Keenan and Riches’BUSINESS LAW

Particular cases examined

In the majority of cases there is no difficulty in deciding

whether a person is employed or self-employed. For ex-

ample, factory employees, office clerical staff and agricul-

tural workers are clearly employees. Garage proprietors,

house-builders and dry cleaners are contractors inde-

pendent of the members of the public who use them.

As we have seen, a particularly compelling example

comes from a comparison between a chauffeur and a

person who owns and drives his own taxi. The chauffeur

is an employee; the taxi-driver is an independent con-

tractor. Suppose, then, that Fred is employed as my

chauffeur: I would have enough control over him to ask

him to drive more slowly in a built-up area. In the case

of the taxi-driver, I would not have (or even feel I had)

the necessary control to insist on a change of speed.

Contract of service or for services –

why distinguish?

First of all, because of the existence of vicarious liability,

an employer is liable, for example, for damage caused

to another by his employee’s negligent acts while that

employee is acting in the course of his employment, that

is, doing his job, but not otherwise.

Second, the rights and remedies provided by employ-

ment legislation, such as the Employment Rights Act

1996, are available to an employee, but not all of them

are available (but see below) to the self-employed. We

shall be looking at these rights and remedies more

closely later in this chapter.

Rights of non-employees

Certain statutory rights are given to persons who are not

employees in any sense of the word. Rights in respect of

racial and sex discrimination are enjoyed by job applic-

ants, contract workers and partners. Job applicants also

have the right not to be refused a job on the grounds of

trade union membership or because they do not belong

to a union.

An employer may also be liable for sex discrimination

after employment has ceased. The Employment Appeal

Tribunal (EAT) has ruled that the Sex Discrimination

Act 1975 covers acts of discrimination, e.g. by failure to

give a reference, even though the relevant acts took place

after the claimant ceased to be employed (see Cootev

Granada Hospitality Ltd(1999)).

Part 4Business resources

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employment and all the usual hallmarks of employment
are present. Certainly, the almost blanket ban introduced
by earlier cases such as Buchanv Secretary of State for
Employment(1997) has been considerably eroded. The
cases have generally arisen where the company has gone
into an insolvency procedure and cannot pay wages and
salaries. In such an event employeesmay make a claim
for outstanding remuneration on the state through what
was the Department of Trade and Industry (DTI). How-
ever, the DTI was replaced by a new organisation: the
Department for Business, Enterprise & Regulatory Reform
(BERR) in June 2007.
Recent case law gives employed controlling share-
holders and directors a better chance of doing that. Fee-
paid directors could not claim. In any case, controlling
shareholders and directors would seem to satisfy the
organisation test set out below and come in as employ-
ees under that.

The organisation test

Later on a test called the ‘organisation or integration’
test was brought in because the control test was not
really suitable for employees who were highly skilled.
There was a possibility that, even though there was a
lot of general evidence of employment, such as PAYE
deductions from pay, an employer would not be vicari-
ously liable for the acts of a highly skilled employee, such
as a doctor, or, really, anyone qualified and experienced
and acting in a professional field, if that employer could
convince the court in his defence that he did not have
the necessary control of the skilled person.
This has not been possible because of the organisation
test put forward by Lord Denning in Stevenson, Jordan
& Harrison Ltdv Macdonald & Evans Ltd(1952). He
decided in that case, in effect, that an employee is a
person who is integrated with others in the workplace
or business, even though the employer does not have a
detailed control of what he does.

Independent contractors –

self-employment

The main feature here is the absence of control or mean-
ingful supervision which can be exercised by those who
buy the services of an independent contractor by means
of what is called a contract for services.