WORKERS AND INDEPENDENT CONTRACTORS AND EMPLOYEES
Introduction
In every organization, there are employees, independent contractors and workers. To an organization, these three categories of individuals play an important role and they must therefore be clearly defined. The rationale for their definition is important in establishment of their rights within the organization. Through this the employees and the employers are capable of understanding their obligations to each other. This distinction is not only important in defining of the obligations and duties which the employees owe to each other, but it’s also important in the defining of legal obligations which may arise out of such relationships. These range from tax related obligations to the establishment of labor related rights. In the United Kingdom, employment related rights and relations are largely governed by the Employment Rights Act of 1966, The National Minimum Wage Act of 1998 among other legal instruments that have been laid down from time to time. It’s equally worth noting that case law has been instrumental in this area of study. All these will form part of this paper as it tries to analyze the various elements of what can effectively be considered as the key differences between workers, employees and independent contractors. The distinction of these three is important for any employee in the country and it’s instrumental in defining of their rights as to whether they are unionized or not. It defines the pay scale, what type of rights each category can claim. Each of these is independently evaluated in this paper.
Employees, Contractors and Workers Differentiated
The level of legal and statutory protection this category of individuals receives clearly puts them at a level which is different from the other categories of individuals who will later on form part of this discussion. A part from the basic definition of an employee which clearly differentiates it from the other interests of this study, a number of distinctive differences can clearly be spelt out. An employee is someone who has an employment contract binding him and the employer. The work is therefore based on the provisions of the contract. It’s important to note that all employees are workers. However, the level of rights which are enjoyed by them differentiates them from the workers and contractors. Their rights must therefore be observed to the fullest during the subsistence of the employment. Therefore apart from sharing the common rights with the workers, employees enjoy additional rights such as statutory sick pay, minimum notice period before termination of their employment, protection against any form of unfair dismissal or termination of the employment, statutory redundancy pay among other rights (Meardi, 2012).
These rights of employees already mentioned herein above are some of what clearly differentiates the worker from the employee. However, on the differences between an employee and a contractor, the nature of their contracts is the key differential feature. Whereas an employee employer contract is that of service, the contract between an employer and an independent contractor is that of a contract for service. Independent contractors are therefore contracted for their services and they do not have a wide range of unlimited rights which is witnessed in an employee-employer relationship. The employee employer relationship is a long lasting one and can only be terminated in a manner stipulated in the contract of the employment. Different views have therefore been put over time to differentiate these distinct but confusing areas of concern. Accordingly, a contractor can be classified as business person, who runs a separate business, but carries out activities for another business organization. The contractor carries out his or her duties on behalf of his or her business organization. However this is not the case for the employee. Employee As opposed to the independent contractor, employees are hired by the business organization to carry out activities within the organization. The task of the employee is to carry out a specific role in the organization as stated by the employer. The relationship with an independent contractor is for a defined period of time and rights such as unionization, health insurance and tax remittance are not part of this relationship in most instances, unless the contract states otherwise (Pedulla, 2013).
The great amount of statutory protection which the employees are entitled to have led to a shift over the centuries from hiring of employees to contracting. This is a view of escaping liability and the many obligations by most of these employers. Under section 230 of the Employment Rights Act of 1996 and employee is an individual who is working under a contract of employment (Deakin, 2012). This section however states that an independent contractor is an individual who has his own independent business, but also work for an employer. Underlying literature in this area of study has established these as the key differences between these areas of concern. Under an employment contract, the employer has to deduct and remit income tax, and the doctrine of vicarious liability which holds employers liable for anything wrong done by the employees during the performance of their duties strictly applies in an employment context (Lewin, 2015).
Case law has also been instrumental in differentiating these areas of concern. Bramwell LJ (as he then was) defined an employee in the English case of Yewens v. Noaks. In this case, he defines an employee as a servant who has been subjected to the command of the employer, who dictates the manner in which he will conduct his duties. He therefore places them under a master servant relationship, with the employer as the master being responsible for the conduct of the employee who is the servant. The level of control is therefore critical in defining this important employer and employee relationship. The fact that an employer is capable of exerting a considerable degree of control over the employee, then this is an employer employee relationship. This has also been upheld in the case of Ready Mix Concrete (South East) Ltd v. Minister of Pensions and National Insurance in which the court held that the degree of control is determined by the power of deciding when the task is to be done, how it’s to be done and the degree and means to be employed in dong this particular task. The case law developed in this area has therefore been instrumental in differentiating this clouded area. The case law has therefore played an important bridging role in creating a difference where parliament has for a long time failed to establish the difference (Harris, 2015).
The last area discussion is basically what defines a worker and the basic differences between a worker and employee. This difference is blurred, based on the fact that all employees are basically workers, but not all workers are employees. Two important tests have been put into place to differentiate these two areas. Equally, case law is instrumental in establishing this difference, just like the other areas already discussed herein above. The integration test and economic reality tests have been put into place as the key differential tests in these areas. The integration test is where the workers are incorporated to become part and parcel of the organization.
It’s noteworthy that what integration really means is difficult to define, but it can basically be understood that where the workers have been incorporated and integrated into the organization, then they can assert themselves as employees. However, the lack of integration will keep them within the realm and definition of workers. Where they maintain the status of mere workers, they are not entitled to the many rights and privileges which are enjoyed by employees as already discussed herein above. The economic reality test has its origin from the United States and was developed from the case of United States v. Silk. It establishes these differences by looking at whether the worker is managing his own account or he’s accountable to another employee. In conclusion, these tests and case law have played an important role in establishing the differences. However, the underlying difference which is of fundamental difference still remain on the fact that the rights which are enjoyed by the employees are far much higher than those of workers and independent contractors (Barrientos, 2013).
Implications for Employers and Employees
The proper classification of employees into worker, employees and independent contractors are twofold. It defines the obligations of the employers owed to these individuals in the organization. Secondly, it’s the defining yardstick on the degree of rights which can effectively be claimed, depending on the relationship. Whereas the employees are entitled to insurance cover, annual leaf and right to form unions, these rights cannot be enjoyed by workers and independent contractors. Employers too, based on this obligation are capable of classifying the workers and performing their tax obligations. It’s therefore worth concluding that an understanding of the obligations of these employees is important in defining that various obligations for both the employers and employees in any given organization (Cappelli, 2013).
Conclusion
It’s of importance that the difference between workers, employees and independent contractors be clearly defined in an organization. The existing legal instruments have not been satisfactory in addressing these differences as already noted in the body of this paper. However, the case law has been of much importance and it has played an important role in supplementing the existing legislations. These differences are of value in establishing the rights and obligations of employees and those of employers. This paper has therefore adequately addressed these differences, and this has been achieved through an analysis of the existing case laws and legislations.
