Are you Employed or Self-Employed?

The legal rights of people who are self-employed are very different from the rights of those who are employed. The self-employed do not have the entitlement not to be unfairly dismissed, to claim redundancy payments or any of the other various entitlements of the Employment Acts which are only given to employees.

It is the employment contract under which the work is carried out which will usually provide the answer. There are three elements which must always be present in any employment contract. All of these must be present or it will not be a contract of employment. They are:

1. there must be an obligation under the contract to provide work personally;

2. it must be possible to show that the relationship between employer and employee contains a mutuality of obligation; and

3. the employee must expressly or impliedly agree to be subject to the control of the employer.

Obligation to Provide Work Personally.

If the contract allows for the work to be carried out by anyone, or by a person to be decided by the worker, it is unlikely to be a contract of employment. There must be a personal obligation by the employee to work personally for the employer if there is to be a contract of employment.

Mutuality of Obligations.

The second element that must be present in any employment contract is for both the employer and the employee to have legal obligations to each other. There has to be an obligation on the employer to pay for the work and for the employees to carry it out personally. If there is no obligation for the employee to work and no obligation for the employer to offer work, such as where there are periods in the contract where there is no work to do and a retainer is not paid, there will be no contract of employment.

Control.

The third element requires that ultimate authority over the employee is the employer and that the employee is subject to the employer’s orders and directions. This may require careful examination of all the circumstances of the employment but relevant aspects are likely to include;

1. How the person carrying out the work is paid,

2. whether the worker provides his own equipment

3. whether he is subject to the employer’s disciplinary and grievance procedures

4. receipt of sick pay or contractual holiday pay

5. provision of benefits traditionally associated with employment such as pension or health plans

6. whether there are restrictions on working for others

Some contracts stipulate that workers are not employees and are self-employed. However such clauses are not by themselves decisive. Courts will look at all of the circumstances of a relationship to determine its true nature and will readily go behind what the parties have labelled a relationship to be. Labels will only be decisive to “tip the scales”, when all other factors relevant to deciding one way or another are evenly balanced.

there are a number of things to which a court will have reference if asked to determine whether an employment contract exists: 1. the person paying income tax and national insurance; 2. whether there is an entitlement to holiday pay; 3. the custom and practice in the particular industry; 4. whether the person is in a position to provide a substitute.

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