Employee or worker – what’s the difference?

In this article we will be considering how employers can assess whether someone is an employee or a worker and the implications that this may have for their business.

For an employment relationship to exist, three key elements must be present:

– the employee must be under an obligation to perform the work personally

– there must be mutuality of obligation between the parties involved. In other words, the employer must be obliged to offer work and the employee must be obliged to accept it; and

– the employer must have a sufficient right of control over the employee.

A worker is defined as an individual who works under a contract of employment or any other contract in circumstances where the individual is obliged to personally provide the work and the party for whom the work is done is not a client or customer of any business carried out by the individual.

As workers have less extensive employment rights than employees, it is not unusual for businesses to require individuals to enter into contracts which seek to exclude one or more of the key elements of an employment. However, employers should bear in mind that when considering “employment status” employment tribunals will have regard to the arrangements in practice as well as the terms of any written contract. It is therefore possible for individuals regarded by a business as “casual workers” to be categorised as “employees”.

An example of this approach is the case of Autoclenz Ltd v Belcher and others where the Supreme Court held that car valeters were employees. This was the case even though the written agreements they had signed purported to allow them to appoint substitutes and expressly stated that there was no mutuality of obligation.

The Court focused on whether these express contractual provisions reflected the “actual legal obligations of the parties”, and concluded that they did not.

The same approach will be taken by an employment tribunal to an individual who has been treated as self-employed but subsequently claims to be an employee or a worker.

Given the wide definition of a worker, it will be relatively easy for a consultant or a contractor who spends the majority of their time working for one business and who is obliged to provide services personally to establish worker status.

As employment status affects an individual’s employment rights, making a mistake can be costly.

An example of this is the recent case of The Sash Window Workshop Ltd & another v King. Mr King worked for The Sash Window Workshop Ltd (SWW) as a commission-only salesman from June 1999 until 6 October 2012. He was paid by SWW as a self-employed individual and he was not paid for holidays or sickness absence.

The EAT accepted that Mr King was a worker and he was able to bring claims under the Working Time Regulations 1998 relating to the holiday that he should have received during the period that he was working with SWW.

If you have any concerns about the employment status of individuals working in your business or would like further information, we will be considering the issue in greater detail at a series of workshops during March and April 2015 – please see our website for more details: www.taylorwalton.co.uk/events.

Heather Cowley is the Head of Employment Law at Taylor Walton LLP, which has offices in Luton, Harpenden and St Albans and provides effective legal solutions to businesses and individuals across Bedfordshire, Hertfordshire and the South East. Heather can be contacted on 01582 731161 or email [email protected]

The information given in this article was, at the time of publication, believed to be a correct statement of the law. However, readers should seek specific legal advice on matters arising, and no responsibility can be accepted for action taken solely in reliance upon such information.