An Employee by Another Name

The buzzword in employment law continues to surround ‘zero-hour contracts’ and the utilisation and development of such contracts, where the employer does not guarantee to provide work and pays only for work actually done. These contracts are being placed under more and more scrutiny by leading Unions and the Government. Solicitors Maria Gallucci and Nathan Taylor-Allkins explain more. 

This is just one example of the variety of employment options available to employers to optimise efficiency and flexibility, and to avoid employment rights being imposed into their working relationships. There does, however, appear to be a common misconception that employers are able to define their staff in any way they wish, whether it be “casual worker”, “home worker”, “zero-hour contract worker”, etc, and that this definition is the determinative factor when considering an individual’s employment status.

Whilst it is true that employers can define their staff however they wish, there are only three broad types of employment status under the Employment Rights Act 1996, i.e. “employee”, “worker” or “self-employed”. Those who fall into the first category enjoy the most employment rights, primarily under the 1996 Act, such as unfair dismissal, redundancy payments, and maternity leave. Workers enjoy employment rights such as protection of wages, national minimum wage and working time regulations, but not to the same extent as employees. The truly self-employed do not have any employment rights at all.

It is essential, therefore, that whatever label or definition is given to an individual, consideration should be given to which category they legally fall within. Unfortunately, there is no single test established by legislation or case law but it is clear from the leading cases that the Court will not always accept the parties’ definition and will look behind written agreements to see the reality of the relationship.

The Court, in considering the relationship will look to the following indicative, but not exhaustive, factors:

  • Mutual obligation – Is there an obligation on the employer to provide work and an obligation on the individual to be available for work? 
  • Personal service – Does the individual have a right to appoint a substitute or delegate the work? 
  • Control – Who has control over what, when and how regarding the work?

With the continued development and expansion of working relationships, it can be exceedingly difficult to precisely identify which category an individual falls into. The introduction of ‘worker’ by the Employment Rights Act 1996 has created an intermediate class between employee and self-employed and even where an individual does not qualify as an employee, an employer should still consider whether that person qualifies for the employment protection granted to this class.

As stated above, the operation of zero-hour contracts continues to be hotly debated and it will be interesting to see what balance is reached in the coming months between the contrasting rights of employers and their workforce. What is clear, however, is that the need for clear employment documentation has never been greater. The caveat is that the documentation must reflect the actual reality of the employment situation, otherwise it may be liable to scrutiny by the Courts.

Employers must, therefore, be advised of the inherent risks involved in placing reliance on the definition of the employment relationship. If the elements indicating an employee relationship are present, using any other name to label the individual is futile and the ramifications of this are that an individual may be afforded far more employment rights than intended or desired. This will cause financial and practical implications particularly in relation to termination of the relationship and ultimately, the likelihood is that employment claims will follow.

For further information or advice, please contact Maria Gallucci on 01908 202150.