Business Law and Practice notes - BPP Law School - High Distinction Level notes!
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Employment law is a mixture of contractual & statutory rights
The employment relationship is largely governed by the employment contract between the
employer and the employee
Many issues therefore involve the application of the common law principles of contract law.
The employment contract & employment relationship is now controlled by statutes (many have derived
from EC law
E.g.: The minimum pay (National Minimum Wage Act 1998)
How long they can be required to work (Working Time Regulations 1998).
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Employees, independent Contractors & workers -
Independent contractors – set up their own business on their own account & provide services for others
under a contract for services. Regarded as self-employed and have no employment relationship with
those for whom they perform services.
Will invoice his customers
Incur own expenses
Deal with tax affairs directly with HMRC
Employees – usually required to work regular hours on tasks set by the employers, at a set location for a
fixed salary.
Generally receive the usual employee benefits
The question of whether the individual is an employee or independent contractor is important for a
number of reasons. The answer to this question will determine the following:
1. Whether the individual has employment status and is therefore entitled to certain statutory
employment protection rights
2. From whom HMRC should be seeking to recover money for tax and NI contributions.
3. Whether a business may be held vicariously liable for an individual's actions (on the basis that
he/she is an employee).
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Who is an employee?-
S230(1) ERA ‘96 - an employee is an individual who has entered into, or works/worked under a contract
of employment.
But as courts look to substance, not form, this is quite unhelpful – so there are common law tests to
determine if an individual is an employee
, the personal service test;
the control test;
mutuality of obligation test; and
other factors – economic reality and integration tests.
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The personal service test-
Considers whether the individual must perform work personally. If the individual has a right to send a
substitute to perform the work in their place this may negate employment status.
The Tribunal will consider if the right to substitute is fettered in any way (e.g. does the substitute
have to be selected from a list that the employer has pre-approved?).
The Tribunal will also look at whether the right to send a substitute has actually been exercised
in practice.
-
The control test-
Looks at the level of control an employer has over the individual’s work pattern.
To what extent does the employer control who does the work?
Does the employer control what work is done e.g. does he control the order in which jobs or
tasks are undertaken?
What control does the employer have over where the work is done?
Does the employer have control over when the work is done and the number of hours worked?
Can the employer control how the work is to be performed?
If you arrive at the conclusion that the employer has very little control, this will tend to point away from
an employment relationship existing.
The mutual obligation test-
The employer should be under a duty to provide work and the individual under a duty to accept and
then perform the work when given it. The expression ‘employer’ is used in this context as meaning the
person to whom the services are being provided and not the ‘employer’ in the legal sense of an
employer/employee relationship.
Other factors – economic reality and integration tests-
Court should account for all aspects of a person's work activities
Additional factors taken into account under this test include:
Whether the individual is integrated into the workforce;
Whether the individual bears a degree of financial risk;
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