorola v Davidson, the employer had a sufficient degree of day to day control, which made the worker an employee.
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 can not be challenged unless they came to the conclusion 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.
Going back the original question, it is clear that the tests created by the Courts were inadequate in a modern society. The courts now tend to look at a multitude of factors in deciding employee status. The most important factor, it seems, will be mutuality of obligations.
Adrian Williams concludes his article by suggesting that statutory intervention is necessary. I agree that because of the importance and number of rights an ‘employee’ will receive, it is paramount that the courts can determine worker status accurately. I find it difficult to see though how a statutory test would advance the position we are in now, the position of painting a picture of all factors and balancing them out.
Steven Mather
Word Count: 2073
BIBLIOGRAPHY
Employment Law – Deborah Lockton (Palgrave) – 4th Ed
Law of Employment – NM Selwyn (Butterworths) – 12th Ed
Modern Employment Law – M. Whincup – 9th Ed
Harvey of Industrial Relations and Employment Law, A1
“A Critical Appraisal of the Criteria Determining Employee Status” – Adrian Williams, Business Law Review, October 2003, p239
“The Status Tests” – Maugham and Dunn, 28 June 2002 (Employment Law Direct, Butterworths Online)
“Employee Status” – K. Wardman – Comp. Law 2003, 24(5), 139-143
“A Question of Status” – J. Hemming - N.L.J. 2003, 153(7091), 1213-1214
“The Employment Status of Individuals in Non Standard Employment” – DTI Report - Brendan Burchell, Simon Deakin and Sheila Honey - URN 99/770 ()
Seminar Notes
Hall v Lorimer, [1994] IRLR 171