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Sample Essay: The Ever-Changing Nature of Employment Law

Written by Alex T.

 

Introduction

Employment law is built around regulating the respective rights of employers and employees within and outside of the workplace environment.[1]  Having an effective system of employment law allows society to ensure that employers retain the flexibility necessary to effectively compete in an ever more globalised world market, whilst balancing this with the need to ensure that workers and employees themselves are valued, protected from exploitation and arbitrary or unfair dismissal, and are properly and lawfully remunerated.[2]   Many of the legal rights and protections afforded by law however are dependent on the status of the worker.  Indeed, the very essence of employment rights as provided for under legislation such as the Employment Rights Act 1996 (ERA 1996) depend upon the worker in question being able to prove that they were indeed an “employee”.[3]

Whilst it might at first glance seem a simple enough task to identify a contract of employment, the reality is, that it is sometimes a complex and uncertain task.   In the modern world in which flexible, part-time labour within what is termed the “gig-economy” is becoming ever more prevalent, and because of the numbers of agency and other staff now being employed on temporary contracts, or who operate as self-employed contractors, it is perhaps more important than ever to ensure that the clear test for whether a worker is an “employee” or not is clear.[4]  This essay will consider the test set out in English law for the determination of whether a contract of employment exists or not, and will determine the extent to which this test is indeed clear and understandable.

 

When is a person “employed” under English Law?

The starting point for any assessment of the test for “employment” in English law is to consider whether or not there is any useful statutory definition of the term.  Unfortunately, there is no real clear statutory definition of what constitutes “employment” or a contract of employment in English law.  Indeed, all the principle statutory      s230(1) ERA 1996 does is to define an employee as an “individual who has entered into or works under…a contract of employment”.[5]  As can be seen from this, the statutory definition of “employment” is in fact a rather circular definition, which requires a definition of employment, or a contract of employment to already exist in order for it to be meaningful.

However, if the statutory definition can be of no assistance, it can also be said that this issue has come before the courts on several occasions, and so the common law might be better placed to provide some degree of clarity into this area.  The law in this area can in fact be traced historically back to the case of Yewens v Noakes, in which it was held, inter alia, that an employee was required to be under the control of their employer.[6]  Bramwell LJ, giving the leading judgment, couched the notion of control within the context of the speech of the time, noting that “a servant is a person who is subject to the command of his master as to the manner in which he shall do his work”.[7]

This same test of “control” was later applied by the Court of Appeal in Walker v Crystal Palace Football Club[8] to ascertain whether or not a footballer, employed by the club, was entitled to compensation upon injury under the Workmen’s Compensation Act 1906 (applicable only to those who were considered “employed”).[9]  As Duddington argues, these tests, based on “control” are based in the prevailing social practices of their time, and as time has gone on, the need for the law to develop and create a more nuanced understanding of who or what an employee is has been recognised by the courts.[10]  Perhaps for this reason, the courts eventually sought to develop alternate tests.  One such test, known as the “organisation” test, was developed by Lord Denning MR in Stevenson Jordan & Harrison Ltd v McDonald & Evans, and asked, simply, whether or not the individual was “integrated into the business” organisation, rather than being an accessory to it.[11]  Clearly, whilst the test has some benefits in terms of it being simple to apply at the time (and allowed many “professional” individuals such as NHS doctors and others to be recognised as employees despite having a significant degree of autonomy over their own operations),[12] there remains a degree of subjectivity as to what constitutes “integration”.[13]  As such this test would be very difficult to apply in the modern world in which a great degree of variance is seen between workers, some of whom work at home, others who operate within an organisation for shorter periods and so on.  In other words, the distinction between contractor and employee (especially part-time employees or those on flexible contracts) is lost by such a test.

In apparent cognisance of the difficulties with creating any single unified test to determine who was an employee, the courts eventually came to the conclusion that the most effective method of dealing with this question was to develop what became known as the “multiple test”.  This was first set out in the famous case of Ready Mixed Concretes (South East) Ltd v Minister of Pensions and National Insurance[14], in which McKenna J ruled that a court should consult a variety of factors in order to develop a balanced view of whether or not a worker was an employee or contractor.[15]  To determine whether or not a “contract of service” (or employment) exists according to this test, the court must ask itself, whether the individual in question agreed to provide their service in consideration for a wage, whether the individual agreed, expressly or impliedly that in the performance of that work they would be subject to the other party’s control, and that “the other provisions of the contract are consistent with its being a contract of service”.[16]  As can be seen, the first two elements of this test are relatively self-explanatory, with the need to provide labour in exchange for a wage being described later in Nethermere (St Neots) v Taverna & Gardner as being the “irreducible minimum of obligation” without which no contract can exist.[17]  The third element however, is much more difficult to gauge.  McKenna J, seeking to assist in the formulation of when this would be satisfied, gave five examples, or questions that could be looked at (such as whether the worker provided their own materials, whether they had to provide their own goods, whether they used their own tools for the work, and whether the individual’s own transport for example).[18]

Ultimately, it is argued by this essay that this “mixed” test too is rather circular in nature, and dependent upon the subjective opinion of the court on any given day as to whether the sum of the questions asked adds up to a contract of service or not.  What the Ready Mixed approach gains in flexibility therefore, it loses in predictability; the multiple test is itself open to quite significant degrees of subjectivity, as it is in essence a balancing exercise, in which the court is required to sum up the entirety of the course of conduct of a worker and to weight these according to the court’s own judgment. 

These difficulties arguably became much more pronounced in the post-Thatcherite years, in which a greater degree of casual or contract work was engaged upon.[19] In response to these difficulties, the courts have gone on to create ever more nuanced  tests, such as the “mutuality of obligations” test.[20]  This approach, set out in Montgomery v Johnson Underwood Ltd[21], explains that in every contract of employment, there is a mutuality of obligations not otherwise found in more casual contracts, including a “promise to employ, and a promise to be employed”.[22]  In Carmichael v National Power plc,  the House of Lords held that the test was exclusionary, meaning that if it was not shown, the worker would be self-employed, or a contractor.[23]  This has been upheld by the Supreme Court in later cases such as in Autoclenz Ltd v Belcher and others, and it can be said from this that it is now clear that a failure to show a mutuality of obligation will be fatal to the claim that one is an “employee”.[24]

This causes many in the modern work environment the same problems that were previously faced by casual manual labourers for example from the 1950s onwards.  This test therefore, whilst it does help identify who is, and who is not “employed” is also a test which is likely to be revised again in the future when social pressure becomes too great to resist.[25]  Already, there are those who suggest that the Supreme Court in Autolclenz provided the road-map ahead for such a revision of the law in this area, as the Court in that case held that the determination should look beyond the mere terms of the agreement to consider the parties relative bargaining power for example.[26]  This is something which is likely to be a very important legal battleground in the future, as many casual workers are likely to argue that they are economically unable to resist “employers” imposing contracts upon them which appear, at first glance, to lack a mutuality of obligation.  In many ways therefore, the clarification of the distinction between “employee” and self-employed contractor made clear in Carmichael might be said to work in the favour of employers and against employees, as employers can now be aware of what they need to do to ensure that their workers are not classed as employees and so subject to statutory protection under the ERA 1996 for example.[27]

 

Conclusion

As can be seen, the law in this area is a story of constant evolution and change as the courts have had to seek to ensure that the law was fit for purpose when deciding what “employment” is in the face of ever-changing market and technological conditions.   This essay has concluded that the law following the introduction of the mutuality of obligations test is now clearer than it has been in the past.  However, it might also appear to be less favourable to workers (partly as a result of this clarity).  In an age when many more individuals are forced by economic circumstance and by changing work methods to work on a more casual basis, the question of whether or not the law reaches the proper balance in protecting workers whilst granting flexibility to employers, is again open to question.[28]

 

Bibliography

Table of Cases

Autoclenz Ltd v Belcher and others [2011] UKSC 41

Carmichael v National Power plc [1999] 1 WLR 2042 (HL)

Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318

Nethermere (St Neots) v Taverna & Gardner [1984] ICR 612

Ready Mixed Concretes (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497

Stevenson, Jordan & Harrison Ltd v McDonald & Evans [1952] 1 TLR 101

Walker v Crystal Palace Football Club [1910] 1 KB 87

Yewen v Noakes (1881) 6 QBD 530

 

Table of Legislation

Employment Rights Act 1996

Workmen’s Compensation Act 1906

 

Secondary Sources

Adams Z, ‘Labour Law and the Labour Market: Employment Status Reconsidered’ (2019) 135 LQR 611

Cabrelli D, Employment Law in Context: Text and Materials (1st edn OUP 2014)

Clarke L, ‘Mutuality of Obligations and the Contract of Employment: Carmichael and another v National Power plc’ (2000) 63 MLR 757

Duddington J, Employment Law (2nd edn Pearson 2007)

Kelly D and others, Business Law (2nd edn Routledge 2014

Lockton D, Employment Law (4th edn Cavendish 2006)

Marson J, Beginning Employment Law (1st edn Routledge 2014

Prassls J, Humans as a Service: The Promise and Perils of Work in the Gig Economy (1st edn OUP 2018)

Smith I, Baker A, Smith & Wood’s Employment Law (11th edn OUP 2013)

 

[1] Ian Smith, Aaron Baker, Smith & Wood’s Employment Law (11th edn OUP 2013) 1

[2] ibid

[3] Employment Rights Act 1996

[4] James Marson, Beginning Employment Law (1st edn Routledge 2014) 53

[5] s230(1) Employment Rights Act 1996

[6] (1881) 6 QBD 530

[7] ibid (Bramwell LJ)

[8] [1910] 1 KB 87

[9] Workmen’s Compensation Act 1906

[10] John Duddington, Employment Law (2nd edn Pearson 2007) 58

[11] [1952] 1 TLR 101

[12] David Kelly and others, Business Law (2nd edn Routledge 2014) 447

[13] Deborah Lockton, Employment Law (4th edn Cavendish 2006) 21

[14] [1968] 2 QB 497

[15] ibid (McKenna J) 515

[16] ibid

[17] [1984] ICR 612

[18] Ready Mixed Concretes (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497

[19] David Cabrelli, Employment Law in Context: Text and Materials (1st edn OUP 2014) 80

[20] Linda Clarke, ‘Mutuality of Obligations and the Contract of Employment: Carmichael and another v National Power plc’ (2000) 63 MLR 757, 757

[21] [2001] EWCA Civ 318

[22] ibid

[23] [1999] 1 WLR 2042 (HL)

[24] [2011] UKSC 41

[25] Jeremias Prassls, Humans as a Service: The Promise and Perils of Work in the Gig Economy (1st edn OUP 2018)107

[26] Zoe Adams, ‘Labour Law and the Labour Market: Employment Status Reconsidered’ (2019) 135 LQR 611, 633

[27] Employment Rights Act 1996

[28] Jeremias Prassls, Humans as a Service: The Promise and Perils of Work in the Gig Economy (1st edn OUP 2018)107