Why a raft of new contracts means the legal status of staff isn’t as clear-cut as you think
When you’re looking for guidance on employment law, the famous ‘gentlemen’s club’ Stringfellows might seem an odd destination. But a landmark case involving a lapdancer is helping illuminate a particularly complex area of practice – just who organisations actually employ, and where responsibilities and liabilities start and end for each party involved.
Knowing who’s on the books used to be as straightforward as conducting a quick head count. But the proliferation of different contract types and arrangements has significantly muddied the waters.
Just ask Nadine Quashie. She worked at Stringfellows as a lapdancer, and brought a claim for unfair dismissal. Dancers had to provide their own outfits and pay the club for use of its facilities, but at the same time the club had some control over the individuals who worked there, in terms of hours worked, being told what to do on stage, and a requirement to attend weekly meetings.
Stringfellows argued she was self-employed, because there was no obligation for her to work, but Quashie claimed she was an employee because she was required to provide her work personally, and could not provide a substitute. At tribunal it was held she was not an employee, so she had no right to make her claim for unfair dismissal. (She appealed, this was upheld, but a further appeal from Stringfellows returned to the original tribunal decision.)
Confused? Employment status even foxes lawyers, as there is no clear distinction between who falls into the three main classifications of employment: employee, self-employed and the blurrier category of ‘worker’. And when you throw in contract arrangements – whether zero hours, fixed term or through agencies – the legal landscape is hellish to navigate.
The status of an individual matters because it determines the statutory protections to which they are entitled. Employees are by far the most protected, with the right to claim for unfair dismissal after two years, access to maternity and paternity rights and statutory redundancy if things go awry.
“Historically, you were either an employee or self-employed. But gradually a new hybrid status of ‘worker’ was included in legislation, and certain protections were extended to this category,” says Bethan Carney, a practice development lawyer at Lewis Silkin. This means ‘workers’ have some of the features of an employee – for example the obligation to turn up – but don’t have the same level of protection.
When assessing whether someone has employee status, a court would look at several factors, including ‘mutuality of obligation’ (a requirement for the individual to turn up, in person, and for the employer to set out work), a level of control over how work is done, and ‘other factors consistent with employment’, such as how integrated the person is with the workforce or how they are paid. Workers would also share this obligation to provide a personal service, but might not share other factors consistent with employment, adds Carney.
Self-employment, meanwhile, broadly assumes the individual has much more autonomy (and works for other clients), with no obligation to provide the service. The downside is that they receive virtually no employment protection.
While many self-employment contracts work well for both parties, there may be a more worrying trend at play. Mike Emmott, employee relations adviser at the CIPD, says that during the downturn, some employers began to use contracts to hold staff at arm’s length. “There’s been an attempt by employers to look for more economical ways of employing people, to limit their commitment to staff in a bid to produce cheaper goods and services,” he says. Not only is this inimical to an inclusive, engaged workplace, it may turn out to be a false economy since tribunal judges will look beyond the contract to the facts.
In the case of Autoclenz v Belcher and others, a group of car valeters were required to sign a contract stating they were independent contractors. There was no obligation to provide services personally and they had the right to refuse work. But the court ruled that the reality was very different – the company had enough control over how they worked and it was unlikely any of the workers would ever send a substitute, so they could be classified as employees. This meant they could claim for holiday pay and other benefits.
“It’s important for the contract to reflect what happens on the ground,” says Luke Bowery, a partner at Burges Salmon. Keeping terms and conditions under review may help avoid any potential claims. Once-casual arrangements (for example a zero hours contract) can easily drift into something more permanent.
“Confusion can arise if someone has been there a long time and you’ve treated them as an employee,” says Laurie Anstis, an associate at Boyes Turner. “The written agreement is significant, but a court will also look at how someone is paid, how integrated they are into the workforce and how much control the employer has over how they work.”
The best advice, say lawyers, is to opt for as simple and complete a solution as possible: how will staff work, and what is the most appropriate employment status? If it’s stability you’re after, arguably it’s best to make everyone an employee.
“There are real costs associated with that, but there’s much less uncertainty because you automatically accept that individuals have rights, while a single approach helps everyone know where they stand,” says James Warren, a partner at Field Fisher Waterhouse.
Emmott feels there is a strong case for simplifying the law on employment status, and unions agree. But with increasingly complex working arrangements emerging all the time, it’s unlikely we’ll see easy answers soon.
Explore a one-day Employee Relations and the Law short course – delivered by the CIPD’s own learning arm - bit.ly/CIPDemployeelaw