Who is an employee? this is the question that comes to mind whenever an individual loses a job or is on the verge of losing one.
Being on the verge of losing a job is a topic we will discuss later, of importance is to know firsthand whether the relationship or arrangement you are getting into constitutes employment.
An employee is a person who works under a contract of employment made between himself and another person (employer).
The contract must be one of service rather than for service. One is said to be under a contract for service if he is engaged as an independent contractor, he is therefore not an employee.
There is no one definitive distinction between an employee and an independent contractor. Therefore in deciding whether one is an employee or an independent contractor, it is necessary to consider the circumstance of every particular arrangement.
However, this is not a difficult task as the court has over time developed various tests for determining whether one is an employee or not.
The first test is the “control test” which means a balance of power between the employee and the employer. In an employment relationship where the employer under contract of employment has a right to direct not only what work to be done but also how it is to be done, then the arrangement qualifies as employment.
The second test is the integration or organizational test. This test was first laid by Lord Denning LJ Stevenson, Jordan &Harrison Ltd vs McDonalds & Evans in 1952.
In this test, the court considers whether the work done by an individual under a contract of service is done as an integral part of the business.
In contract for service, the work done for the business is not integrated into it but is only an accessory to it.
In another test referred to as the multiple test, the court tends to consider all the circumstances and apply a cocktail of the above-mentioned tests so that consideration such as whether an employer deducts tax under PAYE system from an employee’s wages or the nature of national insurance contribution is taken into account.
Lastly is the economic reality or mutuality of obligations test. In applying this test, the court asks whether a person is in business on his or her own account and if so, then he is at risk of making losses from the capital and in the alternative may benefit from the success of the business except for wages or salary that he earns.
In addition, before there can be a contract of service, there must be an irreducible minimum of obligations on both parties. This simply means that the duties and rights of both parties must be set out with clarity in the employment contract and without which there cannot be a contract of service.
By law, only employees enjoy statutory protection against unfair dismissal or may be entitled to redundancy payment if the resultant dismissal was by reason of redundancy.
This has its roots in the basic common law doctrine of privity of contracts which prevents third parties from bringing action in relation to performance or otherwise of a contractual obligation whereas he or she is not a party to the contract.
Therefore the first step in lodging a claim for unfair dismissal or redundancy is to prove that one is an employee.
Subsequently, the employer would only be vicariously liable to the employee’s action in the cause of their duty. Third party claims against an employer for acts of omission or commission by the supposed employee would fail if the party suing cannot establish the existence of an employment relationship.
Lastly, statutory deduction on wages such as the PAYE system can only be affected on an employee’s income.