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Mutuality of obligation
The courts have established the concept of mutuality of obligation between an employer and an individual who works for the employer. This is an obligation on the individual to carry out some work, and an obligation on the employer to pay for it.
Mutuality of obligation is necessary for there to be any contract at all. Its presence does not tell you whether someone is an employee or a worker, because in both cases there must be mutuality of obligation — a legal agreement to do some work in return for (usually money) payment. If there is no mutuality of obligation, then there can be no contract, meaning that the person is neither a worker nor an employee. This explains, for example, why a genuine volunteer cannot be either an employee or a worker (X (Appellant) v Mid Sussex Citizens Advice Bureau [2012] UKSC 59). See Volunteers on pages 42 and 136.
The obligation on the worker/employee is only to do some work. The right to refuse work or to choose to withhold work does not mean that there will be no 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 (Cotswold Developments Construction Ltd v Williams [2006] IRLR 181). However, if someone is free to refuse to work at all, this indicates a lack of mutuality of obligation, and that person can be neither a worker nor an employee. For example:
Mr Knight was a taxi driver working seven days a week with the Fairway and Kenwood taxi service (F&K). When the arrangement came to an end, he was owed £1,188 and he brought a claim for wrongful dismissal in the employment tribunal. The written contract between the parties stated that Knight was not obliged to do any work at all for F&K. As long as he paid the rent and gave the correct notifications under the contract, it was entirely up to him whether or not he worked. There was nothing to suggest that the document was a sham, and the fact that he worked seven days a week out of economic necessity did not alter the lack of a legal obligation to work. The absence of a legal obligation to do at least some work meant that he was not an employee. Instead, he was self-employed. Instead of bringing a claim in the employment tribunal, he should have used the small claims court.
Knight v Fairway & Kenwood Car Service Limited UKEAT/0075/12/LA