2. Text for reading. Contracts of Employment The Contract for Service and the Contract for Services

A contract for service gives rise to the relationship of employer and employee, whereas the contract for services is between an employer and a self-employed person, an independent contractor.

The distinguishing criteria

The original nineteenth-century test was based on the actual control exercised by the employer and was replaced by one focusing on the control of work environment. In Garrard v. Southey (A.E.) and Co. and STC Ltd [1952] two employees of electrical contractors working in a factory were paid by the contractors who alone could dismiss them, but were supplied with materials, tools and plant by the factory's occupiers and supervised by their foreman. The factory occupiers owed a duty of care to them as employer and employee.

A more complex series of tests has evolved for distinguishing between employees and independent contractors. In Market Investigations v. Minister of Social Security [1969], the court identified significant factors including (i) the degree of control of the employer; (ii) the prospect of profit or risk of loss by the employee; (iii) whether the employee is regarded as part of the organisation; (iv) the source of materials and equipment used for the work; (v) the tax situation and the position with regard to national insurance contributions; (vi) the parties' own view of the relationship; and (vii) the traditional structure of the occupation.

The position of casual workers

The situation is more complex for casual or quasi-casual workers, including home, seasonal and catering workers.

In O'Kelly and others v. Trusthouse Forte plc 1983, the company had a fluctuating need of banqueting staff and relied on casual workers, some of whom had priority status as 'regular casuals', and there was sufficient work to ensure full-time employment for the regulars. The plaintiffs were dismissed for trying to organise a union. The following factors indicated employee status: (i) the plaintiffs had no personal investment in the business; (ii) they were under the company's direct control; (iii) they were part and parcel of THF; (iv) they were furthering the business of THF; (v) their uniforms and equipment were supplied by THF; (vi) their work roster was fixed and permission was required to take time off; (vii) they were governed by a disciplinary and grievance procedure; and (viii) they could benefit from a holiday pay or incentive bonus scheme based on past services. Against this, four factors indicated self-employed status: (i) they were not entitled to notice; (ii) they could refuse to work on a particular roster; (iii) THF had no obligation to provide work or pay them; and (iv) both sides believed they were independent contractors. The tribunal found they were independent contractors, the key factor being the lack of mutual obligation.

The position of temporary workers

Under the Employment Agencies Act 1973, agencies are required to give temporary workers written statements of the terms and conditions of employments and to deduct tax and national insurance contributions from their pay and to state whether they are employed by the agency or are self-employed.