This research paper seeks to consider the extent to which control is a factor in determining whether a worker is an employee or independent

contractor. Introduction Since the second half of the 19th century the courts have been concerned with the question as to whether or not a contract of service exists. This has led to the evolution of case law on the subject. Leaving aside the legal requirements for a contract to exist, the courts often had to decide whether a contract was either a contract of service or a contract for services. An employee works under either a Contract of Service or Contract of Employment. Firstly a contract of employment/service is an agreement whereby one person agrees to employ another as an employee and the other agrees to serve his employer as an employee. Under a contract of service, the employer must contribute to National Insurance; subject to tax deductions, and provide relevant statutory benefits such as annual leave, sick leave etc. for its employees engaged. On the other hand an independent contractor works under a contract for services. A contract for services is an agreement whereby a person is engaged as an independent contractor, such as a self-employed person or vendor engaged for a fee to carry out an assignment or a project for the

company. Under such a work arrangement, there is no employer-employee relationship. Although such contracts exists, it is sometimes difficult for contractual workers to determine their status should they be injured on the job, or should another significant episode takes place which triggers investigation into what and if any damages could be awarded to them. Under a contract of service, the relationship between the parties was considered to be that of master andservant whereas, under a contract for services, it was principal and agent (todayclient and independent contractor is probably more appropriate). What can be done? Tests have been developed through case law for determining whether a person is an employee, and therefore if they are employed under a contract of service or employment, or whether they are self-employed and engaged under a contract for services. These tests enable the courts to distinguish between the two types of contract, so although for the majority of people at work, there is no problem in deciding whether they are employees or independent contractors, there may be occasions on which the distinction is not clear-cut. (Mann et. al) The Control Test

The control test was developed by the courts as a simple test that looks purely at the amount of control the employer exercises over the worker.
(Kelly et. al.)

In applying the control test, one is required to find out if the person who is to be regarded as the employer controls the employee or servant. Control extends from what an employee does to how it is done. The reason in finding out the above was that an independent contractor might be told what to do, but has discretion as to how to do the work. This information obtained had problems as the sole test applied by the courts. (Mann et. al.) In Walker v Crystal Palace Football Club [1910], Walker was employed as a professional footballer with the defendant club. It became necessary to decide whether he was employed under a contract of service or a contract for services. It was held that he was employed under a contract of service (or employment) because he was subject to the control of his master in the form of training, discipline and method of play.(Kelly et. al.) One method of applying the control test was that it was interpreted strictly, it resulted in skilled and professional people being categorized as independent contractors, which at time when there were limited employment rights proved to be a problem for the persons injured as a result of their negligence at work. As a result the courts saw fit to develop another test which would reflect this development in the workplace by recognizing that skilled and professional people could also be employees. (Kelly et al.)

The Integration Test The Integration test was developed to counter the deficiencies of the control test. In applying the integration test, one needed to ascertain whether the employee was integrated into the employers business. If this could be proven then there was an existence of a contract of employment. The use of this test was confirmed in Stevenson Jordan and Harrison Ltd. v MacDonald and Evans [1952], in which Lord Denning stated that, A person is an employee if that person is an integral part of the business. This is of more use than the control test because it overcomes the problem of skilled people having control over their own work. However, it does not help in the example of an electrician if a company is carrying out a refurbishment project, completing the rewiring is an important part of the overall process. If there is no other electrician, the person who has been hired could be seen to be an integral part of the business (under Lord Dennings ruling). This does not necessarily mean that he has become an employee. (http://www.hmrc.gov.uk/manuals/esmmanual/esm7010.htm) In Whittaker v Minister of Pensions and National Insurance [1967], Whittaker was employed as a trapeze artist in a circus. She claimed industrial industry benefit as a result of an accident sustained at work. Initially, this was refused, on the basis that she was not an employee of the circus. She was, however, able to show that, for at least half of her working day, she was expected to undertake general duties other than trapeze work, such as acting, and working in the ticket office. It was held that her general

duties showed that she was an integral part of the business of running a circus and was therefore, employed under a contract of employment. This test was successfully used in the cases of Cassidy v Ministry of Health [1951] to establish that highly skilled workers, such as doctors and engineers, can be employed under a contract of employment and may even have a type of dual employment however employers could be tempted to avoid various aspects of the statutory provisions by categorizing employees as self-employed when this was not always the case. For example employers could avoid tax and national insurance. As a result the next test was designed. (http://www.hmrc.gov.uk/manuals/esmmanual/esm7010.htm)

The Multiple Test The multiple test was introduced and used when it is not possible to focus on one particular aspect of the working relationship to determine whether or not there is an employment relationship. On that basis, the most commonly used test in the courts today is the multiple test. In using the multiple tests the courts look at every aspect of the relationship as described, and use them to determine the nature of that relationship. This is best illustrated in the case of Ready-Mixed Concrete v Minister of Pensions [1968] ER 433 - In determining whether or not the drivers were self-employed the courts looked at a number of aspects of their employment.
In this case, it was decided that the drivers were independent contractors, as there

were factors which were inconsistent with the existence of a contract of employment, for example, the ability to provide a replacement driver if the need arose.

Despite the extensive control that the company had over the worker, he was held to be self-employed. In his judgment MacKenna J said that "a contract of employment exists if these conditions are fulfilled: (i) The servant agrees that, in consideration of wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, express or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service." As for control his Lordship held this "includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in so doing it, the time when, and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and his servant. The right need not be restricted Mackenna J further said that An obligation to do work subject to the other partys control is a necessity though not always a sufficient, condition of a contract of service. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract, and the person doing the work will not be a servant. The judges task is to classify the

contract ... He may, in performing it, take into account other matters besides control. (http://www.hmrc.gov.uk/manuals/esmmanual/esm7010.htm) Although there is no exhaustive list, the factors to be considered include control; personal service; equipment; financial risk; basis of payment; mutuality of obligation; holiday pay, sick pay and pension rights; part and parcel of the organization; right to terminate a contract; opportunity to profit from sound management; personal factors; length of engagement and intention of the parties. In the tax case of Hall v Lorimer [1993] the High Court Mummery J. made the following comment which was quoted with approval by Nolan J in the Court of Appeal In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that persons work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The

details may also vary in importance from one situation to another.

(http://www.mom.gov.sg/employment-practices/employment-rights-conditions/contract-ofservice-termination/Pages/contracts-of-service-and-termination.aspx)

Another case that supports the multiple test is Bank voor Handel en Scheepvaart N.V. v. Slatford[1953] 1 Q.B. 248, Denning L.J. said, at p. 295: "The test of being a servant does not rest nowadays on submission to orders. It depends on whether the person is part and parcel of the organization." In United States of America v. Silk [1946] 331 U.S. 704, the question was whether certain men were "employees" within the meaning of that word in the Social Security Act, 1935. The judges of the Supreme Court decided that the test to be applied was not "power of control, whether exercised or not, over the manner of performing service to the undertaking," but whether the men were employees "as a matter of economic reality."

(http://www.hmrc.gov.uk/employment-status/index.htm)

The Economic Reality Test The Economic Reality test has proven to be most adequate, in that it only requires evaluation of the factors which are inconsistent with the existence of a contract of employment. It is important to note that there are no exhaustive lists of inconsistent factors. The courts will treat as irrelevant the fact that there is a contract in which someone is termed independent contractor when the other factors point to him or her being an employee. This is illustrated in Market Investigations Ltd. v Minister of Social Security [1969] using the Economic Reality Test in which Market Investigations employed Mrs. Irving as an interviewer on an occasional basis. The court considers not only the amount exercised over a part-time worker but also the question of whether she was in business on her own account. The court cited the case of Ready Mixed Concrete in which MacKenna J stated that a contract of service existed if three conditions were fulfilled.
(http://www.cipd.co.uk/NR/rdonlyres/108A3BBD-2FE8-49C0-91BBF4DA2CED961F/0/9781843981886_sc.pdf)

The Mutual Obligations Test Another test is the mutual obligations test which looks at the nature of the relationship between the employer and the person in question, and considers whether there is sufficient mutuality for an employment

relationship to exist. There are two levels of mutuality to consider that is whether there is an obligation to provide work (and an obligation to carry out that work); and whether there is a promise of future work (both a promise to provide it [employer] and a promise to carry it out [employee]). (Mann et. al.)

This test definitely helps us to understand the definition of an employee more clearly, but there are still some difficulties. In helping examine further, in the Carmichael v National Power [2000] IRLR 43, Mrs Carmichael and her colleague worked at a power station as visitor guides. The work was parttime. There was some correspondence between the ladies and National Power that the ladies relied on as a contract of employment. The relationship between the ladies and National Power was described as that of a station guide on a casual as-required basis. National Power argued, therefore, that the work was on a casual basis and that there was no obligation to provide work. On that basis the relationship was not one of employer and employee. It was also noted that on seventeen (17) occasions Mrs Carmichael had been unable to work, and her colleague had been unable to work on eight (8) occasions. On none of these occasions had National Power taken any disciplinary action.
(http://www.hmrc.gov.uk/employment-status/index.htm)

The employment tribunal agreed that there was no employment relationship. Eventually, the

Court of Appeal overturned this decision. National Power appealed against this decision and the House of Lords found in favour of the employer so the relationship in this case was not one of employer and employee.

The basis for the decision was that the relationship, as described, failed the first stage of the test of mutuality. National Power had no obligation to provide work, and Mrs Carmichael and her colleague had no obligation to work even if there was work available. A decision that seems to contrast with this is that of Cornwall County Council v Prater [2006] EWCA Civ 102 - Prater was a teacher working with children who were unable to attend school. She worked under a series of contracts, with no obligation to take a further contract once one had been completed and the Council was under no obligation to offer her any future contracts.