ACCA F4 - Corp and Business Law (ENG)

124 8: Contract of employment  Part C Employment law

Study guide

Intellectual level

C Employment law^

1 Contract of employment

(a) Distinguish between employees and the self-employed 2

(b) Explain the nature of the contract of employment and common law and

statutory duties placed on the employer and employee

2

Exam guide

Questions may be set that require you to identify the differences between the employed and the self-

employed and the implications to an individual of being classed as one or the other.

You may also be tested on the various duties that employees and employers have to each other.

1 What is an employee?

It is important to distinguish between a contract of service (employment) and a contract for services

(independent contractor). Each type of contract has different rules for taxation, health and safety

provisions, protection of contract and vicarious liability in tort and contract.

A contract of service is distinguished from a contract for services usually because the parties express the

agreement to be one of service. This does not always mean that an employee will not be treated as an

independent contractor by the court, however; much depends on the three tests.

 Control test

 Integration test

 Economic reality test

A general rule is that an employee is someone who is employed under a contract of service, as

distinguished from an independent contractor, who is someone who works under a contract for services.

However, it is important to note that some statutory provisions apply to 'workers' and this term is wider

than 'employees' and includes those personally performing work or services unless they are truly self-

employed. Examples of workers include agency workers, short-term casual workers and some freelancers.

Workers benefit from some basic employment rights and protections although these rights are generally

not as wide ranging as someone who is employed.

An employee is an individual who has entered into, or works under a contract of employment.

A contract of employment is a contract of service or apprenticeship, whether express or implied, and (if it

is express) whether it is oral or in writing.

A worker is any individual who works for an employer, whether under a contract of employment, or any

other contract where an individual undertakes to do or perform personally any work or service.

In practice this distinction depends on many factors and it can be very important to know whether an

individual is an employee or an independent contractor. The courts will apply a series of tests.

Primarily, the court will look at the reality of the situation. This may be in spite of the form of the

arrangement.

The various tests applied by the courts in determining whether someone is employed or self-employed

could easily be tested in any type question.

Key terms

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