The employment status of individuals is becoming increasingly important. The incorrect
categorisation of a person providing services can have serious cost implications for the
"employer" following the recent significant increases in legal rights enjoyed by
employees as opposed to the self-employed. In addition, rights have recently been
introduced under the Working Time Regulations 1998 and the National Minimum Wage Act which
provide rights to "workers"’ Even though this phrase covers a wider
population than the definition of "employee", the genuinely self-employed are
still excluded from such provisions, so reinforcing the importance of establishing an
individual’s intended legal status at the outset of the relationship between the
parties.
The recent decision of the House of Lords in the case of Carmichael and another v
National Power plc has highlighted some of the issues relevant in assessing that
status. Mrs. Carmichael and a colleague responded to an advertisement inviting
applications for the post of Station Guide at Blyth power station. The advertisement
stated that "employment will be on a casual as required basis". The Applicants
were successful in their application and were offered work by letters which both
Applicants signed. The letters stated ‘Station guide - casual employment…. I am
pleased to accept your offer of employment as a Station Guide on a casual as-required
basis.’
Thereafter both ladies worked as Guides often for 25 hours a week or more. They were
provided with a uniform and a company vehicle where necessary, although they did not
receive sick pay or holiday pay and were not covered by any pension arrangements or
National Power’s disciplinary or grievance procedures.
The Applicants complained to the Employment Tribunal that they had not been given a
written statement of the particulars of employment as required for employees under section
1 of the Employment Rights Act 1996. The Court of Appeal had concluded that they were
employees and so were entitled to such a statement. National Power appealed against the
finding that they were employees. The issue before the House of Lords was therefore
whether the Applicants were employees or self employed. They held that the Applicants were
not employed under a contract of employment and therefore were not entitled to a written
statement of terms and conditions of employment. Key factors which the Lords considered
included the lack of "mutuality of obligation" in that Mrs Carmichael and her
colleague were under no obligation to accept work and National Power was under no
obligation to provide it. On a large number of occasions the two ladies had not been
available for work but were not subjected to any disciplinary action as a result. The
Lords took that to mean that as and when work arose they were free to accept or reject it.
Lord Hoffman also gave useful guidance as to the proper approach to constructing contracts
of employment namely:-
- Where the contract is contained in writing alone, construction is a matter of law (and
so may be subject to appeal).
- Where the contract is partly (or not at all) evidenced in writing but is supplemented by
the parties’ conduct then the Tribunal may examine the subsequent conduct to infer
what the parties believed their obligations and rights under the contract (including their
legal status) actually to be. This was a question of fact for the Tribunal and so not
appealable.
Users of the services of individuals should be warned that it is entirely possible for
two separate Employment Tribunals to reach conflicting decisions on the same facts,
neither of which can be the subject of an appeal to the EAT. In Collett v R Miller Ltd
& N Miller Ltd the Applicant worked as a labourer for the Respondent. He received
no sick pay or holiday pay and was treated for Inland Revenue purposes as self-employed.
After March 1997 the Respondent ceased trading. The Applicant made a claim for a
redundancy payment and the question before the EAT was whether the Applicant was an
employee (and so entitled to such a payment) or self-employed (and not so entitled). The
complication for the EAT was that different Employment Tribunals had earlier reached
opposite conclusions on the point in cases involving the very same "employer"
and other staff who had been on the same terms as Mr Collett. The EAT made it clear that
whether an Applicant is an employee, a worker or genuinely self-employed, is essentially a
decision of fact for the Employment Tribunal and in the absence of a misdirection in law
or a perverse decision it will not therefore be open to the EAT to interfere with it. Not
very reassuring!
The lesson to be learnt from the Carmichael and Collett decisions is therefore to
ensure that so far as possible all documentation and the user’s subsequent treatment
of the individual supports the intention that the worker is self employed.
"Employers" should seek advice at the outset to ensure that such documentation
includes clear declarations as to the legal status of the relationship to minimise the
risk of costly legal wrangling later (in the Carmichael case references were made
to "employment", which will not have assisted National Power in their
submissions that the Applicants were self-employed!) – even though the documentation
is not by itself conclusive as can be seen from National Power’s eventual success.
Care should be taken that nothing is done during the course of the relationship (such as
disciplining such a worker for failure to attend work) which could change the status of
the worker by creating an implied mutuality of obligation between the parties.
Whilst the Carmichael case was limited to a claim for a written statement of
employment particulars the implications for casual workers will apply wherever a casual
worker seeks to rely on rights granted by statute to employees and/or workers but not to
the self-employed. It is therefore crucial that employers review both existing and future
contractual arrangements to ensure that the question of status is as clear as it can be.
STOP PRESS
Another six draft statutory instruments have been issued by the Home Office in relation to
the Data Protection Act 1998 which is due to come into effect on 1 March 2000. A further
four are due to be published. The Regulations cover areas such as the processing of
"sensitive data".
