Employee or Independent Contractor?
In order to understand what employment rights an individual may have it is necessary to consider whether they are correctly classed as an “employee”, “independent contractor” or “worker”.
For many years employers and employees have often sought to characterise their relationship as that of principal and independent contractor. Each party often has convenient tax reasons to do so.
It is often only when something goes wrong that the Tribunal is called upon to adjudicate as to the real nature of the relationship. The issue is important because, for example, rights in relation to redundancy and unfair dismissal accrue only to employees.
Employment Tribunals are accustomed to identifying “shams” and will classify each case on its own facts regardless of any label that the parties may have attached of their own accord. In determining the status of the parties' relationship a number of different tests are commonly applied:-
- If an employee is entitled not to attend at the employer's place of work but instead to send a substitute of his choosing, this is not consistent with a contract of employment.
- An Employment Tribunal will consider the question of “control”. Who determines how the employee actually does the work in question?
- Is the work of the individual integrated into the employer's organisation – or just an accessory to it?
- Is the worker really a small businessman – sharing in risk?
- Is the employee obliged to turn up to work and is the employer obliged to offer work? This is known as the mutual obligation test and is paramount.
Particular difficulties arise with “agency workers” – those individuals who are employed by an agency but are sent to work for another organisation. The agency workers contract will be with the agency – not the “end user”. Recent case law has held that more usually agency workers do not acquire employment rights against an end user unless the end user is entitled to insist that the agency supplies a particular worker or where the agency arrangement is a clear “sham” or there exists some special verbal agreement or arrangement entitling a tribunal to employ a contract of employment.
Lawson Lewis Blakers are able to provide specialist advice in relation to all areas of employment law including the preparation and termination of contracts for services/employment.