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International Laws On Employment Status

Employment status generally means the classification of an employment relationship which decides how individuals are titled to legal rights. Determination of Employment status is becoming major issue because of changing industrial relations. Various working relationship exists between individual employers and prospective employers and such kind of relationship must be changed into various categories with the perspective of allocating individual rights and protection.

The main reason for development of employee status is that it helps in determining employee’s eligibility for certain legal rights. Basically there are three kinds of employment statues:
  1. Employee – these employees are working under a agreement of contract
  2. Self-employed- these are independent contractors.
  3. Workers – their status lies between employment orself-employment.
Employees are entitled to the maximum rights under Employment law. Workers have less rights as compared to employees but they have freedoms than employees. The self-employed bears their own risks but they enjoy total freedom. ET’s are only available to employees and workers forresolving of disputes relating to rights.

Definition of employee:
as per section 230of Employment Rights Act 1996, “Employee” means an individual who has entered into the work under a contract of employment

Where there is need to know about employment status?
Such issues generally occur when there is dispute between employers and individuals.


Modern work practices such as freelancer, contractors, interns, agency workers, zero hour contracts are bringing issues in finding of employee status. Every organization need to know difference between employment status and employment rights.

Difference between rights according to employment status
The rights available to employees are as follows:
  • Request for flexible working
  • Paid time off in case of disputes of trade union
  • Protection against unfair termination from job
  • Payment for maternity leave.
  • Rights to Employees And Workers
  • National Minimum Wages
  • Paid annual leave
  • Health and safety protection
  • Protection against discrimination
  • Protection from unlawful deduction from salary or wages
  • For Self Employe
  • No such rights are provided to Self Employed
  • Common Law Test
  • Employee status

The courts entrenched various tests for identification of presence of contract of employment or contract or service.

One of the important cases regarding the same is Ready Mixed Concrete (South East) Ltd VS Minister of Pensions And National Insurance [1968] 2 QB 497

In this case it was found out that what are the characteristics of contract of employment and what are the characteristics of contract or service.

The characteristics of contract of service as per the said case law are as follows:
  • The individual has to work personally for the payment
  • Mutuality of obligations is present between the parties.
  • There is consistency in the provisions related to contract.
  • The control of the work lies in the hands of the employer.

Worker status
According to section 230 of Employment Rights Act, 1996, all employees should be classified as workers but all the workers cannot be classified as employees. In section 230(3)(b) the list of workers is who are not classified as employees is given.

Limb worker is the worker who works personally under the contract. These workers do not meet the eligibility criteria for employee status.

Criteria for worker status

The person must work under a contract.

The worker must give personal service.

There is no control of employer for the work.

Employment status and Tax
Employment status is important for determination of tax. The laws related to tax are different for employed or self-employed or partnership firm. It is very important to differentiate individual running their business and or company or incorporated business because different tax laws are applicable for them. For example, employees are liable for income tax and incorporated business are liable for corporation tax.

Current position of employment status in UK
The main problem in the labour law is imposition of employment rights because of uncertainty of employment status.

In UK recently section 230 was enforced in Employments Rights Act, 1996 which is connected to the rise of Gig Economy by which new work plans have raised which disapprove ideas of existence of employee’s rights. Basically, the safeguards given to the individuals at the place of work varies on their status of employmenti.e., worker or employee or self-employed. Still finding the rights of employee according to employment status is very challenging due to popularity of GIG Economy and changing work arrangements.

Some Areas of difficulty in Law of Employee Status

Zero Hour Contracts

People who are engaged in zero-hour contracts are not sure of their rights. People have fear of losing of their earnings.

Freelancer,Consultant, Contractors, Interns
The main problem faced in this group is that of uncertainty of work and sometimes only particular task is given which is not included in any type of employment.

Agency workers
The difficulty faced in agency workers is that who is liable for the employment rights.

Taylor’s report
Taylor’s report comprises of recommendation of four sets
First set of Taylor’s report deals with categorization of intermediate workers into dependent contractors.
The second set of Taylor’s says that the level of tax for self-employed or employed must be closer to the parity.
The third set deals with restoring of the rolled-up holiday pay.
And the fourth set says that there is requirement of new varieties of rights must be introduced which allows an individual to ask to work on fixed hours or to work on direct contract.

The report of Taylor was focused on the importance of flexibility of employment status. The report also focuses on existence of different framework for building the employment status in order to find out the employment rights and tax which need to be paid .

Taylor also recommended that employee status test should be conducted. he also recommended government for developing new legislations which gives clarity of working relationships of an individual.

Response of the Government
Government agreed to the report of the Taylor especially findings which were related to the sources of confusion in employement status of an individual. In Good Work Plan(2018) government has strengthens the rights of workers as per Taylor’s recommendation.

Conclusions of the Court
Importance of case Law

Courts found the tests for finding out employee status of an individual , whether the individual is employed , worker or self employed. Courts also checks the length, nature , pay and benefits of the employees.

Due to lack of clarity the court has came with the test which will help in determination of individual’s employment status.

These kinds of test were used in past case laws including the case of

Ready Mixed Concrete( South East) Ltd VS Minister of Pensions And National Insurance [1968]. In past times courts has attempted for demonstration of greater flexibility in determining the employement status along with establishing of a new test Mutuality Of Obligation. As per section 230(3)(b) it is compulsory that there must be existence of mutuality of obligations.

Sometimes worker status is beyond the fundamental contractual principle of consideration.

Case law of Byrne Brothers (Formwork) Ltd vs Baird (2002),
In this case the court said that there must be some form of personal service as well as right to change performance that can change worker status.

One of the famous case in this regard is Pimlico Plumber vs Smith

In this case courts have developed the flexibility in the determination of worker status. In the case Sir Terrence Etherton MR said the issue regarding obligation to do work in person will depend upon the contractual agreements. There are two ways in determination of worker status. First way is that the appellant can argue against a fraudulent contract and the second is appellant can argue saying that the contract is unforceable.

Case of Aslam vs Uber [2015]
In this case the court observed that the case is faintly ridiculous.. the court concluded saying that actuality of situation must not be considered.

Conclusion
There must be development of policies which clarifies the best method for employment tests and which also shows the changes in modern working arrangements between the employers and individuals. The problem of employee status is complex. In case of dispute of individual employee status , intervention of courts can take place in which laws regarding employement plays important role.

Courts have to adapt changes time to time regarding employment status. Labour market is continusoly growing , so there is requirement of flexible legislations regarding employment status. And even the boundary between self employed and employed is complicated.

Clarification of employment status is beneficial for UK Economy for the growth of rising employment rate and ensuring rise in the wages by making sure versatility in the determination of employee status and safeguarding the status of workers. There will be potential of growth with increasing employment opportunities if there will be flexibility in determination of employment status.

Award Winning Article Is Written By: Ms.Daminee Jain
Awarded certificate of Excellence
Authentication No: MA113450055016-14-0521

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