The definition of employee and worker and atypical work patterns

This post is an abridged and modified version of a paper, which I submitted for my masters program. In the previous post I set out the four cardinal principals to be considered in determining whether or not a worker has been unfairly dismissed. One of the necessary qualifications is that the person must be an employee. This paper examines the concept of an employee as well as the concept of a statutory worker in relation to atypical work patterns in the United Kingdom. I must also apologise for some of the formatting but I could not seem to resolve this on the blog

Traditionally the employment relationship has consisted of full time employment with a single employer of an indefinite duration. However as identified in the literature, this pattern of work has changed over the past few decades. There has been a move towards non-standard patterns of work, which has been described as a move towards, ‘essentially temporary, casual or part-time workers’.^[1] There has also been an increase in the use of agency workers^[2] and in ‘quasi-entrepreneurial^[3]’ modes of work. That is to say the workforce has become more flexible^[4].

There has been an attempt respond to these shifting patterns by widening the scope of application of existing employment legislation as well as introducing other statutory instruments.^[5] This paper critically examines the idea of whether or these legislative interventions provide adequate protection to these atypical workers^[6].

Access to rights conferred by protective employment legislation is extended to two categories of workers, namely employees and statutory workers. The statutory definitions of employees and workers are uniform^[7]. I will now examine these definitions and therefore the scope of the protection as it applies to atypical workers.

It is an important feature of protective employment legislation that the definition of who constitutes an employee in employment legislation is not self-contained in the legislative instrument. An employee is defined as ‘someone who works under a contract of employment^[8]’. A contract of employment is not defined in the legislation and in this way is reliant on the common law definition of or tests for an employment.

The common law test for employment has developed over time and has included many different approaches.^[9]  The modern approach has been to apply a multiple test in which a number of factors are considered in order to establish whether someone is an employee or not. The leading case in this regard is Ready Mixed Concrete decision^[10] (RMC). Here the Court of Appeal held that there is a contract of employment contract where:

1.  The service provider is contractually bound to provide personal service in return for remuneration;
2. The service provider agrees that he will be subject to the other parties control to a sufficient degree and;
3. Other provisions of the contract are consistent with it being an   employment contract. 

Following on from the formulation in RMC, the courts have added a number of other necessary if not sufficient conditions of employment^[11]. One of these requirements is the so-called ‘mutuality of obligations’. This requirement is normally understood as meaning that there must be a minimum obligation on the part of the employer to provide work and a minimum obligation on the employee to undertake that work.^[12] The requirement of a mutuality of obligations is a necessary condition of employment.^[13]

The requirement of mutuality of obligations has presented a major obstacle for intermittent workers^[14]in obtaining employment protection. The courts have used this requirement on many occasions to deny such workers employment status.^[15] The problem that mutuality of obligations requirement presents for intermittent workers is that there is normally no on-going obligation to provide work to the work provider and or on-going obligation to accept work. In such circumstances, the courts have held that there is an insufficient mutuality of obligations^[16].

The requirement of mutuality of obligations has also proved to be an obstacle for agency workers in obtaining employment status. The problem can be characterized as follows. Typically the worker has a loose arrangement with the agency in that the agency only undertakes to seek work for the worker. The agency is only the recruiting agent. In such situations, it is often found that there is a lack of mutuality or control between the agency and the worker because there is no obligation to provide on-going work.^[17] It has also been found that because the end user or client does not have any contract with the worker and has no obligation to provide work to and or pay the worker, there is a lack of sufficient mutuality between these parties and as such, no employment relationship^[18]. As such, agency workers often find themselves unable to claim rights granted to employees. This is anomalous because a long term agency worker i.e. an worker that is supplied on a long term basis to a client is but for the fact that they were supplied by an agency, indistinguishable from an employee of the client as is just as dependent and vulnerable as that employee.

The intermittent or flexible service provider faces further difficulties as a result of the way the statutory interventions are structured and which result in limited access to statutory protections.

Firstly there is the problem of continuity of employment. Due to the very nature of intermittent, casual or temporary work, there are breaks in service. This presents problems because in order to gain access to certain rights, there are varying qualifying periods of continuous work or employment that must be met ^[19]. It has been accepted that continuity generally applies in respect of a single employer ^[20]. This means that the genuine casual or agency temporary worker who moves from employer to employer may not ever obtain protection from arbitrary dismissal or redundancy[21].

It has also been held that continuity applies in respect of a single contract of employment,^[22] which exacerbates the problem for most intermittent and temporary agency workers because as it is noted, continuity may be broken by regular but separate contracts ^[23].

The provisions of the Employment Rights Act, which attempt to deal with the issue of continuity, ^[24]are of limited value to the intermittent worker[25].

S 212 deems certain weeks to count in respect of the calculation of continuity of employment even though the worker may not be working. The provision, which is of primary importance, is the temporary cessation of work provision[26]. As pointed out by Davies[27], this provision does not apply if an employer replaces a casual worker with another where the work is on going. It has been held that this does not constitute a cessation of work as contemplated by S 212(3) of the ERA[28]. The remaining provisions of S 212 do not cater for the nature of the intermittent breaks in work that are part of the normal casual or intermittent worker work pattern.

S 218 of the ERA deals with exceptions to the general principle that the cessation of work with one employer brings continuity to an end. However once again these exceptions do not in the main assist intermittent worker because one would imagine that in most cases where causal employees move from one employer to another, these employers are not associated employers.

The continuity of work qualifications is also contained in the Agency Workers Regulations.^[29] The regulations provide agency workers with some protection in that it they are designed to ensure similarity of terms and conditions of employment between agency workers and full time employees of the client. However in order to qualify for protection under the regulations, the agency worker must have been continuously employed for more than twelve weeks.  It has been argued that this qualification as well as other qualifications will mean that only a half to a third of temporary agency workers will be able access these rights^[30].

While the Working Time Regulations^[31] do not have similar qualifying periods in terms of continuity of employment, they do suffer from another problem in respect of flexible or intermittent workers. As a result of regulation 20, important rights do not apply ' in relation to a worker where, on account of the specific characteristics of the activity in which he or she is engaged, the duration of his working time is not measured or predetermined or can be determined by the worker himself'. This is problematic because as pointed out by Smith and Baker, many modern forms of flexible working have some element of unmeasured time^[32]. If for example the home worker contract specifies that a piece of work must be complete by a certain date and contains no specification as to the hours of work, it is possible that various provisions of the regulations would not apply.

One major statutory development in terms of extending protection to atypical work relationships has been the development of the concept of a statutory worker. A number of important rights^[33] have been extended to statutory workers notwithstanding the fact that they may not meet the definition of employees.  A worker is defined as:

‘“worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(a) a contract of employment, or(b)any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;’[34]

Given the problems we have seen in terms of accommodating atypical working patterns within the definition of employees, the success of labour legislation in extending rights to these workers is largely dependent on the ability of worker definition to accommodate atypical working patterns. 

While the concept of the worker is no doubt an improvement on the concept of an employee^[35] in that it creates an intermediate category between an employee and the self-employed^[36], there are significant problems with the definition, which limit its usefulness in this regard.

Firstly, take the first requirement of the definition. This is namely that a worker must render personal services under a contract. In the leading case on the definition of workers, Bryne Brothers v Baird^[37], the court specified that the requirement of a ‘mutuality of obligations’ ala Carmichael also applied to worker^[38]. A right of substitution refers to a contractual right for the service provider to provide another person to work in his or her place on any particular day. Where the contract contains an unfettered right to substitute service, the courts have found that the person is neither an employee nor a statutory worker^[39].

These principles allow the ‘employer party’ to avoid rights afforded to employees or workers by including contractual provisions such as the right of substitution and or clauses negating the mutuality of obligations^[40]. In Autoclenz^[41], the Supreme Court sought to address this problem by allowing a tribunal to depart from the written terms of an agreement in determining the nature of the relationship. However this is limited to exceptional situations and is still dependent on a contractual model^[42]. The definition of an employee or a worker is still linked to a common law contractual analysis^[43] and is handicapped by its relative inability to recognize imbalances in the bargaining positions between worker and employer or service provider and client.

This brings me to the second difficulty with the definition. Even if it is shown that the service provider is obliged in terms of the agreement between the parties to provide personal service, in order to qualify as a worker, it must be shown that the person is not providing services to a client of a self employed contractor^[44].  It seems clear that the definition of worker still excludes the self-employed. This arises both from the requirement of personal service and from the business or undertaking exception contained in the worker definition.

Once difficulty with this aspect of the definition is that it does not define or provide any guidance as to the distinction to be made between a worker and someone who is providing personal service in the form of a business undertaking. The courts have applied a ‘dominant purpose doctrine’ in order to make this distinction. That is to say is the dominant purpose of the contract to render personal service or is it incidental to it^[45]? The court asks this question in order to ‘attempt to identify the essential nature of the contract. Is it in essence to be located in the field of dependent work relationships, or is it in essence a contract between two independent business undertakings’^[46]? This test is vague and is essentially circular and is likely to lead to contradictory results.^[47]

Another difficulty is that the definition of both employees and workers may exclude some service providers who are deserving of some protection. These are the so -called dependent contractors^[48]. It has been recently argued that research shows that there are an increasing number of people choosing work in quasi-entrepreneurial ways. These people do not ‘consider themselves employees but nor are they small business because they do not employ anyone’^[49]. These sorts of workers have the potential to be excluded from the definition of workers as demonstrated by the decision in Smith v Hewitson where persons providing cabin services on a bus were found not to be employees or workers. Although the courts have been more willing to include such workers such as in James and Autoclenz because of the vagueness of the definition of a worker, such service providers are subject to judicial discretion and are not guaranteed protection.

In certain jurisdictions, a certain level of protection is afforded to what are known as dependent contractors^[50]. Dependent contractors are small contractors who are typically dependent on one or two clients’s to sustain their business. Hepple gives an example of certain sales representatives, newsagents and tenants of filling stations belonging to oil companies^[51].  These types of service providers may be excluded from scope of a worker because they operate a business and or because they are not obliged to render services personally^[52]. You may say that these types of service provider should not be protected. However from a dependency or vulnerability point of view, they are in the same position as a worker or employee because they depend on one perhaps two clients for the economic survival.^[53]

It may be argued that fault lies not in the legislation but in judicial interpretations of the definitions contained in the legislation[54].  I think that this is partly right. However it is also evident that there are structural deficiencies in the legislation itself, which has aided and abated the problematic judicial interpretation. Firstly as we have seen an employee remains undefined and to that extent, the legislation must rely on common law principals which is based on a binary contractual conception of work relationships[55] and which therefore encourages the current judicial interpretations[56].  Similarly, the definition of worker in the statutes is defective in that it does not define what is meant by business undertaking carried out by the individual. In the last analysis there seems to be, as far as the definitions of employees and workers are concerned, an inherent flaw contained in employment legislation. As Anderman has argued, it seems that the statutory provisions in question are designed to remedy or supplement the power imbalances in the common law contractual relationship between employer and employee[57]. However at the same time they explicitly rely on the common law conception of the employment contract or in extending those rights. Surely the statutory provisions will suffer from the same deficiencies as the common law.  By relying on the common law contractual approach to understanding the employment relationship, categories of workers who are denied recognition in terms of the contractual approach, will also be denied protection offered by statute.

While it cannot be said that atypical working arrangements are not yet the predominant form of work, these working patterns are increasingly prevalent. As such and to the extent that legislative intentions do not provide protection for these classes of work, the legislation has not kept pace with the times. In this paper, I have shown despite the introduction of an expanded definition of a worker and the resulting expansion of the scope of protective labour legislation, this legislation still does not afford protection to many types of intermittent, agency, or freelancer. In particular small or one-person businesses that may be vulnerable as any other employee or worker are not protected. In addition many important rights such as the right not to be unfairly dismissed or redundancy rights are still not afforded to the intermediate worker.  Moreover I have also briefly shown that even where these atypical work patterns fall within the scope of the current legislation, as a result of the intermittent or flexible nature of their work, they do not qualify in terms of access to important rights.    As such, the artificial worker still remains vulnerable and relatively unprotected. This position is unlikely to improve in the short to medium term given the current government’s position that regulation of work relationships inhibits growth and therefore retards the rate of employment. The evidence in favour of this argument remains to be seen.  

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^[1] Davies, P and Freedland, M Towards a More Flexible Labour Market (Oxford University Press, Oxford 2007) at page 56. In addition Baker, A & Smith, I Smith and Wood’s Employment Law 10^th ed (Oxford University Press, Oxford 2011) at page 56 footnote 69

^[2] It has been reported that as much of five percent of the work force in the United Kingdom consisting of agency workers.  See Wynn, M 'Regulating Rogues? Employment Agency Enforcement and S 16-18 of the Employment Act 2008' 2009 ILJ 64

^[3] Such as Freelancers and one-person businesses.

^[4] See Smith & Baker note 1 above at page 57, footnote 71

^[5] See Davies and Freedland at note 1

^[6] I take atypical workers to include temporary workers, casual workers, agency workers, homeworkers, freelancers and single person businesses providing services to third parties.

^[7] See S 230 and 13 of the Employment Relations Act 1996 (the ERA), S 54(3) of the National Minimum Wage Act 1998, S 2 of the Working Time Regulations 1998, S 10-13 of the Employment Relations Act 1999, Reg 1 of the Part time Workers (Prevention of Less Favorable Treatment) Regulations 2000 and regulation 3 of the Agency Work Regulations SI 2010/93 

^[8] See note 7 above

^[9] See Smith and Baker at page 47-48 and Harvey on Industrial Relations and Employment Law paragraphs 18-33 for a comprehensive discussion of the history of the various tests for employment

^[10] Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. The RMC test for employment was recently affirmed by the Supreme Court as the classic description of employment in Autoclenz Ltd v Belcher and others [2011] UKSC 41, [2011] I.C.R 1157 (SCA) at para 18

^[11] These are summarized succinctly by the court in Autoclenz v Belcher [2011] UKSC 41 at paragraph 19 of the judgment

^[12] Carmichael v National Power plc [1999] 1 WLR; [1999] ICR 226 (HL)

^[13] See Carmicheal, note 15 and Montgomery v Johnson Underwood Ltd & Another [2001] EWCA Civil 318, [2001] ICR 819 (CA), at para 46 and most recently by the SCA in Autoclenz v Belcher and others at note 12

^[14]

^[15] See Carmichael at note 12,  A.C.L Davis ‘The Contract for Intermittent Employment’ ILJ  (2007) 103 and Patricia Leighton ‘ Classifying Employment Relationships – More Sliding doors or better regulatory framework? ‘ (2011) ILJ  5, at page 118 

^[16] For a classic example of this reasoning see Carmichael at note 12

^[17] For example see Bunce v Postworth Ltd t/a Skyblue [2005] IRLR 557.

^[18] See Stephenson v Delphi Diesal Systems Ltd [2003] ICR 471 (EAT). Also see Hewitt-Packard Limited v O'Murphy [2002] IRLR 4 (EAT)   and Costain Building & Civil Engineering Ltd v Smith [2000] ICR 215 (EAT) which are cited by  Elias, J in Stephenson (supra) at paragraphs 40-45

^[19] These include qualification for written particulars, notice periods, redundancy pay and most importantly unfair dismissal rights

^[20] See note 1 Smith & Baker, page 100, fn 298

[21] The qualification period for this right is one year of continuous employment. See 108(1) of the ERA

^[22] See Lewis v Surrey County Council [1998] ICR 982, HL and Heller Bros v McLeod [1987]  1WLR 728 (CA)

^[23] See Heller Bros above note

^[24] See S 212-218 of The Employment Rights Act

[25] Davies, A.C.L’ Casual Workers and Continuity of Employment’ (2006) 35 ILJ 196, page 199-200

[26] S 212(3) of the ERA

[27] See note 58

[28] See Bryne v Birmingham City District Council (1987) 85 LGR 729, [1987] ICR 519 (EAT)

^[29] Agency Work Regulations, SI 2010/93

^[30] Leighton and Wynn ' Classifying employment relationships-more sliding doors or a better regulatory framework' 2011 ILJ 5 at page 8. The authors do not cite authority for this proposition but see Wynn, M ‘ Regulating Rogues: Employment Agency Enforcement and Sections 15-18 of the EA’ ILJ (2009) 64 quoting the Survey of Recruitment Agencies (SORA) 

^[31] SI 1998 (as amended)

^[32] Smith, I and Baker, A ' Smith and Wood's Employment Law' at page 220

^[33] For example rights concerning minimum wages (S 54(3) of the Minimum Wage Act 1998), unlawful deductions from wages (S 13 and 230(3) of the Employment Rights Act 1996), regulation of working time (s 2, Working Time Regulations). See Davidov, Guy ‘ Who is a worker?’ (2005)  ILJ 57, at 59

[34] See S 230 of the Employment Rights Act ,1998

^[35] This follows from the fact as pointed out by Davidov for example, that the set of who constitutes workers is as a matter of the definition, wider than that of an employee

^[36] As noted by Freedman, M The Personal Employment Contract (Oxford: OUP, 2003)   at pages 19-21. For judicial comments see James v Redcats (Brands) Ltd [2007] I.C.R 1066, [2007] I.R.L.R. 296 (EAT) and Autoclenz v Belcher & Others [2009] EWCA Civ 1046 (CA)

^[37] [2002] ICR 667, [2002] IRLR 96 (EAT)

^[38] See note 19 at paragraph 24 of the judgment at page 680. See also Community Dental Centers Ltd v Sultan-Damon [2010] IRLR 1024 (EAT)

^[39] See Community Dental (supra) where the court relied on a lack of an obligation to provide personal service. In addition see judgment of the EAT in Autoclenz at note 26

^[40] See Note 16, Davidov at pg 63

^[41] Autoclenz v Belcha & Others [2011] UK SSC 41, 92011] I.C.R 1157 (SC)

^[42] The court held that a tribunal may depart from the express written terms of the contract in determining the nature of the obligations between the parties where it is clear that the written terms do not reflect what the parties real intent was or is.

^[43] The analysis is still based on what both parties actually agreed to, irrespective of what the practical day-to-day reality is.

^[44] See note 36 James v Redcats (Brands) Ltd  at paragraph 6 and 49, Autoclenz Ltd v Belcher & Ors [2009] EWCA Civ 1046 (CA) at paragraph 10 and Yorkshire Window Co Ltd v Parkes Appeal No. UKEAT/0484/09/SM

^[45] See note 36 James v Recats at paragraphs 52-55

^[46] See note 30.

^[47] See for example the difference in outcome in Smith v Hewitson and Autoclenz Ltd v Belcher & Ors

^[48] This argument is made by Brodie, D in ‘Employees, workers and the Self Employed’ (2005)  ILJ 24 253 at page 254

^[49] Ibid

^[50] See Canada for example. See Marsden, D  ‘Employers, independent contractors and dependent contractors: are dependent contractors entitled to reasonable notice of termination?’ an article online at http://www.lexology.com/library/detail.aspx?g=406963ab-80c8-47c2-829a-333627d31957 accessed on the 5^th January 2012.

^[51] See Hepple, B ‘ Restructuring Employment Rights’ (1986) 15 ILJ 69

^[52] See Community Dental Centers Ltd v Sultan-Damon [2010] IRLR 1024 (EAT)

^[53] See Community Dental Centers Ltd v Sultan-Damon [2010] IRLR 1024 (EAT)

[54] For example see Davidov at note 25 where he argues that if one adopts a purposive interpretation of the term worker, these defects may be rectified. It has also been argued that the courts have misapplied the concept of mutuality of obligations to the worker category based on a misconception that such a requirement is part of the general law of contract. See Davies, A.C.L Davies ‘ The Contract for Intermittent Employment’ ILJ 2007 102, 104

[55] See Freedland, M  The Personal Employment Contract  (Oxford: OUP, 2003)

[56] This point is also made by Douglas Brodie in ‘ Employees, Workers and the Self Employed’ (2005) 34 ILJ 253,

[57] See Anderman, S ‘Protective Employment Statutes and Contracts of Employment’ (2000) 29 ILJ 223, 225