The test for deciding whether a worker is an employee is whether s/he works (or worked) under a contract of service or apprenticeship. A contract of service is defined in case law as a contract of mutual obligation, with the employee being required to perform the service personally and the employer having an element of control of the work.
Can there be an employment contract if the worker is not subject to the employer's day-to-day control? According to the EAT, there can be, in a case governed by what the ‘employer’ considered a commercial, not an employment contract, although the agreement provided for annual leave and referred to itself as an "employment agreement".
In that case, the alleged employer denied that the agreement under which the Claimant worked was a contract of employment and the Claimant therefore had no right to claim for unfair dismissal and unpaid wages. The ET agreed with the employer. In holding that the agreement was not a contract of employment, the ET placed emphasis on the absence of actual day-to-day control over the work done by the Claimant.
The EAT allowed the Claimant’s appeal. It ruled that the key question is not whether in practice the worker has day to day control of his own work. All aspects of control are relevant. An employee may be left in charge and trusted to exercise his own judgment. The EAT concluded that the employer retained a right of control to a sufficient degree. The ET's approach was wrong in law. There were strong indications in the agreement that the employer retained a sufficient degree of control, even though substantial day-to-day responsibility was placed on the Claimant’s shoulders. There was a right to control as matter of contract. The EAT added that, although the label chosen by the parties to describe their working relationship is not necessarily the correct conclusion on the legal nature of the relationship, in this case both parties signed a document referring to it as "this employment agreement" and that was an expression of their intentions confirming the objective analysis of the legal position.
Also of note is the fact that the Claimant did work elsewhere did not preclude an employment relationship with the employer nor did the fact that the pay arrangement was informal and was operated without deductions by the employer for PAYE and National Insurance.
If you would like advice about how the issues in this note apply to your situation, please contact Tony Brown on 01225 740097 or by e mail to firstname.lastname@example.org
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