Are You an Employee or a Contractor? | You and the Law

By Dr. William Para Riviere

July 1, 2013

Mr. Able signed an agreement with a company named Sweepclean Inc. the terms of which are as follows. Mr. Able is to take care of the yard of the company's premises, particularly to mow the lawn, cut, trim and groom the trees, shrubs and flowers, and keep the compound clean, tidy and free of obstacles to vehicles and users of the yard. These tasks are to be performed "between 7am and 5pm," except on Saturdays, Sundays, and public holidays. Mr. Able is to provide all the tools, equipment and cleaning materials he needs. Sweepclean Inc. will pay $18,000 a year for the job in equal monthly instalments. But Mr. Able will be responsible for paying his own income tax and social security deductions; and he will receive no benefits from the company.

Mr. Able goes to the company's premises at 7am sharp and completes his tasks by 11am, after which he leaves for the day. The Company's Managing Director is quite satisfied with Mr. Able's work and compliments him. But Miss Givings, his duty, cannot stand idea of Mr. Able leaving work so early, and tells him he is in breach of his contract and from now on he must not leave before 5pm. Mr. Able is almost 100% certain that he is not in breach of contract but, because jobs are difficult to find, is afraid to confront Miss Givings.

At issue here is whether Mr. Able is an employee of Sweepcelan Inc. or an independent contractor doing a particular job for the company.

It might be said, to begin with, that the difference between the two is that an employee works under a contract of service, whereas an independent contractor works under a contract for services. But in practice this distinction has not been easy to draw. Because of this the courts have time and again laid down tests aim at clarifying the difference between the two.

The "Control" Test

An early test may be called the "control" test. The difference between an employee and an independent contractor was stated to be based on the degree of control which the employer exercised over the worker. In the case of an independent contractor the employer could order or require what was to be done, whereas in the case of an employee the employer could order not only what was to be done but also how it was to be done.

Take, for example, the case of Dinah, a domestic helper in the private household of Mrs. Fussy. Mrs. Fussy would most certainly tell Dinah how she wanted the work to be done, in which situation the arrangement would be a contract of service. Compare this with Mr. Patchwork, a plumber employed to re-lay the plumbing of the house. Mrs. Fussy's control could only go as far as to tell him to remove the old plumbing and put in new plumbing, not as to how he should do this.

This "control" test, while it proved satisfactory in simple domestic situations, has been found to be inadequate in today's highly-skilled business environment. That is so because today's companies employ under contract of service professionals who are so highly skilled and qualified that their employers are most of the time incapable of instructing these employees as to how to their work is to be done. For example, a pilot flying LIAT aircraft could not be controlled by the airline's owners as to how to fly the aircraft. Nor could the Ministry of Health dictate to a surgeon at the princess Margaret Hospital as to how to perform his surgery. Yet, the pilot is an employee of LIAT and the surgeon (who is not a consultant) is an employee of the State.

The difficulty confronting the courts was brought out in English case where it was held that a man who ran a sub-post office as part of a shop he owned was an independent contractor, not an employee of Her Majesty's Post Office. The court agreed that Her Majesty's Post Office controlled many of the man's activities. But it was of the opinion that this control was over finance and security not over the management of the sub-post office. That is to say, the man was told what to do but not how to do it.

The "Organisation" Test

Another test, thought to be more in tune with modern times, may be called the "organisation" test. The legendary Lord Justice Denning explained it thus:

"Under a contract of service, a man is employed as part of a business, and his work is done as an integral part of the business; whereas under a contract for services, his work, although done for the business is not integrated into it but is only accessory to it." Stated very simply, a worker is an employee if the job that he does is necessary for the business to function. Where the work is not part and parcel of what is required for the business to function, the worker is probably an independent contractor.

The "Multiple" Test

But this test and the earlier "control" test have been found to be inadequate by themselves. As a result of this, a third test called the "multiple" or "mixed" test has been adopted by the courts. The approach here is to look at all the facts in each case. The court will look, for instance, at the terms of the agreement on the whole to establish whether the intention if the parties were to enter into a contract of service or contract for services.

It will also look at the degree of control the employer has over the work done, and also at whether or not the employer is bound to provide work, as happens in the case of a contract of service.

Further, the court will consider the question of who is to perform the job. Is it to be done by the party himself, as is normal in the contract of service? Or, might it be done either by the party or by anybody approved by the employer, as is more likely for services. Consideration will also be given to the kind of work to be done and how regular the work is, as well as how the worker is to be paid.

Of importance also is who is to provide the tools, equipment and materials. It is the employer, as is more usual in a contract of service, or is it the worker, as is more likely in a contract for services?

Who pays Taxes and Social Security?

The court will no doubt look at how taxes are to be paid and statutory deductions, like social security contributions, made. Is that done directly by the worker, as is usual in a contract for services, or by the employer, as is the norm in a contract or service? It is not unknown however for a contract for services to contain a clause authorizing the employer to do these things on behalf of the worker. And, account will be taken of whether or not the worker is to receive benefits like vacation with pay, sick leave or uniform allowance, which are common in contracts of service but not in contract for services.

In effect, the court will make a determination on whether a worker is an employee or an independent contractor by looking at all the surrounding circumstances of the particular case, rather than at a single factor by itself. And, instead of laying down general rules to the applied to all cases, it will determine the outcome of each case on the specific facts of that case.

What, then, of Mr. Able? On the facts, the company tells him some of what he should do but leaves the details to him. It does not control how he does his work. He, not the company, is to provide tools, equipment and cleaning materials. The agreement does not state or imply that he must himself perform the job, or authorize the company to pay taxes and make social security deductions on his behalf. The fact that he receives a monthly pay check does not by itself make him an employee of the company; and, that he is to work "between 7am and 5pm" is more properly understood to mean that the job must be done anytime during these hours, on completion of which Mr. Able may leave, rather than that should start work at 7am and leave at 5pm. Ms. Givings may not like this. But, our opinion is that, in the circumstances of the above, Mr. Able would have a good day in court.