Employment Act 1955 - Assignment

Tutorial 1
1. Briefly, why is it necessary to distinguish between contract of service and contract for
service?
Contract of service
- S2(1) of the Employment Act 1955: ‘Contract of service’ means any agreement,
whether oral or in writing and whether express or implied, whereby one person
agrees to employ another as an employee and that other agrees to serve his
employer as an employee and includes an apprenticeship contract;
- A contract of service is an agreement (whether orally or in writing) binding on
parties who are commonly referred to as “employer” and “employee”. For example,
a customer service consultant working in a telecommunications company.
However, it is still important to look at the terms of the contract to determine the
type of contract.
Contract for service
- A contract refers to a relationship akin to an agency. Generally, a person engaged
via a contract for services is not an employee. For example, a property agent who
helps to sell your house or independent contractor.
Why is it necessary?
- To determine an individual’s legal position. This is because an employee under a
contract of service will be entitled to invoke the jurisdiction of the Industrial Court in
the event where his rights under the statute had been violated by the employer. If
not, the claimant can only seek remedy for a breach of contract in a Civil Court.
(This legal position encompasses in terms of liability, the law applicable and
remedies for the parties. The avenue of redress also differs between the two types
of contract.)
- To determine the statutory protection that applies as well as the rights and
remedies that can be claimed under the different courts

2. What are the tests for determining contract of service? Why are there so many tests?
(discuss the relevant authorities)
Control Test
- The traditional test, how much control is being exercised over the worker by the
employerz
- Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia: The degree of control
which an employer exercises over a worker is an important factor. The more
control that is being exercised over the individual by the employer, the more likely
the worker is an employee of the company. However, His Lordship did content that
the control test was not the only measure to be used in determining the status of
the worker as the nature (contents) of the contract must also be examined.
- Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd: an
agreement between a band and the dance hall company that determined that the
company has the right to control over the type of music that is to be performed by
the band and how they will behave on their performance. Here, the members of the
band are said to be employees as the dance hall company had control over the
members of the band.
Multiple Test
- Further recognition that there is no one factor that can establish whether a contract
of service exists.
- This test concludes that no single test can, in itself, determine employment status.
It accepts that all tests have value and merit and are useful as general guidance
- Ready-Mixed Concrete (South East) v MPNI: In this case, each driver of the
company must buy his own vehicle and paint it in the company’s colours. They
must wear the company’s uniform as well and must be available for work when
needed. Their salary was paid based on mileage rate for the work that has been
performed for the company. Here, the drivers are independent contractors and not
employees as they were operating at their own financial risk.
Mutuality of Obligation Test
- Used on a number of occasions, particularly to try to determine the status of part-
time, casual or ‘agency’ workers.
- It requires that
1. The employer feels obliged to offer work and;

2. The worker feels obliged to take it when offered.
- There was no obligation on both sides, thus, there was no contract of service. In
short, it is the intention of the both parties that is important.
- O’Kelly v Trusthouse Forte plc: To prove that part-time casual catering workers
were not employees, since the court found that the company were under no
obligation to provide work, and the workers were under no obligation to accept
work if it were offered
- Carmichael v National Power Plc: Made it clear that both control and mutuality of
obligation are essential features of a contract of employment. Moreover, the test for
mutuality of obligation must be applied in a contractual manner; in other words, the
worker must be under a contractual obligation to accept work and the company
under a contractual obligation to offer it
Economic Reality Test
- Extension of the ‘multiple test’
- Is the business carried out on the person's own account or is it for the employer?
- Formulated in the case of Market Investigations v Minister of Social Security
and asks the fundamental question whether the worker is in business on their own
account? It then considers such factors as control, whether the worker provides his
own equipment, whether he hires his own helpers, what degree of financial risk he
runs, whether the worker has responsibility for investment and management of the
work and what, if any, opportunity the worker has to profit from the sound
management of the task.
Be prepared to discuss the following cases:
1 Performing Right Society Ltd v Mitchell & Booker Ltd [1924] 1 KB 762
Fact: There was an agreement between a band and a dance hall company. Based
on the contract, the dance hall company had the right to control over the type of
music that is to be performed by the band and how and when the music were to
be played as well as how they will behave on their performance.
Held: It was held that the members of the band are employees as the dance hall
company had detailed control over the members of the band, since the company
could control the type and the manner of how the music was to be played.

– court held that a dance ballroom is a company (can decide the
type of song to be played, where and when it is to be played) and
that there is specific/detailed control over the bands involved.
*have nature of work which is highly skilled but yet has specific
control (football players) contract of service.
2 Short v Henderson (J&W) Ltd [1946] 62 TLR 427
- There were 4 factors to be considered in determining the
existence of contract of service
1. The power of selection by the employer;
2. The power in determining salary or other remuneration;
3. The power to or right of the employer to control the method in
which the work was done;
4. The power and right of the employer to terminate the
employee’s services
3 However, not necessarily that employers always have to” control how employees
do their works” so as to fulfill the test, especially for specialists or professional
workers
Cassidy v Minister of Health [1951] 2 KB 343
- Fact: The claimant was a patient at a hospital run by the
defendant who required routine treatment to set the bones in his
wrist. Due to negligence on the part of one of the doctors, the
operation caused his fingers to become stiff. The claimant sued
the defendant in the tort of negligence on the basis of vicarious
liability. The issue is whether the Minister of Health is an employer
to the hospital which the MOH argued that the doctor responsible
for the negligence was not one of its servants, as it had no control
over how he performed his job.
- Held: The defendant was vicariously liable.The fact that the
worker engages in specialised and technical work for which he is
specially qualified does not mean that he is necessarily not a
servant. The Court held that a person is a servant of the
defendant if he was chosen for the job by the defendant and is

fully integrated into the defendant’s organisation.
In this case, the doctors were appointed to the hospital by the
defendant and not chosen by the patient, and were fully integrated
into the hospital. They were therefore the defendant’s servants.
- It was held that a skilled surgeon was an employee of the Ministry
of Health when the surgeon was selected and integrated into the
organisation by the Ministry even though the Ministry could not
have control over the surgeon.
4 In Malaysia, the control test is the main choice by the Court
Bata Shoe Co Ltd v EPF [1967] 1 MLJ 120
- Fact: In this case, the shop managers were given authority by Bata
to employ salesmen to assist them. So the issue was whether these
salesmen are employees of Bata.
- Held: Clearly, the shop managers were employees of Bata due to
the considerable control which the company had over the shop
managers. However there was no relationship of employer and
employee between the Bata Shoe Co. (M) Ltd and the salesmen
employed by the shop managers of the company. Under the
agreement between the company and the managers, the managers
were given power to employ persons to assist them and it was
stated that the managers would be responsible for payments under
the Employment Provident Fund Ordinance.
- The shop managers were employees of BATA due to the
considerable control which the company had over the shop
managers. However, the salesman employed by the manager
were not. They were instead the employees of the manager.
5 Ready Mixed Concrete v Minister of Pensions [1968] 1 All ER 433
- A contract between the plaintiff company and a lorry driver stated
that the lorry driver was self-employed. He owned, insured and
maintained his own lorry, but the plaintiffs had helped finance its
purchase. He wore a uniform, and the lorry was painted with the
company’s colours. He could delegate the driving and was paid
per mile driven. The issue arose as to whether he was an
employee and whether the plaintiffs should have been making

pension contributions for him to the defendants.
MacKenna J stated that three conditions had to be fulfilled to
establish a contract of service:
(1) There must be an obligation of the person to provide his own
skill and work in return for a wage or other remuneration,
(2) There must be a sufficient degree of control by the employer
(3) The other provisions of the contract must not be inconsistent
with its being a contract of service.
The court found that the economic reality of the situation should
also be considered when coming to a decision. Having regard to
all of the factors, the court concluded that the lorry driver was an
independent contractor
6 Market Investigations Ltd v Minister of Social Security [1968] 3 All ER
732
- “... control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor”.
7 Ferguson v John Dawson & Partners [1976] 3 All ER 817
- It was held that, in relation to the actual relationship between the
contracting parties, even the express intention of the parties
regarding the nature of their contractual relationship could not be
conclusive.
- A builder’s labourer was paid his wages without deduction of
income tax or national insurance and worked as a self-employed
contractor providing services. His ‘employer’ could dismiss him
and decide on which site he worked and direct him as to the work
he should do. It also provided tools which he used. He was
injured at work and sued his ‘employers’ on the basis that they
owed him legal duties.
Decision: Based on the reality of the situation and the facts taken
as a whole, he was an employee working under a contract of
employment.

The courts will also look at any agreement between the parties.
8 Massey v Crown Life Insurance Co [1978] 2 All ER 576
- The claimant was originally employed by an insurance company
as a departmental manager, he also earned commission on
business he introduced. At his request he changed his
employment status to a self-employed basis. Tax and other
payments were no longer deducted by his employer but he
continued to perform the same duties. The employers terminated
these arrangements and the claimant sued for unfair dismissal.
Decision: As we will see later, to make a claim for unfair dismissal
it must first be proved that the worker was in fact an employee.
The claimant had chosen to become self-employed and therefore
his claim had to fail.
9 Nethermere v Gardiner & Taverna [1983] IRLR 103
- Ps worked 5-7 hours a day at home for a factory (sewing) for 40
weeks a year, using machines provided by D company. The
amount they worked depended on employers’ needs and no
obligation on them to accept work (zero hours arrangement). CA
held that they were employees and therefore were entitled to
make unfair dismissal claims. There was mutuality of obligation.
10 Airfix Footwear v Cope [1978] 1 CR 1210
- Where a person has done work at home for the last seven years,
five days a week, obeying the company’s instructions as to quality
of work, quantity and health and safety precautions, and accepting
the company’s piece-work rates, a tribunal is entitled to reach the
conclusion that a continuing relationship has been established
which falls into the “employer-employee” category.
- Mrs Cope worked at home assembling plastic heels. Each day the
company brought enough material to enable her to make up 12
dozen heels, and took away the previous day’s production. The
company provided all the tools, equipment and adhesives and laid
down strict rules as to rates of work, quality and safety regulations

to follow. However, no National Insurance or PAYE was deducted.
This continued for seven years until the company brought the
arrangement to an end. Mrs Cope claimed unfair dismissal. A
preliminary point was raised as to whether Mrs Cope was an
employee at all. The industrial tribunal found that she was and the
company appealed. The tribunal had reached the conclusion on
the facts that Mrs Cope had agreed to be subject to the
company’s control and was in essence a manual employee
working at home as a matter of mutual convenience.
- The degree of an employer’s control over the method of working
and that the employer provides all tools and equipment point to an
employment relationship.
12 Withers v Flackwell Health Football Supporters’ Club [1981] IRLR 309
- that difficult cases could be resolved by using industrial
rather than legal terminology. Hence, the person could be
asked a simple question, ‘Are you your own Boss?’ This
makes workers exposed to situations where their
independence may be detrimental to their own well-being.
Even if one person has sufficient control over one’s work,
there are many areas where there is equally an increasing
magnitude of dependence on the employers.
“That both parties had put the self contradictory label “self-employed” on their
relationship is far from conclusive and is to be disregarded when the reality is
that the label, and the fiscal consequences that flow from its use, are adopted
simply for fiscal reasons.”
13 Prater v Cornwall County Council [2006] 2 All ER 1013
-the plaintiff was engaged by the defendant local council as home tutor for pupils
unable to go to school under several separate contracts
-if she was engaged under each contract, she will have been employed under a
contract of service. It makes no difference to the legal position, in that the job was
under an individual basis under number of separate contracts running
concurrently or successively.
-makes no difference that after the end of each engagement, the council was no
obligation to offer her another teaching engagement and she was not obliged to
accept

-what is important is that once the agreement is entered into, she was under
obligation to teach and def was under obligation to pay.