UK: Power Station Generates Heated Argument

Last Updated: 6 January 2000

The employment status of individuals is becoming increasingly important. The incorrect categorisation of a person providing services can have serious cost implications for the "employer" following the recent significant increases in legal rights enjoyed by employees as opposed to the self-employed. In addition, rights have recently been introduced under the Working Time Regulations 1998 and the National Minimum Wage Act which provide rights to "workers"’ Even though this phrase covers a wider population than the definition of "employee", the genuinely self-employed are still excluded from such provisions, so reinforcing the importance of establishing an individual’s intended legal status at the outset of the relationship between the parties.

The recent decision of the House of Lords in the case of Carmichael and another v National Power plc has highlighted some of the issues relevant in assessing that status. Mrs. Carmichael and a colleague responded to an advertisement inviting applications for the post of Station Guide at Blyth power station. The advertisement stated that "employment will be on a casual as required basis". The Applicants were successful in their application and were offered work by letters which both Applicants signed. The letters stated ‘Station guide - casual employment…. I am pleased to accept your offer of employment as a Station Guide on a casual as-required basis.’

Thereafter both ladies worked as Guides often for 25 hours a week or more. They were provided with a uniform and a company vehicle where necessary, although they did not receive sick pay or holiday pay and were not covered by any pension arrangements or National Power’s disciplinary or grievance procedures.

The Applicants complained to the Employment Tribunal that they had not been given a written statement of the particulars of employment as required for employees under section 1 of the Employment Rights Act 1996. The Court of Appeal had concluded that they were employees and so were entitled to such a statement. National Power appealed against the finding that they were employees. The issue before the House of Lords was therefore whether the Applicants were employees or self employed. They held that the Applicants were not employed under a contract of employment and therefore were not entitled to a written statement of terms and conditions of employment. Key factors which the Lords considered included the lack of "mutuality of obligation" in that Mrs Carmichael and her colleague were under no obligation to accept work and National Power was under no obligation to provide it. On a large number of occasions the two ladies had not been available for work but were not subjected to any disciplinary action as a result. The Lords took that to mean that as and when work arose they were free to accept or reject it. Lord Hoffman also gave useful guidance as to the proper approach to constructing contracts of employment namely:-

  • Where the contract is contained in writing alone, construction is a matter of law (and so may be subject to appeal).
  • Where the contract is partly (or not at all) evidenced in writing but is supplemented by the parties’ conduct then the Tribunal may examine the subsequent conduct to infer what the parties believed their obligations and rights under the contract (including their legal status) actually to be. This was a question of fact for the Tribunal and so not appealable.

Users of the services of individuals should be warned that it is entirely possible for two separate Employment Tribunals to reach conflicting decisions on the same facts, neither of which can be the subject of an appeal to the EAT. In Collett v R Miller Ltd & N Miller Ltd the Applicant worked as a labourer for the Respondent. He received no sick pay or holiday pay and was treated for Inland Revenue purposes as self-employed. After March 1997 the Respondent ceased trading. The Applicant made a claim for a redundancy payment and the question before the EAT was whether the Applicant was an employee (and so entitled to such a payment) or self-employed (and not so entitled). The complication for the EAT was that different Employment Tribunals had earlier reached opposite conclusions on the point in cases involving the very same "employer" and other staff who had been on the same terms as Mr Collett. The EAT made it clear that whether an Applicant is an employee, a worker or genuinely self-employed, is essentially a decision of fact for the Employment Tribunal and in the absence of a misdirection in law or a perverse decision it will not therefore be open to the EAT to interfere with it. Not very reassuring!

The lesson to be learnt from the Carmichael and Collett decisions is therefore to ensure that so far as possible all documentation and the user’s subsequent treatment of the individual supports the intention that the worker is self employed. "Employers" should seek advice at the outset to ensure that such documentation includes clear declarations as to the legal status of the relationship to minimise the risk of costly legal wrangling later (in the Carmichael case references were made to "employment", which will not have assisted National Power in their submissions that the Applicants were self-employed!) – even though the documentation is not by itself conclusive as can be seen from National Power’s eventual success. Care should be taken that nothing is done during the course of the relationship (such as disciplining such a worker for failure to attend work) which could change the status of the worker by creating an implied mutuality of obligation between the parties.

Whilst the Carmichael case was limited to a claim for a written statement of employment particulars the implications for casual workers will apply wherever a casual worker seeks to rely on rights granted by statute to employees and/or workers but not to the self-employed. It is therefore crucial that employers review both existing and future contractual arrangements to ensure that the question of status is as clear as it can be.

STOP PRESS

Another six draft statutory instruments have been issued by the Home Office in relation to the Data Protection Act 1998 which is due to come into effect on 1 March 2000. A further four are due to be published. The Regulations cover areas such as the processing of "sensitive data".

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