Introduction
The UK Employment Rights Act attempts to set various criteria or tests to differentiate a contract of service from a contract for service. Further, the Act grants certain rights to the first category of services that are not available to the latter. Typically, a contract of employment gives rise to an employer-employee relationship. It assigns various duties to the employer over the employee. For instance, an employer is bound by law to provide healthcare insurance to the employee. He or she may be vicariously liable for torts committed by the said employee in the normal course of duty. Conversely, a contract for employment gives rise to an independent contractor situation where the recipient of the services does not assume the role of an employer in any way. Therefore, an independent contractor cannot benefit from the rights conferred under the Employment Rights Act. Hence, I agree that it is important to establish whether a contract is a contract of service or a contract for service. The following discussion sets out the reasons why this distinction is essential.
The Need to Understand the Applicable Laws
The two types of service discussed above are governed by different bodies of laws. For the employer-employee relationship, the Employment Rights Act of 1996 primarily governs it. This law provides a set of duties and responsibilities that an employer must perform to create an effective working environment for workers. Besides, the Act sets out rights, which employees are entitled to at the workplace. On the other part, the Law of Contract Act and the common law principally govern the contract for service. Given that different laws apply to either scenario, it is important for parties involved to understand the legislation that governs the nature of the agreement they undertake. Specifically, the employer-employee scenario creates important duties that the employer must perform for the smooth performance of the employment agreement.
The Need to Understand the Laws and Rights Applicable
The most significant reason why the difference between an employee and an independent contractor is relevant relates to the body of rights that apply to each scenario. As explained above, some rights are available to employees but not an independent contractor. Thus, an employer must be aware of these rights to avoid contravening them in the first place. For instance, employees are entitled to a paid annual leave, as well as sick leave. Additionally, employees have the right to maternal and paternal leave, as prescribed under the employment rights Act. Importantly, an employer must be aware of the laws that set out these rights. Failure to grant employees these civil liberties often attracts penalties on the part of the employer (Dimian 2014). On the other hand, no special rights are granted to independent contractors. Therefore, an employer must be aware of the class of workers that ought to enjoy the rights prescribed under the UK employment laws.
The Aspect of Vicarious Liability in Employer-Employee Relationship
Another reason why the distinction is important concerns the extent of liabilities applicable in either scenario. In the case of the employer-employee relationship, the liability for the actions of employees is extensive, owing to the controlling nature of the employer-employee connection. In other words, the high level of control exercised by the employer limits the options of an employee regarding what he or she can do at any given point. For this reason, the Employment Rights Act appreciates that most actions by the employees emanate from instructions by the employer (Hersch & Shinall 2016). Thus, if such actions result in a tortuous liability, the employer should be held vicariously liable. Employees do not enjoy the freedom to turn down assignments from the employer since this privilege may be interpreted as insubordination. However, under the contract for service, parties set out clearly in the terms how any possible liability would be addressed. Given this scenario, it is important for the distinction to be made between workers who deserve protection from liability arising in the ordinary course of their work.
The courts perform a test to determine whether the employer should be held liable for the wrongful act committed by the employee. Such a test seeks to establish whether the employee performed the act during the ordinary course of duty. The rationale for such a test is that if an employee is not performing his or her duties normally at the time when the wrongful conduct occurs, then the employer must not be held accountable (McClelland 2012). One of the tests that the court performs is the close and direct connection investigation. In other words, there should be a close link between the employee’s job description and the harmful act occasioned.
Vicarious liability arises on the part of the employer-based on several presumptions under the common law. First, employers obviously have powers compared to their servants (Golynker 2015). As such, they are capable of paying for injuries that occur because of employee’s negligence. Furthermore, an employer can easily access insurance cover. In certain cases, he or she may have an influence over the legal process. Thus, he or he is better placed to shoulder the employee’s liability. Thirdly, it is the common understanding that the employer ordinarily benefits from the actions of the servant. Hence, he or she should also be willing to suffer detriment from the wrongful conduct of the same servant. Ultimately, by holding the employer vicariously liable, he or she is likely to become more proactive in preventing similar occurrences in the future.
Appreciating the Statutory Duties of Employers
Employees deserve a level of protection that is not necessary for independent contractors. The English employment laws recognise employees as vulnerable, given their subordinate position subject to that of their employer (McClelland 2013). For instance, employers exercise a wider authority over their employees. As such, employees are not entirely responsible for their actions during the ordinary course of duty. They (employees) perform their duties strictly as instructed by the employer. On the other hand, independent contractors experience minimal interference or guidance from the recipient of the services. For this reason, the recipient of services cannot be liable for the actions of the independent contractor whom they do not control in the first place. In contrast, an employee’s act or omission can be connected back to the employer-provided the said employee acted as per the employer’s instructions.
The Employment Rights Act establishes certain statutory duties that employers need to fulfil in line with the employee-employer relationship. For instance, employers are required to make certain deductions on behalf of their employees. They include Pay As You Earn (PAYE), medical cover, and other contributions (Nyombi 2015). However, these deductions are not provided for in the case of independent contractors. For this reason, an employer will need to understand the nature of the contract he or she has entered with the other party because it determines whether such deductions arise. This awareness will help the employer to avoid disputes in the instances where he or she fails to make deductions when they are actually provided for (McClelland 2012). Liability may include being found guilty of defaulting tax deductions, as provided for by the Employee Rights Act. As well, employees may sue the employer for failing to make the necessary deductions for their benefit. On the other hand, an employer who fails to exercise due diligence may find that he or she has extended certain allowances to independent contractors to the detriment of the employer.
Employers are required to exercise a special duty of care in the course of dealing with their employees. For instance, employees who are harmed in the course of work are to be compensated by the employer. This duty of care extends to all aspects of the employees’ wellbeing at the workplace, including health and safety. While this duty emanates from a legal perspective, employers can take advantage of it to build successful relationships with their employees. In turn, this case would promote employee productivity while reducing the rate of employee turnover. Conversely, the recipient of services under a contract for service does not owe a special duty of care to the independent contractor, beyond what the common law considers ‘reasonable’ (Golynker 2015). For instance, independent contractors are not entitled to health insurance by the employer. Besides, the employer cannot address physical injuries suffered by an independent contractor since he or she is not required by the law to guarantee their safety. Therefore, a proper distinction between a contract of service and a contract for service helps the employer to decide the class of workers to whom he or she must exercise the said duty of care.
The employer’s duty of care extends to providing employees with adequate training and feedback regarding their performance. The need for training is particularly essential where employees are engaged in activities that are considered dangerous. For instance, operating machinery that could cause employees harm can be classified as a dangerous working environment (Dimian 2014). For this reason, liability may arise where it can be shown that the employer did not afford the requisite training to his or her employees regarding the safety measures to be observed when operating in such an environment. Besides, training should be conducted to prepare employees for potential promotion. While promotion is not a right, employees are entitled to be considered for promotion. Employers must ensure that employees are qualified and prepared to undertake the occasional promotion interviews conducted by the company.
Employees are required to work for a specific number of hours each day, with at least a single rest day every week. Additionally, the employer must allow employees to rest during public holidays, failure to which a statutory breach arises. The employment laws discourage servitude-like practices at the workplace. The law targets to protect vulnerable classes of workers, for instance, domestic workers and migrant employees (Nyombi 2015). The UK employment laws are consistent with the provisions of the 1919 conventions (No.1) of the International Labour Organisation (ILO) regarding working hours. The convention sets the recommended number of working hours per day at eight and forty per week (McClelland 2012). Servitude is a punishable offence under the Employment Rights Act. Conversely, independent contractors do not have their working hours set by any law. Rather, they have the terms of the contract. Thus, independent contractors dictate their working hours, provided the work is completed within the period agreed upon by the parties.
Further, the duty of care extends to issues of harassment at the place of work. An employer is required by the law to protect his or her employees from harassment and unfair targeting that amounts to discrimination. In particular, sexual harassment and bullying are highly discouraged under the Employment Rights Act. An employer is required to have an anti-harassment policy in place. As well, there should be an efficient mechanism for employees to report harassment and an assurance that they shall not be victimised for so doing. An employer who fails to provide the said anti-harassment policy is likely to contravene the Employment Rights Act. Thus, he or she is liable to compensate injured employees. In contrast, in the case of an independent contractor, there is no requirement by the employer to provide an anti-harassment policy, regardless of the number of contractors. Therefore, a proper distinction between a contract of service and a contract for service helps the employer to promote an effective working environment by creating a harassment-free atmosphere.
Conclusion
A contract of service and a contract for service are fundamentally different. While the former establishes an employer-employee relationship, a contract for service only creates an agreement for the performance of work. Under the employer-employee relationship, the employer is required by the law to perform certain duties to create an effective working environment for the employee. Conversely, these duties are not present under a contract for service. Parties operate only as agreed upon regarding the contract. Therefore, a distinction of the nature of service is most important to the employer who may then avoid liability for breach of the Employment Rights Act.
Reference List
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Golynker, O 2015, ‘Family-friendly reform of employment law in the UK: an overstretched flexibility’, Journal of Social Welfare & Family Law, vol. 37, no. 3, pp. 378-392.
Hersch, J & Shinall, J 2016, ‘Something to talk about: information exchange under employment law’, University of Pennsylvania Law Review, vol. 165, no. 1, pp. 49-90.
McClelland, J 2012, ‘A purposive approach to employment protection or a missed opportunity?’, The Modern Law Review, vol. 75, no. 3, pp. 427-436.
McClelland, J 2013, Rediscovering the contract of employment for non-standard workers in the UK common, Web.
Nyombi, C 2015, ‘A response to the challenges posed by the binary divide between employee and self-employed’, International Journal of Law and Management, vol. 57, no. 1, pp.3-16.