This snapshot taken on 09/07/2011, shows web content selected for preservation by The National Archives. External links, forms and search boxes may not work in archived websites.
May 1998
It was in the 1960's that for the first time employment protection legislation was introduced on a large scale; the Contracts of Employment Act 1963 decreed the provision of a written statement of contractual terms by an employer to each employee; the Industrial Training Act 1964 sought better training provisions and set up Industrial Tribunals; and for the first time the Redundancy Payments Act 1965 provided statutory compensation on dismissal. The Trade Union and Labour Relations Act 1974 strengthened the unfair dismissal provisions and the Employment Protection Act 1975 accorded many new employment protection rights and gave statutory powers to the new Advisory Conciliation and Arbitration Service (ACAS). Industrial tribunals were given several new jurisdictions and a new appeal body, the Employment Appeal Tribunal (EAT), was created. The Equal Pay Act, which was passed in 1970, came into force in 1975 which, with the Sex Discrimination Act, sought to prohibit discrimination against job applicants and employees on the ground of sex and/or marital status. A new Race Relations Act 1976 widened the scope of previous enactments and gave the individual employee the right to complain to Industrial Tribunals. The Employment Acts of 1980 and 1982 sought to restrict the powers of the unions. The Government was also impelled by European Directives to implement the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981 No 1794), which gives employees various rights on take-overs, and the Equal Pay (Amendment) Regulations 1983 (SI 1983 No 1794), which gives women the right to claim equal pay when their work is of equal value to a man's instead of when they perform like work. The Employment Act 1988 gave further rights to trade union members over union funds and the Employment Act 1990 further restricted secondary action by unions. The Employment Protection (Consolidation) Act 1978 consolidated the law on individual employment rights, particularly with regard to unfair dismissal and redundancy. A new consolidation measure, the Employment Rights Act 1996, which came into force on 22 August 1996, has brought together the provisions of the Employment Protection (Consolidation) Act 1978, the Wages Act 1986, the Employment Acts 1980 and 1982 and parts of several other statutes.
Most working people have a contract of employment and are employees. It is fundamental to employment law to identify who is an employee and who is an independent contractor. The Employment Rights Act 1996, section 230(1), defines an employee as "an individual who has entered into or works under a contract of employment". It needs to be established whether there is a contract of service (employee) or a contract for services (independent contractor). The payment of wages and sick pay usually indicates that the person is an employee, since a contractor usually receives a lump sum for the job and bears any risk of ill health himself. These can be difficult questions to determine and in case of query or challenge, Technical Section should be consulted.
An employee will qualify for the following benefits:
Some statutory provisions are extended to both employed and self-employed alike but this is relatively rare. An important distinction is that employees are taxed under Schedule E of the Income and Corporation Taxes Act 1988 (under the PAYE scheme) whereas a different regime applies to self employed individuals.
76.3 Different work relationships
There are also several different work situations to consider:
Office holders - the clearest examples are bailiffs, trade union officers, company directors, police and prison officers and clergymen. The courts have also decided that Justices of the Peace and rent officers fall within the definition of office holder.
Crown servants - they are engaged under or for the purposes of a government department and therefore make it a wider category than civil servants alone. The reason for the separate category is that it is undecided whether they have a contract. Most Crown servants are expressly included in the unfair dismissal legislation although the statute refers to their terms of employment not contract of employment.
Apprentices - an apprenticeship is not only a relationship of employment, since the apprentice agrees to serve his master for the purpose of learning and the master agrees to teach the apprentice. This relationship has now been included in most statutory definitions of employment.
Students, cadets and youth opportunity schemes - some people provide services only to a limited degree ancillary to their main role of learning. For example, a student does not have a contract for services with his college or university. As yet there is no binding authority as to whether persons engaged on Employment Training are employees. An articled clerk in a solicitor's office was held to be employed by the firm and not merely by the partner to whom she was articled (see Oliver v J.P.Malnick & Co. [1983] IRLR 456), since there was a dual system of a training contract with the partnership.
Labour only sub-contractors - particularly common in the building industry is the practice that an individual contractor supplies his labour to complete a job and is paid in a lump sum. Such workers will often move from employment to this form of self-employment regularly. This is done with the acquiescence of the main contractors who thereby have less administration and do not pay secondary national insurance contributions or industrial training levies. However, such labourers cannot claim employment protection rights. Action has been taken regarding the avoidance of tax associated with this type of employment/engagement in that independent contractors are treated as though employed under sections 559-567 of the Income and Corporation Taxes Act 1988. Therefore, payments made by a main contractor to a sub-contractor must have tax deducted at source, except where the sub-contractor has obtained a certificate that he is operating a business covered by adequate insurance and that he has complied with tax requirements over a three year period. The contractor is responsible for Class 1 national insurance contributions.
Outworkers -this is a practice especially common in the garment industry and usually the relationship is that of independent contractor. However, in Nethermere (St Neots) Ltd v Taverna & Garginer [1984] IRLR 240, the two outworkers were found to be employees despite the fact that they had no fixed hours for doing the work brought to their homes and for a number of weeks did no work at all. There was sufficient service for the contract to be a contract of service and the applicants did the same work for the same rate as the employees in the factory.
Casual workers - a detailed discussion of the position of casual workers is found in the Court of Appeal's judgment in O'Kelly v Trusthouse Forte plc ([1983] 3 WLR 605). Although a person may be a "regular casual", there may be no mutuality of obligation if the employer is not obliged to provide work and the workers are free to take alternative work. However, the decision of the Court of Appeal in Carmichael and Another v National Power plc (The Times 2 April 1998) set out that if casual workers agreed with a company to work on an as required basis that involved the company giving a reasonable share of work and the workers performing a reasonable amount of work offered, then they entered into a binding arrangement which amounted to a contract of employment.
Agency workers - it is unlikely that they are employees of the agency especially where they work on a temporary basis.
Workers' co-operatives - the Employment Appeal Tribunal in Drym Fabricators Ltd v Johnson [1981] ICR 274 considered that workers involved in a co-operative which is registered as a limited company are likely to be employees. However, a different decision was reached in the case of orchestras which operated as musical co-operatives, since the musicians were entitled to do other work and effectively provided services in business on their own account (Addison v London Philharmonic Orchestra Ltd [1981] ICR 261).
Partners - a partner is not an employee of his firm.
Merchant seamen - there are some additional requirements which apply to merchant seaman (see the Merchant Shipping Acts 1970 and 1988). Official receivers are advised to consult Technical Section or to take independent advice regarding the contracts of employment of merchant seamen if difficulties are encountered.
Directors - a director is an officer of the company but may also have a contract of service, either an express service agreement or one implied at law. In Albert J. Parsons & Sons Ltd v Parsons [1979] ICR 271, the Court of Appeal held that there was no contract of employment in the case of a full-time working director who was paid by director's fees only and had not been treated as employed for national insurance purposes. In Eaton v Robert Eaton Ltd and the Secretary of State for Employment [1988] IRLR 83, when it was held that the director was not an employee, the main factors in determining the question were identified as :
the use of any descriptive term such as managing director,
whether there was an express contract of employment or a board minute constituting an agreement to employ,
whether remuneration was by way of salary as opposed to a director's fee,
whether that remuneration was fixed in advance rather than paid on an ad hoc basis,
whether remuneration was by way of entitlement rather than being gratuitous, and
the function actually performed by the director.
Whilst a director may be removed from office by a simple majority at a general meeting of the company, this is without prejudice to any contractual rights he may have.
The following special provisions relate to a director's contract:
the company must keep a copy of every written service agreement and a written memorandum of every oral contract, and
a company must not give its directors a contract of employment for more than 5 years unless the company approves it by resolution in general meeting; if no such resolution is passed, any contract must be terminable on reasonable notice by the company. If a new contract is made more than 6 months before the old one expires, the extra period is added to the unexpired period under the old contract.
The term director includes anybody who occupies the position of a director regardless of his title and includes "shadow directors", that is those individuals in accordance with whose directions or instructions the directors of the company are accustomed to act.
Notes: [s318 CA 1985][s319 CA 1985][s741 CA 1985]A contract of employment is constituted by offer and acceptance supported by consideration. In the majority of cases, the offer comes from the employer and is accepted in writing or by the conduct of the employee in arriving for work. There may also be situations in which persons may sue another although no contract of employment has been entered into e.g. if an employee is enticed to leave a job on the promise that he would be offered a better position which does not materialise, he is entitled to damages for breach of warranty or a collateral contract (see Gill v Cape Contracts [1985] IRLR 499). A contract of employment need not be in writing although contracts of apprenticeship must be. Statute has protected the employee by means of the implication of terms into the contract of employment, usually by generalising what is already best practice. The rights to guarantee pay, equal pay, notice and maximum working hours in factories are effected in this way. The contract of employment may change during its course as circumstances alter, even so any variation in contractual terms requires the assent, express or tacit, of both parties and should be supported by consideration.
76.5 Written statement of terms
Most employees are entitled to receive a written statement of the most important terms of their contracts of employment. This statement is not in itself a contract but it may be used to establish what has been agreed in the contract of employment. The statement must be given within two months of starting work and must include the following details:
The statement must also contain details of disciplinary procedures relating to the employee and the employee must be notified of a person to whom he may apply if he is dissatisfied with any disciplinary decision and how such an application should be made. Companies with less than twenty employees are exempt from the obligation to include details of disciplinary procedures in the written statement of terms.
An employee who has not been provided with a written statement of employment by his employer, or who contests the accuracy of the written statement, may refer the matter to an Industrial Tribunal. The Tribunal will determine what particulars should have been given. However, an industrial tribunal has no power to include terms relating to holidays, holiday pay, sick pay, pensions and disciplinary rules where none existed by agreement between the parties since the contract was not required to contain such terms (Eagland v British Telecommunications plc [1993] ICR 644).
Notes: [s1(3)(4) ERA1996][s1(4)(f) ERA1996][s1(4)(e) ERA1996] [s1(4)(g) ERA1996][s1(4)(h) ERA1996] [s3 ERA 1996]76.6 Rights and obligations of employer and employee
There can be no employment relationship without a power to command and a duty to obey. The courts have frequently implied a duty of co-operation between employer and employee. The general principle is that the employee must serve the employer and his interests. The most essential element for the employee is payment for hours worked. Generally, remuneration is negotiated by way of collective or individual bargain but so essential is it to the contract that in the absence of express agreement, there is still a right to reasonable remuneration.
Since the introduction of statutory sick pay, the regulations effectively render the employer an agent of the Department of Social Security to administer the sickness pay rights of his employees. In outline, the scheme provides that the employer must pay sick pay for the first 28 weeks of illness and only after that is the employee entitled to state sickness benefit. The employee may not claim statutory sick pay for the first 3 days of any period of sickness and the following persons are completely excluded from claiming it:-
To make a claim the employee must be suffering from a disease or physical or mental disablement rendering him incapable of performing any work. Two periods of incapacity are treated as one if they are separated by not more than 2 weeks.
To claim statutory sick pay, the employee or his agent has to inform the employer that he is unfit for work. The employer can fix a time limit for notification and may set out the mode of notification. The Statutory Sick Pay Act 1991 made important changes to statutory sick pay in order to reduce government expenditure; regulations were made to limit the amount which could be recouped by an employer from national insurance contributions to 80% of the Statutory Sick Pay made.
It is an implied term of the contract of employment that every employer must take reasonable care for the safety of his employees. An employer is not obliged to insure the employee against the effects of unusual or dangerous work but an employer must be covered by insurance pursuant to the Employers Liability (Compulsory Insurance) Act 1969 and cannot hide behind a supplier of defective equipment (Employers Liability (Defective Equipment) Act 1969). The employee has a similar duty to take care of such of the employer's property as is entrusted to him.
The Sunday Trading Act 1994 contained important protection for those persons who do not wish to work on Sundays and is now incorporated in the Employment Rights Act 1996. There is no general restriction on the number of hours of work in Britain but there are statutory provisions relating to children and women. However, the Working Time Directive will change these provisions (the Bill has been sent for consultation and it is expected to be enacted later this year). Statute provides certain rights for employees to take reasonable time off, such as trade union officials to carry out their duties, to receive ante-natal care and for an employee who is a member of a local authority, magistracy or statutory tribunal and some similar bodies.
Notes: [Part IV ERA 1996] [s50 ERA 1996]There is no general right to a holiday in English Law and holidays are generally dealt with in collective agreements, while custom and practice and statute have a subordinate role. However, the Working Time Directive will change these provisions (the Bill has been sent for consultation and it is expected to be enacted later this year). The only general statutory provision concerns Bank Holidays which are regulated by the Banking and Financial Dealings Act 1971. It is not an implied term of a contract of employment that an employee is entitled to payment in lieu of holidays if his employment is terminated (Morley v Heritage Plc [1993] IRLR 400].
At common law the employee is, in general, obliged to obey all lawful orders of the employer but the orders must be reasonable. A dismissal for failure to obey an illegal order is unlawful.
The consequences of a breach of contract by the employee are that:
An employee has a licence to enter his employer's premises but this will normally be withdrawn on suspension or dismissal. An employer has a right to refuse a reference for an employee. Where an employer gives a reference, he owes a duty of care to those persons (i.e. prospective employers) whom he can foresee will rely on such a reference and also owe a duty to the employee to take reasonable care in its preparation (Spring v Guardian Assurance Plc [1994] ICR 596).
[Back to Introduction] [On to Part 2 - Statutory Protection]