Contract of Employment Case Law

Case law to determine whether or not a contract of employment is in place.

The following case law provides confirmation of the queries behind whether a contract of employment is in place.

Contract for or Contract of Services

Ready-Mixed Concrete (South East) Limited v. Minister of Pensions and National Insurance. This case gives us the key indicators to whether or not a contract is ‘for services’ i.e. provided by an independent contractor. Or ‘of services’ i.e. an employment contract. They are mutuality of obligation, personal service, control and whether other provisions are consistent with a contract of employment.

If a contract states that no control is exercised over the worker and the contract reflects what happens in reality then it is unlikely that it would be accepted as being a contract of services. This view was backed up in the recent case of Thompson v Paymaster. The workers were employed by an umbrella company under a contract of employment. The Tribunal Judge decided that the umbrella company did not exercise sufficient control over the workers for there to be an employment relationship in place.

In order for a contract to be overarching there needs to be mutuality of obligation for the duration of the employment. Not just whilst the contractor is on assignment. This is borne out by the following cases:

Stringfellow Restaurants Ltd v Quashie – Mutuality of Obligation

This was an EAT case which went to the Court of Appeal. The worker was claiming unfair dismissal. The case was lost, in part, because Stringfellows had no obligation to pay the worker when she was not dancing at the club. Therefore there was no mutuality of obligation at all during the periods when she was not working. There was also no overarching contract was found to be in place.

Clark V Oxfordshire Health Authority – Mutuality of Obligation (MOO)

Sir Christopher Slade who presided over the case stated: “I would, for my part, accept that the mutual obligations required to found a global contract of employment [overarching contract] need not necessarily and in every case consist of obligations to provide and perform work. To take one obvious example; An obligation by the one party to accept and do work if offered. An obligation on the other party to pay a retainer during such periods as work was not offered would in my opinion, be likely to suffice.”

Carmichael & Another v National Power PLC – Pay Between Assignments (PBA)

It was found in this case that the station guides who brought the case could not be considered employees of the company. This is because there was no contract in place to cover periods when the guides were not working. The House of Lords who eventually decided the case concluded that it ‘founders on the rock of absence of mutuality’. The relationship between the parties was not regulated by contract when they were not working as guides.

These cases aside; The Agency Worker Regulations, allow for workers to be removed from consideration for equal pay if engaged under a Swedish Derogation Contract. This model has now been tested before Employment Tribunals; its basis is that the worker is engaged under a permanent contract of employment. Under this the worker continues to be paid a minimum amount when they are between assignments.