2. Categories of worker
Employment status
There are legal distinctions between an employee, a worker and someone who is genuinely self-employed. These distinctions are important because individuals have different statutory employment rights according to their employment status.
While contractual rights can be enforced by anyone who has a contract, regardless of whether or not the contract is in writing, statutory rights (which come from a particular statute or piece of legislation) only apply to those specified in that statute.
Individuals who are self-employed have few statutory employment rights, but may be covered by anti-discrimination legislation if they have a contract to personally carry out work for someone else.
As well as being protected by general equality legislation, part-time workers and fixed-term employees are protected by specific legislation from less favourable treatment because of their employment status. This is discussed below.
Determining an individual's employment status is far from straightforward, largely because of the ever increasing variety of arrangements under which individuals are prepared to work. As a result, there is a large and constantly growing body of case law on the subject.
The box below sets out the main employment rights applying to workers and employees.
Main employment rights
Rights covering all workers
• National Minimum Wage (unless excluded on grounds of age or training)
• Protection against unlawful pay deductions
• Equal pay
• Working hours and breaks
• Holidays
• Right not to be refused work because of union membership
• Right to be accompanied at a disciplinary/grievance hearing
• Protection against discrimination on all unlawful grounds
• Protection against detriment for whistleblowing
• Protection against detriment and right not to be refused work because of a blacklist
Rights covering employees only
• Itemised pay statement detailing gross net pay and deductions
• Written statement of particulars
• Statutory minimum notice
• Protection from unfair dismissal
• Implied terms (such as mutual trust and confidence)
• Time off for union duties and training
• Time off for union activities
• Time off for safety reps
• Time off for public duties
• Time off for antenatal care
• Statutory maternity pay and leave
• Statutory paternity pay and leave
• Statutory adoption pay and leave
• Parental and dependency leave
• Right to request flexible working
• Right to request time off for study or training
• Protection in business transfers (TUPE)
• Redundancy pay and rights
• Guarantee pay on layoffs
• Medical suspension pay
Employee, worker or self-employed?
Definitions of employee and worker vary, and it is important to check the precise definition in the legislation you are relying on to see to whom it applies. Generally, the law defines an employee as someone who works under a contract of service (or contract of employment) and a worker as someone who works under a contract for services. However, these definitions are not explained so it has been up to judges to explain the difference through case law.
The courts have established the concept of mutuality of obligation between an employer and an individual who works for the employer.
There must be some obligation on the individual to carry out work, and an obligation on the employer to pay for or provide that work. For example, where an agency worker could decide at will to arrange for an alternate to turn up to work (i.e. send a substitute when they pleased) and the organisation could dispense with their services whenever it chose to, there was no mutuality of obligation (Craigie v LB Haringey EAT/0556/06).
Mutuality of obligation is necessary for there to be any contract at all, so it must be present for both workers and employees. The presence of a mutuality of obligation therefore does not tell you whether someone is an employee or a worker, but if there is no mutuality of obligation then the individual is neither - they could be a casual worker (see Casual workers) or self-employed.
The obligation on the worker/employee is only to do some work. In the case of Cotswold Developments Construction Ltd v Williams EAT/0457/05 ([2006] IRLR 181), the EAT confirmed that the right to refuse work or to choose to withhold work does not prevent there being mutuality of obligation, as long as there is some obligation on an individual to work and some obligation on the other party to provide or pay for that work.
However, the ability to refuse to work at all indicates a lack of mutuality, as found by the EAT in the case of Khan v Checkers Cars Ltd EAT/0208/05:
Mr Khan worked for a company that provided a taxi service at Gatwick Airport. He had his own car and paid his own tax and National Insurance, but had to use set routes and charge set fares. He paid the company a commission and could choose whether or not he wanted to work and what hours to work.
The EAT held that the obligation on an employee is to provide some minimum work and not necessarily to accept all work whenever it is offered. However, Khan could choose whether to work at all and therefore was not under an obligation to do any work, which meant there was no mutuality of obligation. Khan was therefore not an employee.
Khan v Checkers Cars Ltd EAT/0208/05
For both workers and employees, there is also a requirement for the individual to personally carry out the work. If they are able to provide a substitute to carry out the work, this points to them being self-employed rather than a worker or employee.
In the case of Real Time Civil Engineering Ltd v Callaghan EAT/0516/05, the EAT held that a lorry driver was not an employee because he had signed a contract just 18 months previously that said he could send in a substitute - even though he had never exercised that right. And in Stevedoring and Haulage Services Ltd v Fuller and others ([2001] IRLR 627), a term in the contract specifically stating that there was no mutuality of obligation led the Court of Appeal to rule that the dockers could not be employees.
The source of wages is irrelevant to the question whether there is an obligation on the employer to pay and the employee to work. In Quashie v Stringfellows Restaurants Limited [2012] UKEAT 0289, a lap dancer was found to be an employee even though she was paid in vouchers known as "heavenly money", bought from the nightclub by customers who gave them to individual dancers. It made no difference to her employment status that on some nights she got no vouchers. The club kept the vouchers in a safe and made deductions, for example commission and various fines, before handing the balance in real money to the dancer.
Having established that there is mutuality of obligation and a requirement to carry out the work personally (essential requirements for both employees and workers), the crucial factor in deciding whether someone is a worker or an employee is likely to be thedegree of control exercised over them. This includes, for example, whether the employer stipulates the hours worked and when holidays can be taken; how much direction or supervision the employer exercises; whether the individual is subject to disciplinary and grievance procedures; and whether the individual is entitled to work for anyone else.
Where there is a specific term in the contract indicating what the employment relationship is, this will be a strong factor in the decision, but it will not necessarily be conclusive.
Independent contractors
Sometimes the issue is not whether the individual is a worker or an employee, but whether they are employed or self-employed. Many of these cases arise over claims for holiday pay. Someone who is genuinely in business on their own account is an independent contractor and has no statutory entitlement to holiday pay, whereas a worker is entitled to paid annual leave under the Working Time Regulations 1998. It is therefore in the employer's interests to argue that an individual is self-employed.
Again, there are a number of factors that identify someone who is self-employed as opposed to a worker, or even an employee. Factors that the court or tribunal will take into account include:
• what the paperwork says (this could be a job advertisement as well as a contract);
• whether the workers provide their own equipment;
• whether they can provide a replacement to carry out the work;
• whether they have any helpers;
• whether they have taken on any financial risk;
• whether they receive sick pay or holiday pay;
• whether they are responsible for their own expenses; and
• whether they are responsible for their own tax and National Insurance.
These all relate to the essential questions the tribunal has to answer, which are whether there is mutuality of obligation, whether the worker is required to carry out the work personally and what degree of control they have over the way they carry it out. Without those, the individual cannot be a worker, as explained above.
A yacht skipper who exercised a level of control and freedom over how he worked, and who was treated as self-employed for tax and National Insurance purposes, was an independent contractor and not an employee.
Haine v Rolls Royce EAT/0028/04
But a gym worker who asked to be self-employed and paid tax on a self-employed basis was an employee, on account of the control exercised by her employer, which included setting her hours and disciplining her (London Fitness Consultancy v Hickson EAT/0160/05).
Leaders of Weight Watchers meetings were employees according to Weight Watchers UK Limited v the Commissioners for HMRC (FTC/57-69/2010). The organisation exercised sufficient control over them, including requiring them to maintain a particular weight at all times, to make them into "employees".
The one factor that might prove conclusive by itself is whether the individual can provide a replacement to do the work, because this means they are not required to carry out the work personally. If an employer asks an employee to sign a contract with a clause saying that the employee is able to provide a substitute, this could deprive them of statutory employment rights:
Mr O'Brien was a bricklayer whose contract gave him an absolute right to provide a substitute to do his work. When he was made up to chargehand, he argued that this meant in practice that he could no longer engage a substitute; therefore, he said he was a worker and entitled to holiday pay. But the EAT held this was not the case: it said that the express term in his contract was clear and was not overruled by his becoming a chargehand.
R J Prentice Brickwork v O'Brien EAT/1086/02
However, if the contract says that you can arrange for a substitute but only with the employer's approval, this does not give you a blanket right to send someone else to do the work. In these circumstances, you can still be a worker (Byrne Brothers (Formwork) Ltd v Baird and others EAT/542/01 ([2002] IRLR 96)):
The Court of Appeal ruled that bricklayers working for the Redrow group were workers, despite the employer's argument that they did not have to carry out the work personally and therefore were self-employed. They had been issued with standard subcontractors' contracts that said they "must at all times provide sufficient labour", but the Court held that this was not a right to provide a substitute. It pointed out that they were paid weekly and given individual contracts, which suggested that they were expected to carry out the work personally. They were workers and so were entitled to holiday pay.
Redrow Homes (Yorkshire) v Wright; Redrow Homes (North West) v Roberts [2004] EWCA Civ 469 ([2004] IRLR 720
In 2011, an important case in the Supreme Court strengthened the position of employees who, because of their lack of bargaining power, sign contract documentation that suggests that the relationship is one of self-employment, when the true relationship is one of employment. Often, as in the Autoclenz case (below) the worker does not even read the documentation before signing, because he or she knows that in practice, without signing the documentation, there will be no work.
Autoclenz entered into written agreements with individuals to clean cars for British Car Auctions. The agreements contained all the clauses you would expect to see in a contract for self-employment. The individuals were paid on a piecework basis and were responsible for their own tax and National Insurance Contributions. Although the contract stated that the valeters were to provide their own equipment, in reality the company supplied cleaning materials and group insurance (in respect of which it made deductions to their pay). Branded uniforms were provided.
The men claimed the national minimum wage and holiday pay but Autoclenz argued that they were self-employed. In a very important judgment, the Supreme Court considered that the key to establishing whether someone is genuinely a worker or self-employed involves looking at the whole context, not just the written terms of the signed contract documentation, taking into account, in particular, the relative bargaining power of the parties.
These individuals were in no sense business people operating on their own account. Rather, they were workers: they had no control over how they did their work or over their working hours; they had no economic interest in the way work was organised; they were not able to source materials for themselves, they worked throughout under the direction and control of Autoclenz; their invoices were prepared by Autoclenz (which also determined rates of pay), and even though, in theory, the valeters could work for other organisations or substitute themselves, in practice this very rarely happened. The Supreme Court concluded that the men were employees working under contracts of employment and their claim for the minimum wage and statutory holiday pay was successful.
Autoclenz v Belcher and Other [2011] UKSC 41
Casual workers
Individuals who work on a casual basis may find it difficult to argue that they have "worker" or "employee" status, because there will not be a mutuality of obligation. In the case of Carmichael v National Power [1999] UKHL 47 [2000] IRLR 43, the House of Lords (now Supreme Court) held that casuals working as guides for National Power were self-employed because their contracts referred to them working "on a casual, as required basis". The same principle was applied in the case of Kendal & others v Caley Fisheries EAT/0507/04:
Mrs Kendal and her colleagues worked as scallop-cutters, a job in which the amount of work varied from day to day and week to week. The employer would leave a message on an answerphone, which the workers could phone to find out whether there was work available for the following day; they could then decide whether or not they wanted to do it. The EAT rejected the argument that Kendal and her colleagues had been continuously employed on a series of contracts of employment, each lasting for a day. There had been no mutuality of obligation, it said, because they had not been obliged to accept work that was available. Therefore, they had not been employed under a contract of service.
Kendal & others v Caley Fisheries EAT/0507/04
But a casual worker who had worked part of every week for three years was found to be an employee and had the right to claim unfair dismissal (Vernon v Event Management Catering Ltd UKEAT/0161/07). And in the following case, the EAT held that a relief area manager was an employee even though his contract stated there would be times when no work was available and he was not paid during these periods:
William Wilson was required to cover for holidays and sickness absences. His contract said that there would be occasions when no work was available. It also contained overtime, holiday and sickness provisions and provided a pension scheme. It provided grievance and disciplinary procedures and required both parties to give notice and had provisions for exclusivity and confidentiality. The EAT said that a number of factors pointed to an employment relationship - for example, Wilson was integrated into the organisation and was paid net of tax and National Insurance, and the company exercised a substantial degree of control over the way he carried out his work. The EAT held that, if there was work available, the employer had to offer it and Wilson had to do it. This made him an employee.
Wilson v Circular Distributors Ltd EAT/0043/05 ([2006] IRLR 38)
In Quashie v Stringfellows Restaurants Limited [2012] UKEAT 0289 (see above), Stringfellows nightclub used a system of fines and penalties (for example, to penalise lateness) to provide the control needed for an on-going employment relationship with its lapdancers. This system, along with evidence of a "pattern of fairly regular attendances" on a rota, supported the tribunal's conclusion that there was a single "umbrella contract" of employment in place, not just on each night the lap dancer worked, but also prior to each nightly engagement.
Homeworkers
There is nothing in principle that prevents a homeworker from being a worker or an employee. Their employment status will be decided on the same basis as set out above. However, it may be particularly difficult to demonstrate that there is the necessary control to establish employment status, as was shown in the long-running case of Bridges and others v Industrial Rubber EAT/0150/04:
Mrs Bridges and seven other women brought claims including unfair dismissal and redundancy against Industrial Rubber, for whom they had worked at home trimming excess rubber from moulded products. In January 2003, Industrial Rubber had issued a new contract to the homeworkers, stating that the company was under no obligation to offer work and the homeworker would be under no obligation to accept any work offered. The EAT was critical of the way the contract had been introduced, but held that the homeworkers were bound by its terms. The contract was the deciding factor on the issue. However, the EAT said that, even if this had not been the case, Industrial Rubber had not had enough supervisory control over the work for there to be a relationship of employer and employee.
Bridges and others v Industrial Rubber EAT/0150/04
Volunteers
Volunteers are not employees if they do not receive any pay or benefits other than their expenses. In the case of SE Sheffield CAB v Grayson EAT/283/03 ([2004] IRLR 353), the EAT held that volunteer advisors could not be employees because their lack of payment in return for offering their work meant that there could be no contract of employment. The EAT reached a similar conclusion in the case of Melhuish v Redbridge CAB EAT/0130/04:
Mr Melhuish was an unpaid voluntary worker for a Citizens Advice Bureau and brought a claim of unfair dismissal. The EAT held that there was no contract at all because there was no "consideration". The legal principle that a promise made for nothing is not binding requires both parties to a contract to bring something of value to it - this is what is known as "consideration". In an employment context, consideration is usually wages on one part and the supply of work on the other. Although consideration does not have to be money, the EAT said the opportunity to attend training courses was not consideration.
Melhuish v Redbridge CAB EAT/0130/04
Voluntary workers are specifically excluded from the National Minimum Wage Regulations (see Chapter 4: National Minimum Wage) and may not even be protected from discrimination (X v Mid Sussex Citizens Advice Bureau and another [2011] EWCA Civ 28).
Young workers
The Working Time Regulations 1998 give young workers (those under 18 but above school leaving age) the right to a rest break of at least 30 minutes, consecutive if possible, after four-and-a-half hours' work, in addition to a daily break of at least 12 hours and at least two days off a week. In most cases, young workers are prohibited from working nights; where they are allowed to do so, the employer has to undertake a health assessment.
Young workers' working time must not exceed eight hours a day or 40 hours a week. These hours cannot be averaged over a longer period, and young workers cannot individually opt out of the requirements. In addition, where a young person works for more than one employer, working hours are aggregated and must be within the overall maximum.
Those aged under 18 who work with dangerous machines and substances have limited statutory protection under the Factory Acts. When carrying out risk assessments and deciding what work is suitable for them, employers are legally obliged to take particular account of young people's inexperience.
Interns
An "intern" is not a legal concept, and whether or not an intern is entitled to employment rights, such as the right to the National Minimum Wage or to statutory holiday under the Working Time Regulations (see Chapter 4: Rights to pay and conditions - Minimum wage), will depend on whether they qualify as a "worker". Whether an intern is likely to be a worker will depend on various factors, for example:
• Are they doing work that benefits the employer, rather than simply shadowing someone for their own benefit?
• How long is the placement? In practice, the longer it lasts, the more likely the intern is to be a worker.
• Are interns free to come and go as they please, or must they keep specific hours and carry out particular tasks? The more control the employer asserts and the more regular the working pattern, the more likely they are to be a worker.
The test is not just what the documents say but rather, what actually happens in practice (see Autoclenz Limited v Belcher [2011] UKSC 41).
Apprentices
An employer takes on an apprentice to provide that person with the training and work experience necessary to qualify in a particular trade, usually over a number of years. The government has announced that from August 2012, all apprenticeships are to last a minimum of a year, and for those aged 19 or over, apprenticeships will now last between one and four years.
New standards, within a quality framework under the Apprenticeship, Skills, Children and Learning Act 2009 (ASCL 2009) are to come into force for all age groups from August 2012, subject to some remaining further consultation with employers and providers.
In April 2012, new regulations, The Apprenticeships (Form of Apprenticeship) Regulations 2012 (AFAR 12), came into force, specifying the form all future apprenticeships must take under the new Act. The regulations require all new apprenticeship agreements to take the form of a written statement of particulars of employment or a contract of employment, and must include a statement of the skill, trade or occupation for which the apprentice is being trained.
Traditionally, an apprentice has occupied a special position in respect of employment rights: an employer has not been able to dismiss an apprentice before the end of the apprenticeship contract except in very limited circumstances. Unlike an ordinary employee, an apprentice cannot be dismissed for redundancy - unless the business is closing down or a very substantial reorganisation has to occur, or for misconduct. An apprentice who is dismissed prematurely may have a contract claim for damages for loss of training and status as well as loss of earnings for the remainder of the apprenticeship (Dunk v George Waller & Son Limited [1970] 2 QB 163).
One consequence of the changes brought in by the new legislation basing the apprenticeship framework on an employment contract may be to make it easier for an employer to terminate an apprenticeship before its completion. However, where this happens, an apprentice is to be helped by the National Apprenticeship Service to find another apprenticeship.
The fact that the parties use documentation consistent with "apprenticeship" will not be decisive of whether or not an arrangement is truly an apprenticeship. Neither will the fact that the employer routinely describes the employee as an apprentice. However, both are likely to be relevant factors when deciding whether the contract is genuinely one of apprenticeship (Chassis & Cab Specialists Ltd v Lee UKEAT/0268/10).
The Dunk case (above) established these key building blocks of an apprenticeship arrangement:
• The obligation to pay wages throughout the term of the apprenticeship; and
• A training programme enabling the apprentice to acquire valuable skills, which will provide employment opportunities in the external labour market once the training is completed.
The traditional apprenticeship arrangement was varied with the development of Modern Apprenticeships, in which training is provided by an external provider and work experience by an employer. These forms of apprenticeship attract the same protections as a traditional two-party apprenticeship (Flett v Matheson [2006] EWCA Civ 53 ([2005] IRLR 412) and will now be governed by the apprenticeship framework brought in by the new legislation.
For information on minimum rates of pay for an apprentice, see Chapter 4: Rights to pay and terms. Apprentices have a right to at least minimum statutory employment terms, in particular, statutory sick pay, statutory leave and rest breaks under the Working Time Regulations. Apprentices have the right not to be unlawfully discriminated against (See Chapter 6: Discrimination).
Children
Children under the age of 13 years cannot be employed in any capacity. Thirteen-year-olds can do light work that is not harmful to their health and safety, school attendance or other factors, and which is permitted under local authority by-laws.
There are strict limits on the working hours of children under 16. Fourteen-year-olds can work up to five hours on weekdays and Saturdays during the school holidays. In all, they cannot do more than 25 hours a week.
Fifteen-year-olds can do up to eight hours a day and 35 hours a week, again only during the school holidays. A child under the age of 16 cannot work more than two hours on a school day or Sunday. They cannot work in industrial undertakings, including transport, street trading, merchant shipping or mining. Employers must have carried out a risk assessment before offering employment to a child or young person.
Children have the right to a rest break of at least an hour in any shift lasting more than four hours, and to a two-week break from any work during school holidays. Bye-laws regarding the employment of children should be available from your local authority.
Part-time workers
The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (PTWR) define a part-time worker as any worker whose hours are less than those of a full-time worker. This definition would even cover workers on "zero hours" contracts who have no fixed hours at all.
Anyone defined as a part-time worker has the right to be treated no less favourably than a comparable full-time worker. This includes the right to the same contractual benefits, such as pay and holiday (although these will normally be made pro rata to the hours worked), and the right not to be subjected to any other detriment.
If the reason for the less favourable treatment is unrelated to the worker being part-time, there is no protection under the regulations (Gibson v The Scottish Ambulance Service EAT/0052/04).
If an employer can show that its less favourable treatment of part-time workers is justified on objective grounds, this will provide a defence against a claim under the PTWR.
When considering claims of less favourable treatment, tribunals consider the following questions:
• What is the treatment complained of?
• Is it less favourable than that of a full-time worker?
• Is the treatment less favourable because the worker is part-time?
• Is there any objective justification for the less favourable treatment?
A claim under the PTWR is based on a comparison with an equivalent full-time worker known as the comparator. The decision in Carl v University of Sheffield UKEAT/0261/08/CEA, established that hypothetical comparators cannot be used for claims under the PTWR.
The case of England v The Governing Body of Turnford School EAT/438/02, shows that it is important to make sure that the comparator works equivalent full-time hours:
Ms England claimed that she was treated less favourably than full-time workers. The workers whom she had identified as her comparators worked nearly twice as many hours as she did: she worked 18 hours a week while they worked 35. However, the employer was able to show that contractual "full-time" hours were actually 37, even though no one worked those hours; the workers were therefore not suitable comparators.
England v The Governing Body of Turnford School EAT/438/02
As well as being full-time, the comparator must be employed under the same type of contract and be engaged in the same or broadly similar work as the part-time worker who is bringing the claim. Guidance on this was given by the House of Lords (now Supreme Court) in early 2006, in a case brought by the FBU firefighters' union on behalf of its retained firefighters:
The Lords said it was wrong to focus on small differences between the full-time and part-time roles when overall the jobs were substantially the same; a tribunal must always look at the roles as a whole, and should also only take qualifications, skills and experience into account in so far as they are relevant to the work undertaken at the time. In that case, the Lords held that the work done by retained and whole-time firefighters is comparable for the purposes of the PTWR.
Matthews and others v Kent and Medway Towns Fire Authority and others ([2006] UKHL 8 ([2006] IRLR 367
Part-time workers have the right to the same pension arrangements as full-time workers. In the case of Preston v Wolverhampton Healthcare NHS Trust EAT/1069/02 [2004] IRLR96, the EAT held that excluding part-time workers from joining an occupational pension scheme was unlawful.
However, the ruling makes it clear that employers can make it necessary for part-time workers to take steps to exercise their option to join the pension scheme, even though entry may be automatic for full-time workers without them being required to take any action. Trade union representatives need to be aware of this ruling, and to ensure that part-time workers are told what their rights are and how to exercise them.
The European Court of Justice (ECJ), in the case of Steinicke v Bundesanstalt für Arbeit C-77/02 ([2003] IRLR 892), held that European law does not prevent pension rights for part-time workers being calculated pro rata, as long as the way that the calculation is done does not mean that the part-time worker gets proportionately less. However, in the case of Trustees of Uppingham School Retirement Benefits Scheme for Non-Teaching Staff v Shillcock ([2002] IRLR 702), the High Court ruled that the exclusion of workers earning less than the National Insurance threshold was justified, even though the outcome was to exclude proportionately more part-time workers.
Part-time workers attending union training should get paid for all the hours on the course (see Chapter 5: Right to time off). However, part-time workers are not necessarily entitled to pay if the course occurs on their days off, that is on days when they would not have been at work (Calder v Secretary of State for Work and Pensions UKEAT/0512/08/LA).
In relation to overtime pay, it is not contrary to equal treatment laws to pay enhanced rates only when the part-timer has completed the full-time hours (Stadt Lengerich v Helmig [1995] IRLR 216).
Nor are part-time workers entitled to have account taken of previous years they had worked full-time when their redundancy pay is calculated (Barry v Midland Bank [1997] EWCA Civ 3037 [1999] IRLR 581). However, in one case where a part-time worker had to work proportionately more hours than a full-time worker before qualifying for overtime pay (the Elsner-Lakeberg case, see below), the ECJ held that this amounted to sex discrimination.
Edeltraud Elsner-Lakeberg was a part-time teacher. All teachers' contracts said that they did not get paid for the first three hours of overtime in a month. As a result, Elsner-Lakeberg had to do proportionately more work before being entitled to overtime pay. The ECJ held that this amounted to unlawful discrimination.
Elsner-Lakeberg v Land Nordrhein-Westfalen C-285/02 ([2005] IRLR 209
A part-time worker who claims to have received less favourable treatment has the right to ask the employer for a written statement of the reasons for the difference in treatment, and may take a claim of less favourable treatment to an employment tribunal. Less favourable treatment of part-time workers can also amount to indirect sex discrimination (see Chapter 6) or unequal pay if it adversely affects more of one sex than the other.
There may also be a claim under the Flexible Working Regulations (see Chapter 8: Flexible working). As always, each case will depend on its facts.
Temporary employees
Employees on fixed-term contracts (also known as temporary employees) are entitled to equivalent rights and treatment as permanent employees under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (FTER)).
Fixed-term employees are those working for a specified period of time or those employed to undertake and complete a specified task. The UK regulations apply only to employees, and agency workers are specifically excluded (regulation 19). A contract is still for a fixed-term even if it contains a clause that would give either party the option to end it earlier:
Fixed-term employee Mr Allen was dismissed, but his employer did not follow the procedures that would have applied to a permanent employee. His contract had a clause that said the contract could be terminated by notice. The employer argued that the regulations could not apply to this contract, since its termination clause meant it was not really for a fixed term. However, the EAT disagreed.
Allen v National Australia Group Europe EAT/0102/03 ([2004] IRLR 847
Fixed-term employees have the right to paid holidays, pro rata to the length of their contract. In cases where they work on more than one fixed-term contract, their service is added together to assess rights to holiday pay. The regulations cover all contractual terms, including pay and pensions. However, each particular term does not have to be the same as for a permanent employee, as long as the overall employment package is no less favourable.
Fixed-term employees have the right to a written statement of their main contractual terms, and to guarantee pay and medical suspension pay (see Chapter 4), in the same way as permanent staff. The right to no less favourable treatment extends to qualifying periods for employment benefits and opportunities for training and permanent employment. Fixed-term employees also have the right not to be subjected to any other detriment because of their temporary employment status.
Fixed-term employees can compare their treatment with that of permanent staff employed by the same employer, so long as they are doing the same or similar work and are working at the same establishment. If there is no comparable employee at that establishment, a comparison can be made with the pay and benefits package of comparable employees at other locations.
Employers can legally justify less favourable treatment if they have a good reason. For example, they may be able to justify excluding a fixed-term employee from the occupational pension scheme on the grounds that the contribution would be too low to be viable.
Fixed-term employees who believe they have been less favourably treated have the right to ask for a written statement explaining the difference in treatment. This can be used as evidence in a tribunal.
If a temporary employee has been working continuously under a single contract that has been renewed at least once, or under a series of contracts, for four or more years, they will become a permanent employee unless the employer can justify continuing to employ them on a temporary basis.
Temporary employees who are employed for a short period can lose out on employment rights that are dependent on length of service, such as unfair dismissal rights. But those who work on a series of temporary contracts with short gaps between each may be able to establish continuity of service (see Chapter 10: Qualifying for unfair dismissal rights).
The dismissal of fixed-term employees on the grounds of their having asserted their statutory rights under the regulations is automatically unfair, and requires no service. However, the ending of a fixed-term contract does not, of itself, amount to less favourable treatment.
In the case of Webley v Department for Work and Pensions [2004] EWCA 1745 ([2005] IRLR 288), the Court of Appeal held that a decision not to renew a 51-week fixed-term contract (that is, a contract designed to prevent an employee gaining sufficient service to be able to claim unfair dismissal) was not unlawful under the FTER.
Less favourable treatment of fixed-term employees can also amount to indirect sex discrimination (see Chapter 6) or unequal pay if it adversely affects more of one sex than the other:
Karen Whiffen, a schoolteacher employed on a series of temporary contracts, did not have her contract renewed. The school wanted to make redundancies and decided to get rid of the temporary staff first. It was only after that stage that they applied the redundancy selection criteria. The Court of Appeal held that the policy of dismissing fixed-term contract holders had a greater impact on women teachers in the school than on men, and was therefore indirectly discriminatory.
Whiffen v Milham Ford Girls' School [2001] EWCA Civ 385 ([2001] IRLR 468
Temporary employees also have the same protection as permanent staff against discrimination on the grounds of pregnancy and maternity. A temporary employee cannot be dismissed, refused renewal of her contract or refused employment for these reasons, according to the ECJ in the cases of Tele-Danmark v Handels C-109/00 ([2001] IRLR 853) and Jimenez Melgar v Ayuntamiento de Los Barrios C-438/99 ([2001] IRLR 848).
Employers can no longer require employees to sign a waiver of dismissal or redundancy rights when beginning or renewing a temporary contract. A temporary employee who is made redundant and who has worked for the employer for two or more years is entitled to redundancy pay (see Chapter 11: Redundancy).
Agency workers
The conduct of employment agencies is governed by the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. These laws make it unlawful for an agency to charge a worker to find them work (with a very few exceptions, including performers, models and professional sports people), and place limits on the right of agencies to charge fees where a temp placed by the agency is offered a permanent job with the employer. They also require an agency to inform its workers of the method and calculation of pay and holiday entitlement, and make it unlawful for an agency to withhold pay if a worker cannot produce a time sheet.
Most agency workers will meet the statutory definition of a worker and will be entitled to the statutory rights given to all workers - including protection against discrimination and victimisation on grounds of trade union membership.
Also, the Working Time Regulations 1998 and National Minimum Wage Act 1998 include special provisions to cover agency workers who would not meet this definition, making sure that all agency workers are entitled to these basic rights including holidays. Furthermore, since 27 October 2008, under the Fixed-term Employees (Prevention of Less Favourable Treatment) (Amendment) Regulations 2008, agency workers on contracts of up to three months' duration are entitled to Statutory Sick Pay (SSP).
It is possible for an agency worker to be deemed to be an employee, either of the agency or the end user, giving them much greater employment rights - including the right to claim unfair dismissal - but recent case law illustrates that this will be very unusual.
The principle that an agency worker can be an employee of the end user was endorsed by the Court of Appeal in the case of Brook Street Bureau (UK) Ltd v Dacas ([2004] IRLR 358). This case concerned a cleaner, Mrs Dacas, who worked for a local authority for four years until she was replaced while on sick leave. The Court of Appeal said that although she was not an employee of the agency, there could have been an implied contract of employment between Ms Dacas and the council.
However, more recent cases have confirmed that it will be very rare for a contract of employment to be implied between an agency worker and the end user. In James v London Borough of Greenwich [2008] EWCA Civ 35), the Court of Appeal found clear contractual terms agreed between the worker and the agency and none with the council. There was no ambiguity in the agreed contractual documentation or the parties' intentions, and so there was no need to imply a term. The position has been followed more recently in Muschett v HM Prison Service [2010] EWCA Civ 25:
In a case very similar to that of Mrs Dacas, Brook Street Bureau agency worker Mr Muschett had been assigned to work for the prison service. He argued that he was a prison service employee. He was paid by Brook Street, but he was given a copy of the Prison Service Handbook and on a day to day basis, he worked under their direction and control. The Court of Appeal confirmed that there was no contract of employment between Mr Muschett and the Prison Service.
Muschett v HM Prison Service [2010] EWCA Civ 25
A tribunal is most likely to find that an individual who has signed contract documentation that purports to create an agency relationship is in fact an employee where there is evidence that the documentation is a sham, designed to conceal an employment relationship, with a view to avoiding employment rights or PAYE tax liabilities.
Patrick Muscat was dismissed with a view to reducing the number of staff on the books in order to facilitate a buy out and then re-engaged as a contractor. The Court of Appeal held that on the facts, he was still an employee (Cable & Wireless v Muscat [2006] EWCA Civ 220 ([2006] IRLR 354)). See also the discussion of Autoclenz v Belcher [2011] UKSC 41 above.
Right to equal treatment with permanent staff
The Agency Workers Regulations 2011 (AWR), which implement the Agency Workers Directive, came into force on 1 October 2011. Under the regulations, agency workers who have worked in the same post for 12 weeks for the same end-user, are entitled to benefit from the same principal working conditions as a comparable employee who has been recruited by the end-user.
The definition of an agency worker in the regulations covers someone who is an employee of an agency and someone who personally carries out work for the agency. It does not extend to someone who is self-employed, employed on a managed service contract, or employed via their own company.
Although there is a 12-week qualifying period, in order to deter abuse, how this amount of service is calculated has been broadly drafted. Where there is a break between the work the agency worker carries out for one particular end-user, the separate periods may be aggregated and counted towards the 12-week qualifying period. Specifically, the agency worker's work shall be treated as continuous if the break is for less than six weeks or is due to the individual taking sick leave (for up to 28 weeks), leave for a reason connected to pregnancy or childbirth (including maternity leave and maternity suspension), paternity leave, adoption leave, seasonal shutdown, closure due to a strike or lock-out, or jury service.
Also, even if the agency worker changes role, the period of continuous service is not necessarily broken. In particular, work in the new role will only be treated as part of a separate qualifying period from the previous role in certain circumstances. Firstly, the role must be substantially different from the previous role, and secondly, the agency will need to have written to the worker explaining the work they will be performing in the new role.
There is also an anti-avoidance provision (regulation 9). Where there is a deliberate attempt to prevent an agency worker from acquiring the right to equal treatment with directly employed colleagues, the agency worker will be deemed to have met the qualifying conditions.
For example, where an agency worker is hired for a period of 11 weeks, then dropped for seven weeks, then rehired for 11 weeks - they will be treated as being entitled to equal treatment. Furthermore, the entity responsible for such an arrangement (i.e. the agency and/or end-user) could be ordered to pay compensation to the individual concerned (additional to any other award due) of up to £5,000.
Where an agency worker does meet the qualifying conditions, they will be entitled to the same principal conditions as their directly hired colleagues. This right to parity extends to working time issues, that is a right to the same breaks and rest periods, the same night work protection, as well as a right to the same contractual holidays.
Pay which is related to the individual's performance is also covered (for example, shift allowances, commission and overtime). However, pay not related to performance (such as company sick pay, maternity pay, paternity pay, redundancy pay, and pension contributions) are excluded. There is no right under the regulations for an agency worker to insist on working the same number of hours as a directly hired colleague.
After completing the 12-week qualifying period, a pregnant agency worker is allowed paid time off to attend antenatal medical appointments, including reasonable travel time.
Certain rights are not dependent on any qualifying conditions and will accrue from the beginning of an agency worker's assignment. Specifically, pregnant workers are automatically entitled to a risk assessment, and to be offered alternative work if suspended on maternity grounds.
Agency workers are, irrespective of their length of service, also entitled to access collective facilities such as a workplace crèche or canteen - unless the refusal of the employer to share these facilities is objectively justified.
All agency workers also have the right to have the end-user keep them informed about any suitable vacancies that the end-user has (regulation 13).
If an agency worker (who has met the qualifying conditions) believes that s/he is receiving less favourable principal working conditions than someone directly hired by the end-user, s/he is entitled to challenge the agency (and if no response is forthcoming, subsequently the end-user).
If an agency worker submits a written request for an explanation of his or her treatment, the agency/end-user must respond within 28 days. The response, or lack of it, will be taken into account by a tribunal examining any claim by the individual. The time limit for lodging a complaint with an employment tribunal is three months.
The "Swedish derogation"
One troubling development for unions has been the number of employers taking advantage of a loophole within the regulations enabling them to avoid paying agency workers at a rate equivalent to a comparable permanent worker. This is known as the Swedish derogation, after the country that requested the exemption when the Directive was under negotiation. A survey by law firm Eversheds in April 2012 revealed that nearly one in five of the employers surveyed are adopting this tactic.
Under the Swedish derogation, employers can avoid the equality obligation in the regulations by arranging for an employment agency to offer the agency worker a permanent contract, but set at a rate below the rate of pay received by permanent staff. Agency workers under this kind of arrangement will be paid when not carrying out an assignment. The rate of pay for this "down-time" spent between assignments must be at least the level of the National Minimum Wage and it cannot be less than 50% of that due when carrying out an assignment (regulation 11 AWR).
General union Unite put forward an emergency motion at the 2011 TUC General Congress calling for a legal challenge to the Swedish derogation, and have threatened industrial action against large employers making use of it, including retailer Argos and car manufacturer BMW.
Crown employees
Crown employees (those who work for government departments and agencies including civil servants) are entitled to most of the statutory rights set out in the Employment Rights Act 1996 except for redundancy and collective consultation rights, minimum notice and insolvency payments. Instead they have equivalent or better rights under agreements within their own employment.
Certain categories of Crown employees have, in some circumstances, alternative avenues for pursuing legal claims. For example, if prison officers and the police (including British Transport Police) are dismissed, the remedy lies not through the tribunals but by way of a special complaints body.
They are entitled to be treated no less favourably than they would have been by the employment tribunals, or to be given the reasons why they were not (R v Civil Service Appeal Board ex parte Cunningham [1991] IRLR 297).
The Criminal Justice and Public Order Act 1994 places prison officers in the same category as the police, and section 127 of that Act removes their right to strike. Although section 127 was disapplied in the public sector in England, Wales and Scotland, the government has re-introduced a strike ban for prison officers in England and Wales and it still applies in Northern Ireland and in the private sector everywhere. Scotland still has a voluntary agreement that prison officers will not take industrial action.
The Prison Officers Association (POA) currently has a pending claim before the European Court of Human Rights. The POA is challenging the government's prohibition on prison officers taking industrial action.
Working outside the UK
With closer ties developing between European states, more workers will find themselves working outside the UK at some point. Under the European Posting of Workers Directive 1996, which came into force in the UK at the end of 1999, all workers temporarily working in a EU state have the right to the same statutory minimum terms and conditions as those permanently working in that state.
Employment disputes are brought in the courts of the place where the employee habitually carries out their work, in accordance with the Brussels Convention.
In the case of Weber v Universal Ogden Services C-37/00 ([2002] IRLR 365), the ECJ held that this is the state where the employee has worked the longest, except where the employee had worked in a number of states but had recently settled in one.
A ruling by the House of Lords (now Supreme Court) in January 2006 made it possible for some employees working outside Great Britain to bring claims of unfair dismissal in the UK. The ruling was made in relation to three separate cases heard together.
The Lords said that, although it is unusual for an employee who works abroad to come under UK law, there are exceptions - such as when an employee is posted abroad for a business carried on in Great Britain, or when someone is working in a British enclave in a foreign country:
Stephen Lawson worked as a security supervisor at an RAF base on Ascension Island, John Botham was a youth worker at Ministry of Defence bases in Germany, and George Crofts was an aircrew member for Hong Kong airline Cathay Pacific who was based at Heathrow.
The Lords held that Lawson and Botham were "expatriate" employees whose work abroad had strong connections with Great Britain, and Crofts was a "peripatetic" employee whose work constantly took him to different places, but whose tour of duty always began and ended in London.
In all cases, they said, the focus must be on where the employee works at the time of dismissal. All three were entitled to bring their claims in the UK.
Serco Ltd v Lawson; Botham v MoD; Crofts & others v Veta Ltd & others [2006] UKHL 3
Although the Equality Act 2010 is silent as to its territorial scope, courts dealing with discrimination cases where there is such an issue, may follow the ruling of the House of Lords (now Supreme Court) in Serco v Lawson.
More information: See the LRD booklets Contracts of employment - resisting changes (£5.80), Temporary workers - a guide to the new law (£3.70), The Agency Workers Regulations - a legal guide (£5.25). LRD's pay and conditions journal Workplace Report has quarterly updates on contracts.