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Employment status, contracts of employment and working hours

Content of this section

This section covers the following:

Employee and self-employment status
Employment contracts

  Post-termination restrictions
Continuous employment
Flexible working
Employers: preventing discrimination
Maximum weekly working hours
Overtime rights
Sunday working
Anti-bribery policy
Employer relocation
Night working hours
Rest breaks at work
Workplace bullying and harassment

Special categories of employee and worker

  Agency workers

   Au pairs

   Employee shareholders

   Fixed term employees

   Interns and work experience placees

   Part-time workers' rights
   Young persons and children

   Zero hours contracts

Employment status

A fundamental legal distinction must be made between an employee on the one hand and a self-employed person on the other. In general, an employee is subject to the rights and duties of employment law whereas a self-employed person is not.

However, the legal position has in recent years become more complicated because certain rights have been given to categories of employees and other workers, particularly in relation to:

   Agency workers

   Au pairs

   Employee shareholders

   Fixed term emplotees

   Interns and work experience placees

   Part-time workers' rights
   Young persons and children

These categories and other special cases are dealt with below under Special categories of employee and worker.

Self-employed distinguished from employed status

Further complications arise from the income tax treatment of certain self-employed persons, and self-employed contractors in the construction industry. See the HMRC pages on Employment status.

There is no single legal test that can be applied to decide whether a person is an employee. The courts have developed criteria to determine whether an employment exists.

One of the leading cases on this subject is the High Court decision of McKenna J in Ready Mixed Concrete (South East Limited) v Minister of Pensions and National Insurance [1968] 1 QB 497:

"A contract of service exists if these three conditions are fulfilled.
(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master.
(iii) The other provisions of the contract are consistent with its being a contract of service."
He later added (p.516-517).
"An obligation to do work subject to the other party's control is a necessary, though not always a sufficient, condition of a contract of service. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract, and the person doing the work will not be a servant. The judge's task is to classify the contract (a task like that of distinguishing a contract of sale from one of work and labour). He may, in performing it, take into account other matters besides control."

The two main criteria for the existence of a contract of employment are:

* Mutuality of obligation: the employer must be obliged to offer work and the employee must be obliged to do it. This is not an absolute test. If the individual has the right to decline to do a certain amount of work but the employer still may require him to do a basic minimum, there could still be an employment. (Cotswold Devs v Williams [2006] IRLR 181);
* The individual must be obliged to carry out the work personally or, at least, have only a very limited right to use a substitute (Staffordshire Sentinel v Potter [2004] IRLR 752)

If either criterion is not present, the individual will not be an employee. But the presence of both criteria will not always mean that there is an employment relationship.

The label attached to a relationship or contract will not determine its treatment in law. A common device used to avoid the creation of an employment relationship is to call the worker an “independent contractor” and to insert in the contract a right for the contractor to delegate another person to do the work, perhaps subject to restrictions, and/or to allow flexibility about how or when the work is done. If such devices do not reflect what actually happens in practice, the tribunal or court may disregard the terminology and look to the substance of the relationship.

What's new items:     

21/12/2012: Stringfellows lap dancer not an employee

Quashie v Stringfellows Restaurants Ltd [2012] EWCA Civ 1735
The Court of Appeal has allowed Stringfellows’ appeal from the decision of the Employment Appeal Tribunal which itself overruled the decision of the Employment Tribunal that a lap dancer was not an employee.

Legaleze comment: this case is a good example of how the basic definition of employment still causes legal debate, and high costs to litigants in the courts.

03/09/2012: Mini cab driver not employed

Knight v Fairway & Kenwood Car Service Ltd UKEAT/0075/12/LA
The Claimant was a taxi driver working with the Respondent company under written terms. The Employment Tribunal (EAT) decided he was not an employee. The EAT upheld the decision because the written terms did not require any minimum or reasonable amount of work from him; he was free to work or not to work. Nor in the circumstances was there scope for inferring such an obligation from the fact that the Claimant in fact worked 7 days a week.

Employment contracts

A contract is an agreement between employee and employer setting out explicit terms and conditions of employment. Employment law does not technically require a full written contract of employment to be supplied to an employee.

However, the employer must provide to each employee and 'worker' a written statement of certain particulars of the employment contract stating:

* the hours and days of the week the worker or employee is required to work, and whether  they may be varied and how;
* entitlements to any paid leave;
* any other benefits not covered elsewhere in the written statement;
* any probationary period;
* any training provided by the employer;

English common law (and similar law in Northern Ireland and Scotland) implies certain conditions into a contract of employment without the need for written terms, such as the duty of fidelity and confidence and to obey reasonable instructions. However, it is generally advisable to prepare a well drafted contract whether for a true employment or another type of relationship for work. Many standard terms and conditions may be included by reference to a separate document, such as a staff manual or in appropriate cases (usually where a trade union is recognised), a collective agreement.

For senior and some specialist employees, special provisions may be necessary or desirable in a contract of employment. These include:

* intellectual property clauses;
* confidentiality;
* “Garden leave";
* post termination restrictions;
* choice of law and jurisdiction clauses where an employee is based out of England and Wales.

See the Legaleze separate section on post-termination restrictions such as non-solicitation and non-compete clauses.

Legaleze comment: Legal advice should preferably be taken before using such clauses. For further advice, contact us. Legaleze Member services provides access to template documents including an employment contract.

What’s new on this topic [see What’s new page or archive for full item]:

06/06/2020: Workers' right to statement of terms

Workers now have the same right as employees to written terms (a ‘written statement of employment particulars’) from their employer. Employers must provide their workers and employees with their written statement.

Continuous employment

Employees working for one employer without a break, employments rights for continuous services, breaks that don't affect continuous service. SEE: Continuous employment

Flexible working

Requesting flexible working, how to make an application, what business reasons an employer can give to reject an application and how to appeal.

An employee has a statutory right under The Employment Rights Act 1996, Pt 8A, (ERA 1996) to make a request to their employer for a flexible working arrangement i.e. a variation in the terms of the employee’s contract as to the hours, times or location of work.

See: Flexible working

What’s new item on this topic [see What’s new page or archive for full item]:

05/06/2014: New Flexible Working Regulations

The Flexible Working Regulations 2014 (SI 2014/1398) come into effect on 30 June 2014.

The Children and Families Act 2014, Pt 9 (CFA 2014) will come into force on 30 June 2014 and amends the ERA 1996, Pt 8A in two respects by:

(i) widening the eligibility to make a request for flexible working so that an employee must have at least 26 weeks of continuous employment to make a flexible working application; the requirement that an employee who exercises the statutory right to request flexible working must be a parent or carer is removed; and

(ii replacing the statutory process for dealing with an application for flexible working provided for by ERA 1996, Pt 8A and SI 2002/3207 with a duty on the employer to consider the flexible working request ‘in a reasonable manner’; the procedure for dealing with an application is now specified solely in the CFA 2014. A Code of Practice issued in accordance with the Trade Union and Labour Relations (Consolidation) Act 1992, s 200 will give guidance on handling requests to work flexibly in a reasonable manner.

23/01/2014: ACAS guidance on handling requests to work flexibly
From April 2014, all employees who have worked with their employer for 26 weeks or more will have to right to ask if they can work flexibly, for any reason. ACAS has published new practical guidance to help employers handle requests by employees to work flexibly in a reasonable manner. It has also published a new draft Code of Practice on flexible working.

Employers: preventing discrimination

Discrimination policy and equal opportunities in the workplace - sex discrimination, disabled workers, older people, compulsory retirement. See: Employers: preventing discrimination

What's new:
18/07/2013: Code of Practice (Equal Pay) (Northern Ireland)
The Discrimination Code of Practice (Equal Pay) (Appointed Day) Order (Northern Ireland) 2013 SR 2013/181 comes into force on 22 July 2013 and is made under SI 1976/1042, art 56A(7). The Order introduces the Code of Practice on Equal Pay, issued by the Equality Commission for Northern Ireland. It replaces the previous Code of Practice on Equal Pay which came into effect on 4 May 1999.

National minimum wage

The National Minimum Wage is the minimum pay per hour all employees and most other workers are entitled to by law. 'Workers' in this context means workers who provide their services personally to an employer and who are not carrying on a profession or business on their own account. See: National minimum wage

Maximum weekly working hours

Working time directive and maximum weekly working hours including how to calculate your weekly working hours and working time limits if you're a young worker. See: Maximum weekly working hours

Overtime: rights

Overtime law - what is overtime, overtime pay, employee rights, part-time workers and time off in lieu. See: Overtime: rights

Sunday working

The rules for working on Sundays, opt in, opt out arrangements, rules for shop and betting shop workers. See: Sunday working

Anti-bribery policy

If a commercial organisation permits an employee or "associated person" (i.e. a person providing services to the organisation), it may commit an offence under the Bribery Act 2010. In order to reduce the risk of the organisation or its employees and contractors committing an offence, it is important for the organisation to to put in place an anti-bribery policy.

See: Anti-bribery policy
On the Bribery Act generally, see Bribery Act 2010.

Employer relocation

When employers move, employees with mobility clauses, what happens with redundancies, compensation, disputes and company takeovers. See: Employer relocation

Night working hours

The rules on working hours - hour and limits, rests, health assessments and terms and conditions. See: Night working hours

Rest breaks at work

Workers' rights to rest breaks at and from work - length of breaks, how your age affects rest breaks, exceptions to the rules. See: Rest breaks at work

Workplace bullying and harassment

What to do about bullying and harassment at work - the law, action employees can take and advice for employers about their responsibilities. See: Workplace bullying and harassment

Special categories of employee and worker

Agency workers

Agency workers have certain rights to be treated equally with permanent employees under the Agency Workers Regulations 2010 (in Great Britain) and the Agency Workers (Northern Ireland) Regulations 2011. See: Agency workers

BIS has published detailed Guidance on agency workers regulations.

Apprentices and apprenticeships

Apprentices engaged under a traditional contract of apprenticeship or modern apprenticeship agreement are distinct from an "ordinary" employee. See: Apprentices and apprenticeships

Au pairs

Au pairs will not usually be treated as employees or workers for legal purposes. See: Au pairs

Employee shareholder status

'Employee-shareholders' whose contracts meet certain detailed criteria surrender the right (subject to exceptions) to claim ordinary unfair dismissal and to receive statutory redundancy pay, to make a request to work flexibly or in relation to study or training. They must give longer notice than other employees if they want to return early from family-related leave (for example, maternity leave), and dismissal (subject to exceptions). However, they will be entitled to minimum periods of holiday under the working time provisions, notice rights, statutory payments such as sick pay and maternity pay (provided that they otherwise qualify), and the national minimum wage.

The main tax relief under the employee shareholder scheme is that shares acquired under an employee shareholder agreement are exempt from Capital Gains Tax on the growth in the value of the shares from acquisition until disposal, provided the market value of the shares at the time of the acquisition does not exceed £50,000 (any restrictions applying to the shares are disregarded for purposes of valuation).

See further: Employee shareholder status

Fixed-term employment contracts

Employees' rights at work under fixed-term contracts - and what happens if a contract is renewed or ended.

Fixed term employees have rights under the (Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002). If an employee is employed continuously for four years or more, the employment becomes permanent unless fixed term employment was justified on objective grounds. See: Fixed-term employment contracts

Interns and trainees

Interns and unpaid work experience placees will not usually be treated as employees or workers for legal purposes. See: Interns and trainees

What's new [see What's new page or archive for full item]:

11/11/2013: BIS and HMRC to support interns’ right to minimum wage
BIS offers new advice for people leaving education which aims to give support to interns uncertain about their pay rights and to crack down on unfair practices by employers. They are also to benefit from more support to protect their right to fair pay under the National Minimum Wage (NMW)..
Potential interns will lso benefit from a concise guide on what to expect from a high-quality internship, and what interns’ rights are with regard to pay. Published by Intern Aware and Bournemouth University on behalf of the Gateways to the Professions Collaborative Forum, and supported by BIS, this has been developed as a supplement to the Common Code of Best Practice for Internships

02/09/2013: Sony pays GBP4,600 compensation to unpaid intern: case of Chris Jarvis, a video games design graduate.

Part-time workers' rights

Part-time workers should not be treated less favourably than full-time workers; employers' responsibilities: the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2001 (2001 No. 1107); Part-Time Workers (Prevention of Less Favourable Treatment) Regulations (Northern Ireland) 2001 Se: Part-time workers' rights

Young persons and children

Further information on the regulations affectiung the employment of young persons and children. See: Young persons and children

Zero hours contracts

From 26 May 2016, exclusivity terms in 'zero hours contracts' may not be enforced by the employer against the worker [Employment Rights Act 1996 Act s.27A inserted by the Small Business, Enterprise and Employment Act 2015].

A 'zero hours contract' (ZHC” means a contract of employment or other worker's contract under which:

* the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and

* there is no certainty that any such work or services will be made available to the worker..

For this purpose, an employer makes work or services available to a worker if the employer requests or requires the worker to do the work or perform the services.

Any provision of a ZHC which:

* prohibits the worker from doing work or performing services under another contract or under any other arrangement, or

* prohibits the worker from doing so without the employer's consent,
is unenforceable against the worker.

There are Regulations which reate a route of redress in the employment tribunal for workers who have an exclusivity clause in their ZHC and then suffer detriment, if they work for another employer or seek consent from their original employer to do so. An employment tribunal may then award compensation to that worker. These Regulations also provide employees on a ZHC with an automatic right of unfair dismissal if the reason for the dismissal is because the employee works for another employer or seeks consent from their original employer to do so The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 2015 No. 2021]

Further information: see Zero hours contracts: guidance for employers

[Page updated: 19/04/2020]


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