Employment Law: Employee Status, Contract Terms and Termination

This report provides a comprehensive overview of employment law, differentiating between various workplace relationships such as employees, workers, and independent contractors, emphasizing the legal implications of each. It delves into the distinction between contracts of service and contracts for services, and outlines tests used by courts to determine employee status, including the control test, integration test, economic reality test, and mutuality of obligation test, culminating in the multiple test. The report further examines the features of employment contracts, detailing both express and implied terms, along with the implied duties of both employees and employers. It then addresses the termination of contracts, covering statutory notice periods, summary dismissal, constructive dismissal, and different types of dismissal claims such as wrongful, unfair, and constructive dismissal. The report emphasizes the importance of understanding these concepts for both employers and employees, providing a valuable resource for those studying or working within the field of employment law.

EMPOYMENT LAW: 1
EMPLOYMENT STATUS
There are several different kinds of relationships in the workplace, such as employees, employee
shareholders, workers, and independent self-employed contractors. It is important to know the
difference, because employees have more rights under the law and employers may be vicariously liable
for harm caused to third parties by employees.
WORKER
A person may be classified as a worker who, although not an employee, is entitled to some of the core
employment rights such as the right to be paid the minimum wage. It is a broader category than
‘employees’ and includes persons who work on a casual basis such as agency workers or short-term
casual workers. A worker is obliged to carry out his contractual duties in person and the person he works
for must not be a client or customer.
INDEPENDENT CONTRACTOR
An independent contractor is someone (who may be a company, a partnership, or a single self-
employed individual) who contracts to provide services for a fee. A self-employed contractor may
substitute someone to cover for him if necessary. Although independent contractors do not have
employment rights as they are self-employed they do have some legal protection, for example the client
must ensure the premises on which the independent contractor is working meet health and safety
standards.
DIFFERENCE BETWEEN AN EMPLOYEE AND AN IND. CONTRACTOR
The way that the distinction between employees and independent contractors is often referred to is the
split between a contract of service and a contract for services. An employee works under a contract of
service. The employer gives instructions to the employee and provided those instructions are reasonable
and within the terms of the contract the employee is obliged to obey them. A self-employed person
works under a contract for services and the relationship with the person he is carrying out the work for
is that of client and contractor.
TESTS FOR DETERMINING EMPLOYEE STATUS
There is no proper definition in statute of what is an employee. In order to decide if someone is an
employee, there are a number of tests that have been applied over the years by the courts, and which
look at the nature of the relationship between the supposed employee and employer. These tests are:
•The control test: This was one of the earliest tests, and looks at the extent to which a person is under
the control of the employer, if he has to obey orders, etc. (walker v crustal palace football club )
•The integration test: Because the control test was not sufficient to deal with all situations, the
integration test was formulated. This looks at how much the work is fully integrated into the core

activities of the employing organisation. Is the work done as an integral part of the business? The more
integrated a worker is the more likely he is to be considered to be an employee. Is the person entitled to
any benefits that form part of the standard employee package, such as joining the occupational pension
scheme? In short, how integrated is he within the organisation? (Whittaker v Minister of Pensions &
National Insurance (1967))
•The economic reality test (Entrepreneurial test): This looks at things from the opposite angle to the
integration test. Instead of looking at the relationship between the employer and employee, it considers
how far a person can be said to be ‘in business on his own account’. In other words, it looks for evidence
of self-employment rather than employment, and looks at issues such as does the person send invoices,
does he use his own equipment, does he get paid holidays, is tax deducted from his pay, is he permitted
to supply a substitute for himself if he is away, does he take any personal financial risks?
•The mutuality of obligation test: The courts then moved on to look at whether the employer is obliged
to provide work for the employee, and the employee is obliged to accept it. If there is such an
obligation, then there is a contract of employment. If not, then it is a contract for services. If, for
example, a person is offered work and refuses it with no consequences, that can suggest that the person
is a worker and not an employee. If, however, he turns down the work and as a result is not offered any
in the future, then it is likely that there is mutuality of obligation and the person would be regarded as
an employee.
Carmichael v National Power plc (1999)
Facts: C worked as a tour guide at a power station. She had no fixed hours, but could be called at any
time when a party of tourists was expected. Tax and national insurance was deducted from her pay,
which was calculated on an hourly rate. When a collective union agreement increased pay generally at
the site, her pay also increased following that agreement.
Decision: C was not an employee, because there was no mutuality of obligation. When she was called
to work, that created a contract just for the duration of that day’s work. She was not obliged to accept
any particular day’s work, and so she was not an employee.
The multiple test. This is the test that has been most often used in recent times, and in effect the court
will look at all these tests and consider the whole situation before deciding if someone is an employee or
not. (SEE THE FIGURE)
Ready Mixed Concrete v Minister of Pensions and National Insurance (1968)
Facts: Ready Mixed Concrete hired drivers who used their own lorries to deliver the company’s concrete
and mixers to customers. The drivers had to wear company uniforms, and had to comply with
reasonable orders from the company. The drivers had to maintain the vehicle at their own cost, and
could decide which route to take. They could also pay for a substitute driver if absolutely necessary.

Decision: The drivers were each running a small business of their own, and as such were self-employed,
not employees. This case set out the principles that:
•an employee cannot substitute another worker for himself;
•control is an important factor, but it is not the only factor;
•the contract as a whole had to be looked at to see if it was consistent with a contract of service, so
factors such as who owned the assets, financial risk, and the opportunity to profit are not consistent
with a contract of service.
MULTIPLE TEST FIGURE
does the person have to turn up to work whne expected ?
YES
does he have to do what the organization tells him to do ?
YES
is he expected to do it personally ?
YES
can he send someone else to do the work?
NO
THEN HE IS AN EMPLOYEE
Features of an employment contract :
EXPRESS TERMS : terms which are negotiated between the employee and the employer.
• Name of employer and employee.
• Date employment and continuous employment started.
• Job location.
• Pay - weekly, monthly etc.
• Working hours.

• Holiday entitlement.
• Job description / job title.
Details of any collective agreement that directly affect the employee's conditions of employment
IMPLIED TERMS:
Implied terms are terms which the parties did not specifically comment on, but which are implied into
the contract. There are two main ways that such terms can be implied; Statue and common law.
IMPLIED DUTIES OF THE EMPLOYEE :
1. Duty of respect
2. Duty of faithful service
3. Duty to obey lawful and reasonable orders
4. Taking reasonable care and exercising reasonable skills in
carrying out the contract
IMPLIED DUTIES OF THE EMPLOYER:
1. Duty to pay wages and provide work
2. Duty to indemnify employees
3. Duty to take reasonable care of employee’s safety and working
conditions
4. Duty of mutual trust and confidence
5. Duty to take reasonable care in giving references
6. Duty to deal promptly and properly with grievances
Termination of Contract
An employment tribunal can deal with any area of employment law, from discrimination to working
time to holiday pay. By far the most common dispute brought to tribunals, however, concerns the way
that an employment contract has been terminated.
STATUTORY NOTICE PERIODS
If an employer wishes to dismiss an employee he will, in most cases, have to give the proper notice.
Equally, if an employee wants to leave his job for whatever reason, he will usually have to give notice.
There are two situations, however, where no notice needs to be given.

SUMMARY DISMISSAL
The first is when the employer believes that the employee is guilty of gross misconduct. In such a case
the employee can be dismissed immediately, and this is known as summary dismissal.
CONSTRUCTIVE DISMISSAL
The second scenario is where there is a serious breach of contract by either employer or employee,
which entitles the other to treat it as terminated. This is the case in constructive dismissal, where the
employee is entitled to leave immediately and treat himself as unfairly dismissed because the employer
has acted in such a way that the employee could not reasonably be expected to stay in his job.
Notice by Employer
Time in job Minimum notice
Less than 1 month No notice required
1 month to 2 years 1 week
2 years 2 weeks
3 years 3 weeks
4 years 4 weeks
This carries on with an extra one week’s notice for each extra year in the job, until 12 years’ service.
Twelve weeks’ notice is the maximum that the law goes up to, even if the person has been employed for
longer than 12 years.
Notice by an Employee
An employee who has been employed for at least one month has to give one week’s notice. This is the
most he is required to give by statute. If he leaves before he has been employed for one month he only
has to give ‘reasonable notice.
Types of Dismissal Claim
There are three different types of dismissal claim that can be made in the employment tribunal. The
three types are:
1. Wrongful dismissal.
2. Unfair dismissal.
3. Constructive dismissal

Wrongful Dismissal
If an employer dismisses the employee without giving him the notice agreed in his contract, or dismisses
him in breach of his contract in any other way, then this would be a wrongful dismissal.
An example of a dismissal in breach of contract might be if the correct notice is not given. Another
example is if there are specific procedures on dismissal that are set out in the staff handbook, such as a
requirement to give a verbal warning and a written warning before dismissal, but no warnings were
given. This would be a dismissal in breach of contract and give the former employee the right to go to
court or tribunal. (Note that this would not apply in the case of gross misconduct, where the employer is
entitled to dismiss without warnings or notice.)
Another example is if the person is employed on an employment contract that is to last for a certain
period of time (known as a ‘fixed term contract’), say six months, but this contract is terminated after
four. This would be a dismissal in breach of contract. If this happens the employee can go to court or
tribunal and recover the money that he would have earned had he been given the proper amount of
notice in his contract, or get damages for breach of contract.
Because wrongful dismissal is a breach of contract claim, not necessarily a specific employment case, the
employee can take the case to a court or a tribunal, unlike most other employment cases, which have to
be heard in the employment tribunal.
A claim of wrongful dismissal can be brought by any employee; he does not have to have a minimum
amount of service.
Unfair Dismissal
Unfair dismissal relates to the reasons why an employee has been dismissed and the reasonableness of
the employer in carrying out the dismissal.
Claims for unfair dismissal are the most common type of claim to be brought before the employment
tribunal. Unfair dismissal is covered by s 98 of the Employment Rights Act 1996 and basically means that
the reasons for the dismissal, or the way that it was handled by the employer, were unfair.
there are three ways in which dismissal may have taken place:
•The contract of employment is terminated by the employer (with or without notice).
•A fixed term contract has expired and not been renewed.
•The employee ends the contract due to constructive dismissal.

POTENTIALLY FAIR REASONS FOR DISMISSAL
Assuming that there is no dispute that there has been a dismissal (this generally only arises in cases of
constructive dismissal), the next question to ask is: ‘What was the reason for the dismissal?’
Not all dismissals are unfair. The law says that certain kinds of dismissal are capable of being fair. This
does not mean that they are automatically fair, although two rare types of dismissal are in fact
automatically fair (unofficial industrial action and national security), but it depends on the circumstances
of the case. These potentially fair reasons for dismissal are:
•Capability.
•Conduct.
•Redundancy.
•Statutory bar.
•Some other substantial reason.
Even if the employer has a reason for dismissal that comes within the list, he still has to look at all the
circumstances, and consider if there is any other kind of action he can take, before the dismissal can be
capable of being fair. The employer has the burden of proving the reason for the dismissal and that, in
the circumstances, dismissal was fair.
1. Capability
A person can be dismissed if he is not up to the job. This can relate to three kinds of issues:
1. Qualifications: does a person have the right qualifications for the job? The employer should, however,
consider before dismissal whether such qualifications are actually needed for this job.
2. Incompetence: can the person actually do the job? It might be that he has made one major error, or a
series of smaller ones, but the employer still has to consider whether the employee was given proper
training, or given any warnings about his performance so that he has a chance to improve. If these
actions were not taken, then any dismissal might still be unfair.
Davison v Kent Meters Ltd (1975)
Facts: 471 of 500 components assembled by D were faulty. She was dismissed.
Decision: D’s dismissal was unfair because the supervisor should have instructed D and then checked
her work after a small number of components had been assembled and she should have been warned
3.Health: if an employee is off work frequently, and the employer has considered all the alternative
ways he could help, then this could be a fair reason for dismissal. It depends on the circumstances of the
case, and the larger and better-funded an organisation, the longer it is expected to wait before

dismissing someone who is suffering from a long-term illness, because a larger organisation is able to
cover for absence more easily than a small one
2. CONDUCT
There are two types of misconduct:
ordinary misconduct and gross misconduct.
For example, someone who is persistently late might be committing ordinary misconduct. Other
examples might be not wearing the proper uniform, persistently looking scruffy for a front-of-house job,
or persistently using the office phone when they knew the employer’s policy was that this was not
permitted.
Gross misconduct is much more serious, and includes things like theft, physical violence or bullying, or
serious incapability through drink or drugs. The contract of employment should set out what kinds of
things are regarded by the employer as being gross misconduct, as this might be different from one
employer to another, and is generally for employers to decide depending on their own particular
circumstances.
The difference between the two types of misconduct is that, for gross misconduct, the employer can
dismiss the employee without notice (although it is better to suspend on full pay while investigating, as
then there will be no risk of unfairness). For ordinary misconduct it would not be reasonable to dismiss
for a first offence, but rather a warning should be given, and the employee should only be dismissed
after a second or (for larger employers) third breach of the rule
Burchell v British Home Stores (1980)
Facts: BHS suspected, but could not prove, shoplifting by a member of staff in one of its stores.
Decision: The dismissal was fair. The test for whether a dismissal for gross misconduct was fair was:
•the employer believed the employee was guilty;
•he had reasonable grounds to believe this;
•he had carried out as much investigation as possible in the circumstances.
Gill v SAS Ground Services UK Ltd (2009)
Facts: Mrs Gill took part in London Fashion Week while being on sick leave from her employment. On
her Facebook page she posted that she had auditioned 300 models and was choreographing a fashion
show. There was also a YouTube video of an event at the fashion week, which showed her walking along
a catwalk and presenting a bouquet of flowers to the fashion show’s designer.
Decision: Gill’s dismissal for gross misconduct was fair.

Gill v SAS Ground Services UK Ltd (2009) established that employers can use entries on websites such as
Facebook and YouTube as evidence in disciplinary proceedings.
3.Redundancy
If the person’s job is redundant, then the person can be fairly dismissed, if the correct procedures are
followed. (discussed in the end of note)
4.Statutory bar
This is where the employer believes that it would be unlawful for him to employ the person, such as
where his work permit has run out, or the person is a driver who has been disqualified from driving. The
employer should check, however, whether he can, for example, give the driver other duties until his
driving ban expires.
5.Some other substantial reason
This comes into play if the employee has been dismissed for a reason which does not come within the
others in the list, but which is a fair one and is ‘substantial’, not just a whim of the employer. This is,
therefore, effectively a mop-up section that allows employers to dismiss someone for other reasons.
Examples include where a business is being reorganised, but the reorganisation does not fit into the
definition of redundancy that we will see later. Another example is where a major client of a small
organisation states that they will take their business elsewhere if a particular employee is not dismissed
(this would probably not be substantial if the client was a minor one, or the employer a large one).
Henderson v Connect (South Tyneside) Ltd (2009)
Facts: The employer provided transport services. Mr H was employed as a minibus driver, taking
disabled children to school. The service was provided under a contract with the Council who had the
right to object to the employment of particular individuals. The Council refused to allow H to drive the
children. The employer dismissed H as he had no other role for him.
Decision: The dismissal was fair. Dismissal because of third party pressure came within ‘some other
substantial reason’.
THE BAND OF REASONABLE RESPONSES
The list of potentially fair reasons that was discussed earlier is only potentially fair. Each dismissal that
comes within a reason on the list still has to be judged according to the ‘band of reasonable responses’.
Whether a dismissal is unfair or not depends on the facts of each case. A tribunal will look at whether
the employer handled the dismissal in a reasonable manner. It is not just a question of whether the
employer acted reasonably, however. The test used by the courts is the ‘band of reasonable responses’

test, and allows employers quite a lot of leeway. In effect, the tribunal will ask itself the following
question:
‘Is it possible to describe the employer’s actions as being reasonable?’
If it is, then the dismissal will be fair. If not, the dismissal will be unfair and the employee entitled to a
remedy. The important thing is for the tribunal not to decide what itwould have done in the
circumstances, but rather whether what the employer did is capable of being described as reasonable in
the circumstances. What is reasonable can also depend on the size and resources of the employer.
There is no list of what is or is not reasonable, but by looking at the cases over the years, it is possible to
identify three issues that tribunals generally look at. These are:
1. Procedure used.
2. The consistency of the employer.
3. Whether dismissal was an appropriate sanction in the circumstances
Polkey v Dayton (1987)
Facts: An employer wanted to make an employee redundant, but did not consult him as was required.
He claimed unfair dismissal. The employer argued that consultation would have made no difference to
his dismissal.
Decision: The employer’s argument was irrelevant. A dismissal can be unfair purely because of a lack of
procedure. The fact that consultation would have made no difference could reduce the amount of
compensation awarded, but it made no difference in relation to the unfairness of the dismissal.
REMEDIES
A person who wins a case for unfair dismissal in an employment tribunal is entitled to a remedy. There
are three main kinds of remedies that a tribunal can give, but only one of them is widely used. The three
remedies are:
Reinstatement: an employee who is reinstated by a tribunal can go back to his previous job as if he had
never been dismissed. For obvious reasons, this is very rarely awarded.
Re-engagement: a tribunal can order that an employee is re-engaged by the employer, but this is not
necessarily into exactly the same job or on the same terms and conditions. The job has to be
comparable to the old one, and suitable. Again, this is not very common.
Compensation: by far the most common outcome if unfair dismissal is found is compensation

REDUNDANCY
Redundancy can be a fair reason for dismissal. There are two reasons why former employees bring
redundancy cases to employment tribunals. The first is because they have not been paid the proper
redundancy payment that they are entitled to. The second is because the manner or procedure of the
redundancy process was such as to make it an unfair dismissal.
Redundancy Situations
s-139 Employment Rights Act 1996 contains the definition of what a redundancy situation is. In effect, it
is:
•when a business is closing;
•when a workplace is closing;
•where there is a diminishing need for employees to do particular kinds of work in an organisation.
Murray v Foyle Meats (1999)
Facts: Foyle Meats were slaughterers. The claimants worked in the slaughter hall. There was a decline in
business, and fewer employees were required to work in the slaughter hall. The claimants were made
redundant, but claimed unfair dismissal.
Decision: As the business had less need for employees in the slaughter hall due to its decline in business,
the employees were redundant. The courts set out a test to decide if someone has been made
redundant:
1.Has the employee been dismissed?
2.Has there been a reduction in the need for employees to do a particular kind of work?
3.Is the dismissal wholly or mainly because of this reduction?
Redundancy Procedure
For employers to have a procedure, should contain two main elements—consultation and fair selection
criteria.
Consultation
There is a difference between the legal obligations for employers who want to make only small numbers
of employees redundant, and those who are contemplating larger numbers of redundancies.
For those who are proposing to dismiss 20 or more employees, the legal requirement is for ‘collective’
as well as ‘individual’ consultation. For employers making fewer than 20 people redundant, there is no
specific legal requirement, but it is good practice to have a proper redundancy procedure, which would

include individual consultation. If employers do not do this, they run the risk of the redundancy being
found by a tribunal to be an unfair dismissal.
Consultation should include:
•the reason for the redundancy dismissals;
•why and how individuals have been selected;
•possible ways of avoiding redundancy;
•possible alternative work.
Selection
In practice, case law has developed a two-stage process for an employer who is deciding which of its
employees to make redundant.
The first stage is to identify those who are at risk of redundancy. This is known as the ‘pool’ of
employees. This is important because the employer can then consult the people in this pool, and comply
with the consultation requirements. It also helps morale because the employer can tell the staff who
is not, therefore, at risk.
The pool will usually consist of those who do a similar type of work in a particular department, or those
whose work has ceased or diminished.
The second stage is then to select from that pool people who will actually be made redundant. There
are three ways that an employer can generally do this:
•Last in, first out (LIFO);
•Points-based system;
•Selection-based system.
We shall look at these in turn.
i. Last in, first out (LIFO)
This used to be the most common method of selecting employees for redundancy.
ii. Points-based system
This can be complicated, but basically the employer will decide on certain criteria, such as attendance,
performance, skills, etc. The criteria that are chosen have to be objectively justifiable on business
grounds, and not just because the employer felt like choosing them. The employer also has to make sure
that the criteria are not discriminatory.

iii. Selection-based system
This is very different to the other two approaches. If the employer chooses this, he should draw up the
new organisational structure, and ask employees in the pool to apply for the jobs in the new structure.
Those who do not have the required skills, etc. will then be made redundant. Again, it is important that
the requirements are fair and objective.