Modern working times have seen a whole myriad of different models of working implemented in the workplace. The issue over whether an individual has the status of an employee or a worker, or is self-employed (an independent contractor) can be surprisingly difficult for some to ascertain.

Under current employment law, there are statutory definitions for “employer” and for “worker”. Although, these are not comprehensive and there can be blurring of the lines. It is possible for an individual to be neither an employee nor a worker, although such person could fall into the category of being self-employed.

Some might ask: why does employment status matter? Well, employers and employees have obligations mutually towards each other which need to be observed. Some core legal protections only apply to employees; for example, rights on termination of employment, or the right to not be unfairly dismissed, and the right to receive statutory redundancy pay.

Only employees are covered by the ACAS code of practice for disciplinary and grievance procedures, also. There can also be advantages for tax treatment for people providing services, dependent on their status too and, as such, being an employee versus being self-employed can cause differences in position.

Employers owe employees statutory duties relating to health and safety also. In light of the current pandemic, being an employee can have its advantages, therefore.

How do you define your ‘Employee Status’?

There are various definitions of “employee” enshrined in statute, although none are comprehensive enough so that the courts can be relieved of having to determine status. There are a number of tests that Courts and Tribunals have used in order to determine the same and case law has also played its part. Under s230(1) of the Employment Rights Act 1996 (ERA) an employee is defined as:

“an individual who has entered into or works under (or where the employment has ceased) worked under, a contract of employment”.

A contract of employment is, broadly speaking, a “contract of service” whether express or implied and whether oral or in writing.

What does ‘Worker Status’ mean?

This reflects that some individuals, whilst not being full-blown employees, are entitled to a whole range of employment rights but are nevertheless not fully independent and are still deserving of some of the protections offered under the Employment Rights Act too.

A worker is defined under s 230(3) of the ERA as:

“an individual who has entered into or works under (or where the employment has ceased worked under):

  1. A contract of employment;
  2. Any other contract, whether express or implied and whether oral or in writing, whereby the individual undertakes to do or to perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any professional undertaking carried on by the individual”.

Clearly, the above can require some interpretation, depending on the circumstances of ones’ engagement, and hence the lack sometimes of obvious demarcation.

It is clear that all employees are workers though. However, there can be a fundamental lack of understanding over the meaning for an engagement of people doing or performing “personally” any work-related services. “Personal service” is fundamental to employment status, but in the case of “worker” status, the requirement for personal service is often analysed through the lens of whether the individual is afforded the right to offer a substitute person to do the work.

The Court of Appeal in the Pimlico Plumbers case (see Pimlico Plumbers Limited v Smith [2017] EWCA Civ 51) confirmed that an unfettered right to provide a substitute is inconsistent with an undertaking providing services personally and the lack of the work being carried out personally is likely to militate against worker status being available.

It is the construction of the contract in the light of the circumstances in which it was made that the Court of Appeal has confirmed in earlier cases that is one of the important test tools used when deciding status.

The status of the Employer matters too; in the sense that if it is a customer of a business or a client of a profession carried on by an individual then, worker status is similarly going to be in jeopardy for the service provider.

Mutuality of obligations between parties is another one of the important factors for an individual to successfully fall within the definition of the worker. This refers to there being an obligation to provide work and for the work to be done by the person hoping to establish worker status.

Workers and Non-Workers Examples – how the Courts have held

  • A self-employed labourer working as a sub-contractor in the building industry – held to be a worker;
  • A general labourer, who was employed for two years before accepting £200 in exchange for becoming a labour-only sub-contractor – held to be a worker;
  • A salesman earning commission from referrals – held to be a worker;
  • An individual with an unfettered right to appoint a substitute for any reason without sanction – held to be a non-worker;
  • A painter and decorator who was required to carry out their work personally, but was only paid for work done – held to be a non-worker;
  • An electrician who worked exclusively for a company for two years that did not hold an industry accreditation or invoice the company whilst working for it – held to be a non-worker.

What are the advantages and disadvantages of being considered a ‘worker’?

Depending on one’s circumstances there are clear advantages and potential disadvantages for being considered to be a worker as opposed to a self-employed person.

There are also advantages and disadvantages to being an employee as opposed to being of any other status. What is clear is that depending on what is intended at the start of any working relationship, the clearer the demarcation can be in the construction of the contract between the various status’ the better at the end of the relationship. It is at the end of course when a dispute could arise and/or there could be implications for tax or other benefits or welfare-related enquiries to start.

Contact FJG

If you or your business would like to know more about status when working, please contact with FJG’s Employment Law team, who will be pleased to analyse the relationships at play and advise on the most up to date interpretation of the law in light of the facts to help avoid any pitfalls – please contact us on 01206 700113 or email [email protected]