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Employment Status Explained
Navigating the rules

Recruiting and retaining staff is tricky in the care sector at the best of times. With the turbulence we are seeing in this area currently, the last thing any provider needs is a claim being brought against them for breaching employment law. Here, Melanie Stancliffe from Irwin Mitchell un-muddies the waters surrounding staff’s employment status.

The increasing prevalence of work arrangements once considered atypical, including zero hours contracts and the so-called ‘gig economy’, has brought the complicated issue of employment status into the public domain. Staff are becoming increasingly confident about challenging their status in order to gain important and valuable employment rights.

To give some context on the current scene, a recent report by Skills for Care found that 90% of the adult social care workforce are employed on permanent contracts, with the remaining 10% working on a temporary basis as casual, bank or agency staff. It notes that a third of care workers are engaged on zero hours contracts, rising to 58% for homecare workers.

In terms of employment status, this varies by job role, with managers and senior care workers more likely to be classed as ‘employees’, and many staff providing care classed as ‘casual workers’, often on zero-hour contracts.

It’s important to note that there is no specific legal meaning attached to someone labelled a casual worker. They can be engaged via a zero hours contract or as bank or agency staff, and they can be employees or workers.

What’s the difference?

Employment law recognises three categories of person: ‘employee’, ‘worker’ and those who are ‘self-employed’. It is not always easy to determine the status of an individual, and the concepts used by the courts to decide cases can sound archaic to modern ears. The law has been interpreted in numerous cases, but the courts have not been able to devise a single test that will conclusively point to the distinction in all cases.

When determining the status of a worker, the courts will look at factors that point both towards and against the status being claimed and will undertake a sort of balancing act.

Employees

To be an employee, the individual must work under a contract (written or oral) and perform the work themselves – they can’t send someone else in their place or refuse to accept work given to them. In addition, the employer must provide work in accordance with the terms of the contract and pay the employee, even if it has no work for them to do. The employer will also ‘control’ when the employee works, what they are required to do and how much autonomy they have.

Workers

Workers also have to work under a contract and, usually, must undertake the work themselves and agree the terms under which work is offered and accepted. This is known as ‘mutuality of obligation’. They do not have to accept work, but when they are working they will usually be integrated into the employer’s organisation.

The important thing to remember is that courts will ignore any written agreement between the parties if it does not reflect the reality of the relationship.

The rights of staff

Employees and workers have rights that are not available to those who are genuinely self-employed. These include rights to:

  • Receive the national minimum wage.
  • Receive paid holiday.
  • Receive rest breaks.
  • Be protected against unlawful discrimination.
  • Not have deductions taken unlawfully from their wages.

These rights are available from the start of their employment (‘day one’).

Employees also have additional rights, including the right to not be unfairly dismissed, to receive a redundancy payment and to take time off and receive pay for family leave (such as maternity, paternity and adoption leave).

In addition, employees should be given minimum periods of notice (one week for every year worked up to a maximum of 12 weeks’ notice) and to receive an itemised pay slip. Not all of these rights are available for employees from ‘day one’. For example, employees must have at least two years’ service to bring a claim for unfair dismissal or to receive a redundancy payment.

Part-time vs full-time

Casual workers may be able to compare their terms and conditions with those enjoyed by full-time workers and bring claims if their own are less generous. Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations, part-time workers have the right to not be treated less favourably than full-time staff working under the same type of contract. For example, if an employer pays a full-time, comparable member of staff a higher rate of pay than the part-time worker, this might amount to less favourable treatment.

What amounts to the same type of contract is not always easy to determine. For example, in Wippel v Peek & Cloppenburg, [2005], the European Court of Justice held that a worker on a zero hours contract who could turn down work could not compare herself to a full-time worker who was required to work a fixed number of hours per week and could not turn down work. This was because there was no full-time worker who worked according to business need and was free to turn down work.

Zero hours contracts

A zero hours contract is an agreement between an individual and an employer where the employer sets out the terms under which the individual will be engaged but provides no guarantee that it will offer any work. The agreement may require the worker to either accept any work that is offered, specify that they can turn down a certain number of offers for work, or allow them to turn down any work offered.

Zero hours contracts are attractive to employers because of the flexibility they provide. However, they are usually less attractive to staff because they may not know in advance how many hours they will be offered and therefore how much money they are likely to earn. The prevalence of zero hours contracts in the care sector is likely to make it harder for employers to find, recruit and retain suitable people.

Many employers assume that any staff they engage under zero-hour or other contracts will be ‘workers’ rather than ‘employees’ and can be dismissed with little or no notice and without following normal procedures. However, this will depend on the actual relationship between the parties. Written agreements, especially in zero hours contracts, often state that the individual’s employment status is that of a worker. Even if that reflects the initial position, a person’s employment status can change over time. For example, if a company engages an individual on a casual basis, but regularly provides work and there is an expectation that this will continue, they may obtain ‘employee’ status and become entitled to those rights.

In the case of St Ives Plymouth v Haggerty, [2008], Ms Haggerty was one of a number of bank staff engaged as a casual worker to provide cover as and when required. The work fluctuated considerably and at short notice. Ms Haggerty was not obliged to work any particular shift or a minimum number of shifts but, in practice, over a nine-year period, she worked regularly. Ms Haggerty left a shift early one day, was disciplined. She chose not to return to work. Instead, she claimed constructive unfair dismissal. To succeed with her claim, she had to show she was an employee (rather than a worker) and had at least two years of uninterrupted service. The employer accepted that Ms Haggerty was an employee during her individual assignments, but it argued that because there were breaks between these for holiday, illness and other unspecified reasons, she did not have two complete years of service.

The Employment Appeal Tribunal found that Ms Haggerty did have sufficient service to succeed with her claim. There was an expectation that she would be offered work and, because this arrangement had existed for a long time, these mutual obligations were ‘just sufficient’ to find there was an overarching contract of employment (sometimes referred to as an ‘umbrella contract’). This meant that the gaps in her employment could be ignored.

Agency workers

Some employers prefer to use agency staff to meet temporary staff shortages. Temporary workers work for the agency’s clients but are paid by the agency. This has some advantages as, in almost all cases, the hirer will not become the employer of the temporary worker, even if the worker is engaged over a long period of time.

However, this does not mean that the hirer has no responsibilities towards the agency worker. From ‘day one’, agency workers have the same rights to use the staff canteen, transport or childcare facilities offered as those directly employed by the hirer. Then, after 12 weeks, they have the right to receive the same pay and holiday as comparable workers. Both the hirer and the agency can be held responsible for any breach of these responsibilities.

In addition, the hirer will also be liable for any discrimination the agency worker suffers whilst at work. Hirers should therefore make sure that all staff (whether it directly employs them or not) behave appropriately at work and are aware of workplace policies.

Tips For Employers

To avoid difficulties, we suggest that companies consider the following when recruiting care workers:

  1. Decide what type of contract to offer and whether you wish to engage an individual as a worker or employee. Zero hours contracts are really only suitable if you have no idea how many hours you need the individual to work and need complete flexibility. If you expect to be able to offer a minimum number of hours per week, set these out clearly.
  2. If you decide to engage an individual as a worker, don’t use a Section 1 statement or contract of employment as these documents will suggest that they are an employee.
  3. Review the contracts of all of your casual staff. How long have they worked for you? Have your expectations changed since the beginning of the contract? Are there any gaps in their employment? The answers to this may suggest that you need to amend the arrangements and put new contracts in place to reflect the relationship.

Melanie Stancliffe is a Partner at Irwin Mitchell. Email: melanie.stancliffe@irwinmitchell.com Twitter: @imhrplus

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