Case update (2): Employment status – self-control not enough

Summary: Does a low level of control over staff and the delegation of day-to-day duties mean that there is no employment relationship?

No says the Court of Appeal in White & Anor v Troutbeck SA [2013].

Background: In order for an individual to be an employee, the following criteria must apply:

• The individual must carry out the work themselves and not pass it to a substitute;
• The employer must have control over the work that is done; and
• There must be an obligation for the employer to offer work and an obligation for the employee to accept it (‘mutuality of obligation’).

If any of these boxes is not ticked, then the individual is not an employee and, depending on the circumstances, will be either a worker or genuinely self-employed.

The second of these factors (the ‘control’ test), will turn on the precise facts of each case, but a recent Court of Appeal decision has thrown some light on the up to date interpretation of ‘control’.

Facts: Two individuals were engaged as caretakers on a farming estate on behalf of the family owners via an offshore company. The family lived abroad and were rarely in residence, but expected the estate to be maintained ready for their occasional visits and the individuals took care of the house and grounds. Although this was a written arrangement – the agreement referred to White and Todd as “employees” – the terms of agreement were vague. Also, there were no fixed hours and they were able to undertake other work, if they so chose.

A dispute occurred and the individuals brought claims for unfair dismissal and argued that they were employees. The Tribunal decided that as the owners did not exercise “day-to-day control” over the individuals, they were not employees. The individuals appealed.

The EAT allowed the appeal. The EAT pointed out that the question of control is not determined by whether the individual has day-to-day control over their own work but rather by whether a contractual right of control over the worker has been retained. Although the two caretakers were allowed autonomy in the way that they carried out their duties, the family owners still retained ‘ultimate control’ and a contractual right to step in at any time and give instructions to them. It was also pointed out that in the modern workplace many workers, including skilled professionals, have a great deal of autonomy in the way they carry out their work.

The Court of Appeal dismissed the family owners’ appeal and confirmed that the absence of day to day control is no longer the determinative factor. There was a sufficient degree of control over the individuals to preclude them being independent contractors and the relationship between the parties recorded in the ’employment agreement’ presented the principal elements of employment.

Implications: Establishing employment status means looking at a number of factors, starting with any contractual terms and what they say. Control is an important indicator, amongst others. However, what this case now clarifies is that the delegation of day-to-day duties does not mean an employer has divested himself of the ultimate right to exercise control and does not preclude an employment relationship.