EMPLOYMENT LAW
Employees, Workers and Independent Contractors
Determines:
- Entitlement to statutory employment protection – unfair dismissal and redundancy.
- Who HMRC should approach for tax and NI – employee will be though PAYE.
- Whether a business can be held vicariously liable for employee’s actions.
Employees:
- S.230(1) Employment Rights Act 1996: Individual who works under a contract of employment.
- Court will look at substance, not whether labelled employment contract / contract for services.
- 4 common law tests:
o Personal Service Test: Must perform work personally. Ability to send substitute may negate
employment status – but Tribunal will look if right to substitute is fettered or exercised in
practice.
o Control Test: Will look at extent to which employer controls who does the work, what work is
done, where and when the work is done and how it is performed.
o Mutuality of Obligation Test: Employer under duty to provide work and employee under duty to
accept and perform it.
o Economic Reality and Integration Tests : All aspects of a person’s work activities – integrated into
workforce, bear a degree of financial risk, regular wage or invoice, able to work for other, subject
to a disciplinary or grievance procedure, holiday / sick pay, wears a uniform and who pays tax.
Worker: EC derived legislation extends some employment rights to this hybrid category, including Working
Time Regulations 1998, National Minimum Wage Act 1998 and Equality Act 2010
- S.230(3): Individual who has entered into or works under a contract of employment or any other
contract (express or implied) where they have undertaken to perform the services personally.
Independent Contractors: Set up business on own account and provide services under a contract for services –
incur own expenses and financial risk, handle own tax. Regarded as self-employed, no employment
relationship.
CONTRACTUAL - Wrongful Dismissal
- Arises where employer has dismissed an employee in breach of terms of employment contract.
- Tribunal’s only concern is if correct contractual requirements have been complied with.
- Notice must also meet a statutory minimum (unless summary dismissal for very serious breach):
- Employed between 1 month and 2 years: 1 weeks’ notice.
- Employed for 2 years+: 1 weeks’ notice for each year up to 12 weeks.
- Claim can be made in County Court, High Court or Employment Tribunal (limit of £25k in ET).
- Concern breach of contract no limitation period of 6 years applies in courts.
- Claims in ET must be made within 3 months subject to mandatory early conciliation procedure under
ACAS – 1 month to settle where time is stopped.
- Remedy is damages for breach of contract so employee must mitigate loss by seeking new
employment, if they find a job or fail to seek a job damages will be reduced.
- Employer can make payment in lieu of notice – no breach of contract if detailed in contract and pay
this in place of notice (payments are taxable).
STATUTORY - Unfair Dismissal
Will deduct or increase by 25% depending on it employee or employer has breached ACAS Code.
- Only available to employees.
- Must be made to ET, then E appeals T, then C of A then SC.
Employees, Workers and Independent Contractors
Determines:
- Entitlement to statutory employment protection – unfair dismissal and redundancy.
- Who HMRC should approach for tax and NI – employee will be though PAYE.
- Whether a business can be held vicariously liable for employee’s actions.
Employees:
- S.230(1) Employment Rights Act 1996: Individual who works under a contract of employment.
- Court will look at substance, not whether labelled employment contract / contract for services.
- 4 common law tests:
o Personal Service Test: Must perform work personally. Ability to send substitute may negate
employment status – but Tribunal will look if right to substitute is fettered or exercised in
practice.
o Control Test: Will look at extent to which employer controls who does the work, what work is
done, where and when the work is done and how it is performed.
o Mutuality of Obligation Test: Employer under duty to provide work and employee under duty to
accept and perform it.
o Economic Reality and Integration Tests : All aspects of a person’s work activities – integrated into
workforce, bear a degree of financial risk, regular wage or invoice, able to work for other, subject
to a disciplinary or grievance procedure, holiday / sick pay, wears a uniform and who pays tax.
Worker: EC derived legislation extends some employment rights to this hybrid category, including Working
Time Regulations 1998, National Minimum Wage Act 1998 and Equality Act 2010
- S.230(3): Individual who has entered into or works under a contract of employment or any other
contract (express or implied) where they have undertaken to perform the services personally.
Independent Contractors: Set up business on own account and provide services under a contract for services –
incur own expenses and financial risk, handle own tax. Regarded as self-employed, no employment
relationship.
CONTRACTUAL - Wrongful Dismissal
- Arises where employer has dismissed an employee in breach of terms of employment contract.
- Tribunal’s only concern is if correct contractual requirements have been complied with.
- Notice must also meet a statutory minimum (unless summary dismissal for very serious breach):
- Employed between 1 month and 2 years: 1 weeks’ notice.
- Employed for 2 years+: 1 weeks’ notice for each year up to 12 weeks.
- Claim can be made in County Court, High Court or Employment Tribunal (limit of £25k in ET).
- Concern breach of contract no limitation period of 6 years applies in courts.
- Claims in ET must be made within 3 months subject to mandatory early conciliation procedure under
ACAS – 1 month to settle where time is stopped.
- Remedy is damages for breach of contract so employee must mitigate loss by seeking new
employment, if they find a job or fail to seek a job damages will be reduced.
- Employer can make payment in lieu of notice – no breach of contract if detailed in contract and pay
this in place of notice (payments are taxable).
STATUTORY - Unfair Dismissal
Will deduct or increase by 25% depending on it employee or employer has breached ACAS Code.
- Only available to employees.
- Must be made to ET, then E appeals T, then C of A then SC.
