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Employment Status: A Question of Control

In determining whether a person is employed or self-employed, there are a number of tests. The starting point is whether there is mutuality of obligation. Without it, there can be employed status. Even if is there it does not automatically mean the person is employed, but it is an important indicator. Mutuality means that the employer must offer work and pay for it; the employee is required to carry out the work.

In addition, where there is an implied contract, the employee has to do the work in person and cannot send someone else as a substitute.

Employed people have certain statutory rights (some are subject to qualifying conditions),for example, statutory sick pay and holiday pay. Self-employed people have no such rights and have to take financial responsibility for these.

There are also a control test and that’s the subject today. Employees are usually subject to a fairly high level of control, though this does vary depending on the circumstances in each case. Lone workers will be subject to lower day-to-day control than workers who are together on the site and it is usually the case that the more senior a worker is the more autonomy he or she will have in the way work is delivered. Each case turns on its own facts.

The control aspect is relatively rarely the subject of litigation so the recent Court of Appeal decision in Troutbeck SA v White and Todd is of interest.

The facts were as follows. Ms Todd and Mr White worked for a company, Troutbeck SA, as caretakers/managers of a house and small farm estate. The premises were part-owned by Troutbeck, though Ms Todd and Mr White were largely left to themselves to run the place.

Their contract contained a number references to ‘employment’, but there were no fixed hours of work. Upon termination of the contract, Mr White and Ms Todd complained that they had been unfairly dismissed.

The company disputed that there was a dismissal and that Ms Todd and Mr White were not employed because there was little or no day-to-day control. The original tribunal agreed, with Troutbeck.

On appeal, the Employment Appeal Tribunal (EAT) found that a lack of day-to-day control was not conclusive. It said that It had to look at the entire relationship, starting with the written agreement.

The company appealed and the Court of Appeal has now upheld the findings of the EAT. The Court said that the employment tribunal had been wrong to treat the low level of day-to-day control of the company over the activities of the claimants as precluding an employment relationship. If looked at holistically, the relationship between the parties suggested and employed arrangement. It also concluded that there was enough control over Ms Todd and Mr White to preclude them being independent contractors.

Referring to the agreement, the Court of Appeal noted that both parties had signed a document which referred to ‘this employment agreement. This set out their intentions.

Employment contracts are the foundation stone of the workplace, so it’s important to ensure that your intentions re clearly expressed. If you need help with employment contracts get in touch.

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