LRD guides and handbook June 2016

Law at Work 2016

Chapter 2

Employee, worker or self-employed? 


[ch 2: pages 35-36]

The question whether an individual is an employee, worker or self-employed is complicated, but it is best to start with the statutory definition used to determine access to most statutory rights, found in Section 230, Employment Rights Act 1996 (ERA 1996). This says that an employee is somebody who works under a contract of employment (whether or not it is written down), and a worker is anyone else who works under a contract to perform work personally for another party to the contract, as long as that other party is not a “client or customer of any profession or business undertaking carried on by the individual”. 


In other words, the key to whether someone is an “employee” is whether they have a contract of employment. If there is no contract of employment but there is a legal obligation to perform work personally, the person will be a “worker”. The only exception is where someone is in business for themselves, contracting with their own clients or customers in a genuine “arms-length” relationship, in which case they will be “self-employed”. 


All apprentices with an Apprenticeship Agreement are employees (see page 51).


Through case law, judges have developed some key tests to help work out whether someone is an employee, a worker, genuinely self-employed, or a volunteer. These are: 


• “mutuality of obligation”;


• an obligation to work personally (i.e. no right to send someone else to do your work instead of you); 


• a right to control how and when work is done; and


• consistency — whether the contract terms are consistent with a relationship of employment. 


Each of these tests is explained below.