The Connection Between Employment Law and Employment Status

This essay comprises in extent the variant kind of relationships that may be found in the organisations. Particularly, the contrasts in regulation and common law between a worker, an employee and independent contractors are advised and the variant kind of agreement that command the employment relationship are protected.

Aylott (2018) stated that ‘’Employment law is meant to protect and to support employers to improve their relationship with their employees and to gain further competitive advantage.’’

Employment Status determines the rights and obligations a worker might possess. Employment Status is an agreement under which a worker is engaged to perform for an employer. Emir (2016) asserts there is myriad of reasons for ‘’stressing the importance’’ of this distinction between a contract of service and a contract for services due to tax, liability, health and safety regards. It is an important matter because if a worker is misclassified there could be risks of financial liability on the part of the employer.

Firstly, in reference to Section 295(1) of the 1992 Act and s 230(1) of the Trade Union and Labour Relations Consolidation Act 1992, the law clearly indicates that an ‘‘employee is an individual who has entered into or works under a contract of employment’’ Employees are an inside member of an organisation, a general agent of a firm. It is salient to establish the distinction between an employee and an independent contractor as an employee is entitled to any rights provided by the Employment Rights Act 1996. Moreover, the employment contract is salient as it provides employees with enough information on the terms and conditions of their employment. For instance, within the employment contract, important details will be written regarding, job description and job duties in which the worker and the employee will be doing, the location where they will be working could also be indicated, also pension scheme could be cited in it as well as how much they will be remunerated (Nairns, 2011, p.109). Furthermore, the written employment contract should also include the names of the employee and employer, the date of the start of the employment, the number of hours of work the worker would be entitled to achieve, terms and conditions relating to payments given incapacitated due to injury and sickness, holiday pay, etc. 

Secondly, in reference to Section 296(1) a worker is said to be ‘an individual who works under a contract of employment, or under any other contract whereby the worker undertakes to do or perform personally any work or services for another party to the contract who is not a professional client of his’. Having said that, a worker occurs to have fewer rights than an employee, however, the worker has more legal rights than an independent contractor (Daniels, 2019, p.43). Daniels (2019, p.46) asserts that the Employment Rights Act 1996 (ERA 1996) has set out rights in order for all employees who continually works for an employer for a minimum period of one month to be eligible to receive a written statement of initial employment particulars, no later than two months of commencing employment.

Thirdly, an independent contractor is a third-party business contracted by the firm. It could also be someone who is in the business for himself or herself, someone who will try to get clients and managing their expenses. In some situation, the independent contractor does not depend on any party but itself, in short, some could see an independent contractor as a business person. By contrast, an employee works for an organisation and are provided of an employment contract which includes fixed working hours and duties.

Independent contractor has the power to negotiate and decide the price of the work when to be achieved.

Another key thing to remember is that independent contractors are in the business of their own account and provides duty works under a contract for services. Whilst employees work under a contract of service. Therefore, there are considered to be ‘largely excluded from employment rights’. According to the case Pimlico Plumbers v Smith (2018), performing as a freelance plumber, Smith was classified as a worker since the company Pimlico Plumbers LTD had a strong control over the worker who was required to wear the company’s uniform as well as driving a van with the company’s logo and was given set of hours.

That has been said, it is crystal clear that an employee or worker needs to know what employment status they will be classified to for them to benefit entirely the rights they are entitled to. Although employees have more rights than workers, it is still advantageous for workers to know the employment rights as they also have legal rights which include, the National Minimum Wages, remunerated holiday, payslip as well as eligible to protection against unlawful discrimination and whistleblowing, and they should not be treated unfairly if the worker works part-time.

It is vital to be aware of what the individual’s status is, for instance, employees and independent contractors does not possess the same tax status.

One of the main reasons why is that employees pay tax under Schedule E and the Pay as You Earn (PAYE) scheme, which means the employer has the responsibilities to deduct the tax from the employee’s pay and needs to transfer into the Inland Revenue (Nairns, 2011, p.111). By contrast to the employee status, the independent contractor's tax status is pay tax under the schedule D which forbids independent contractors to set off tax against expenses and they may pay tax in arrears as well as paying VAT onto services.

Furthermore, in terms of National Assurance, in comparison to independent contractors paying class 2 and are entirely responsible for the payment of their contribution, employees pay Class 1 which assess on how much they are remunerated. Moreover, contributions in which are deducted by employers who also contribute on the behalf of the employee.

Not to mention, only employees are entitled to make claims in case of unfair dismissal, redundancy pay or maternity pay, which in this case, those rights do not apply to independent contractors and workers. However, few of the legal rights can only arise after two working years such as claiming for unfair dismissal to the tribunal and redundancy pay. Having said that, if employees believe they are not benefiting their full legal rights, due to that employees could eventually take their employers to Employment Tribunal. Most commonly, employees wishing to make claims against their employers will reach out to ACAS (Advisory Conciliation and Arbitration Service), which consist on advising employees and employers on many different levels of aspects within the workplace and the legislations it follows (ACAS). The reason why workers and employers are reaching to ACAS first is that ACAS would provide the worker or employers who claim to get many rapid outcomes. Likewise, it helps to find ways of conciliation between worker and employer without involving the Employment Tribunal.

Tribunals are indeed the most advantageous platform for legislations to be enforced such as the National Minimum Wage Act 1998 as well as the Working Time Regulations 1998 (House of Commons. A Framework for Modern Employment. 2017 p.13). To avoid challenges in finding out the employment status of the individual, tests have been developed along the years to determine the status of the worker whether they are classified as employee, worker or independent contractor. However, the decision to classify them as such is down to the court and the Employment Tribunal.

Control test, was the only test to exist from the nineteenth century, it comes from the case of Yewens v Noakes (1880). This test takes over the worker by controlling the time the worker spent doing the duty, the duty itself and the given instructions using their skills and expertise.

On the other hand, the independent contractor could be hired for one main task and to will be told specifically what to do if recruited, for instance (cleaners, plumbers, etc.).

Integration test, which is also known as the organisation test, which consists on how well the worker integrates into the organisation of the employer (Nairns, 2011, p.113). However, this also reveals that skilled people have control of their work, in that situation employers have no control of the individual so the worker will not be classified as an employee.

Multiple test, the modern approach, is known to be one of the most common test used in the courts today. In doing so, the court is said to observe at every aspect of the relationship as described to employs them to identify the nature of that relationship (Daniels, 2019, p.41).

This test was first used in the case of Ready-Mixed Concrete v Minister of Pensions (1968), which demonstrated the drivers to be independent contractors even though they had ordered from their employers however indications showed the drivers were responsible for maintenance and running costs of the lorries, driver could potentially employ a substitute driver, drivers could own more lorries and they were paying their own tax and NI contributions.

Mutual obligations test could also be used alongside the multiple test by the courts. It is about whether the client or agency are obliged to arrange work, and whether the client is obliged to take it or not. The employment contract will not be given if none of those subjects is identified by the court, in fact, the accord has to be met from both parties.

In expression of legal prospect, employees appreciate more common law employment rights for instance the responsibility to sustain an association of shared belief and assurance, or the current duty of care that all employers owe to all employees. Employers have primary duty under health and safety law than is the case with independent contractors. Employers are lawfully responsible for the actions of their employees while they are at work. This has significance both in health and safety law. However, Emir (2016, p.51) determines employer will not normally be responsible for the wrongful acts (civil wrongs) committed by independent contractors. Employers are lawfully required to provide insurance for themselves against responsibility towards employee. In the absence of a written contract that states otherwise, employers are deemed in law to be the owners of any copyright relating to work carried out by their employers in the course of their employment. This is not the case with independent contractors. An employer owes a duty at common law to take reasonable care for employee safety, whereas these duties do not normally apply with respect to independent contractors.

This obligation incurred by the employer to employees under the health and safety work Act 1974. The regulations made under the Act are more extensive than those owed to independent contractors. Fundamentally, this signify that a independent contractor who is hurt whilst at work possibly unable to seek any damages from the employer and also will be unable to seek industrial injuries aid or sick pay.

To conclude, it is crucial for employers to do their part to prevent legal disputes by knowing the basics of employment law and employment status of the individual. Employees, workers and independent contractors have different legal rights from one another. Many employment safeguarding measures are only reserved for employees, however, there are some which use the broader significance of worker, inclusive of National Minimum Wage ACT 1998 and Working Time Regulations 1998. The character of the common law study used to organise the employment status of workers has empowered employers to efficaciously obviate workers from attaining protective worker rights.