Written statements of employment

Screen capture by Seán J Crossan

In the UK, the beginning of April is always an important period for employment lawyers because the British Government and/or the Westminster Parliament typically introduce new laws which directly impact on people’s terms and conditions of employment.

There is no such thing as one document which contains all the terms of an employment contract – something that my students and members of the public have difficulty understanding at first. It is important to grasp from the outset that there are various sources of the employment contract which include, amongst other things:

  • The written statement of the main terms and conditions of the contract (as per Section 1 of the Employment Rights Act 1996)
  • Employee handbooks (e.g. available on employer’s intranet)
  • Employer’s policies and codes of conduct (e.g. disciplinary codes)
  • EU Laws, Acts of Parliament and statutory instruments (e.g. Employment Rights Act 1996, Equality Act 2010, TUPE Regulations 2006, Equal Treatment Directives)
  • Judicial precedent and the common law (e.g. Walker v Northumberland County Council 1 AER 737)

Today new rules come into force about the written statement of the main terms of employment. Previously, only employees were entitled to receive such a document which had to be issued by an employer within 8 weeks of the commencement of employment (as per Section 1 of the Employment Rights Act 1996). Now, an employer must issue a written statement to both employees and workers from or before day 1 of their employment or engagement.

The written statement will contain important information about the contract of employment, such as:

  • The employee’s name
  • The employer’s name
  • Date when employment commenced and period of continuous service
  • The rate of pay and how often the employee is paid
  • Working hours
  • Holiday entitlement
  • Sick pay entitlement
  • Pensionable service and details of employer’s pension scheme
  • Notice requirements
  • Job title or brief JOD description
  • Whether the job is permanent/temporary/fixed term
  • The location of the employee’s place of work
  • The existence of collective agreements and how they affect the contract
  • Arrangements for working outside the UK (if relevant)
  • Details of disciplinary and grievance procedures

Furthermore, as a result of today’s changes to the law, the written statement must also address the following matters:

  • The hours and days of the week that the employee/worker must work for the employer and whether they can be changed and the mechanism for doing so
  • Entitlement to any paid leave
  • Entitlement to contractual benefits which have not already been addressed in the written statement
  • Probationary periods (if relevant)
  • Training opportunities provided by the employer

The legal status of the written agreement

The written statement is not the contract of employment itself because no single document could possibly encompass all the terms of such an agreement. There is nothing to stop the parties adopting the statement as the contract of employment, but it is important to understand that it can be varied or altered as a result of legislative changes, court decisions and collective agreements.

As of today, entitlement to leave for bereaved parents is being introduced; increases to the National Minimum and Living Wages come into force; and increases to a range of statutory payments are also taking place. With all of this going on, it would be very difficult – if not impossible – for any written statement to express the totality of the employment contract in any meaningful sense.

Failure to issue a written statement

Section 38 of the Employment Act 2002 gives employees the right to pursue an Employment Tribunal claim against an employer for failure to issue a written statement. This type of claim would usually be brought by an employee as part of another claim against the employer e.g. dismissal or discrimination claims. In such an instance, the employee would state on the Tribunal application (the ‘ET1’) that the employer had failed to issue written terms. It is always worthwhile submitting this type of claim as part of the bigger picture of the employee’s grievance because an Employment Tribunal could issue an award worth up to 4 weeks’ wages.

Any employee who is dismissed by the employer for requesting their statutory right to receive a written statement will have the right to pursue a claim for unfair dismissal in terms of the Employment Rights Act 1996.

An example of an extract taken from an ET1 form can be seen below:

Fictional example of an Employment Tribunal claim by Seán J Crossan

Employment status

The right to receive a written statement was, previously, a very important indication of a person’s employment status i.e. whether they had a contract of service in terms of Section 230 of the Employment Rights Act 1996 – as opposed to a contract for services.

In the leading House of Lords’ decision – Carmichael v National Power plc [2000] IRLR 43, two women who were engaged on casual as required contracts as tour guides at the (now demolished) Blyth Power Plant in Northumberland were not entitled to receive written statements of employment because they were engaged under a contract for services. There was no mutuality of obligation between the parties in that National Power was not obliged to offer the women work and the two women, if offered work, were not obliged to accept it. With today’s changes to the Employment Rights Act 1996, the two women in Carmichael would now be entitled to receive a written statement.

A link to the UK Government’s website which provides (free) access to a blank template for employers to generate their own written statement can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/183185/13-768-written-statement-of-employment-particulars.pdf

Related Blog Article:

https://seancrossansscotslaw.com/2019/02/11/employment-contracts-read-them-or-weep/

Copyright Seán J Crossan, 6 April 2020

California dreamin’?

Photo by Ross Sneddon on Unsplash

I’m currently in the fourth week of Semester 2 and I’m teaching Employment Law to a group of second year students. I usually begin this course by discussing the importance of an individual’s employment status.

In today’s world of work, the great divide very much rests upon whether a person has a contract of service OR a contract for services.

An employee is said to have a contract of service as defined by Section 230(1) of the Employment Rights Act 1996. Having this status potentially allows someone to acquire employment protection such as the right not to be unfairly dismissed; the right to a redundancy payment; the right to be the beneficiary of family friendly and flexible working practices.

After the first few lectures have been completed on employment status, I usually ask the students if they think this is an important issue?

Hopefully, if I have been doing my job properly and they have been listening to me, the penny will have dropped: it is more often better to be an employee than someone who works under a contract for services (e.g. zero hours workers, casual and atypical workers, freelancers and the genuinely self-employed).

There are notable exceptions (aren’t there always?): high earning British television celebrities (e.g. Lorraine Kelly) or a number of BBC news journalists have preferred to be treated as freelancers or self-employed persons. Why? They can then minimise their exposure to income tax liability in a way (often via the medium of personal service companies) that would not be possible because if they were employees they would almost certainly be taxed at source on a PAYE (pay as you earn) basis.

We have seen an explosion in the type of work that is often characterised or labelled as the ‘gig economy’. This work is often characterised by a distinct lack of employment rights; irregular working patterns; chronic insecurity; lack of long term career progression; and low pay. It is often impossible for such individuals to complete the necessary periods continuous service to acquire employment rights.

Companies such as Deliveroo, Lyft and Uber have become synonymous with the ‘gig economy’, as have whole sectors of the employment market e.g. catering, cleaning and hospitality services.

Admittedly, the UK Government of Prime Minister Theresa May (2016-19) did commission Matthew Taylor to review employment status. The main conclusion reached by the Taylor Review was that a minimum level of employment protection should be extended to workers – after all these individuals pay their National Insurance contributions too.

Links to the Taylor Report and the UK Government’s response can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/679767/180206_BEIS_Good_Work_Report__Accessible_A4_.pdf

In Scotland, the devolved Government has also established a Fair Work Convention with the aim of promoting better and progressive employment practices by 2025 (see the link below):

https://www.fairworkconvention.scot

Admittedly, an employee does not gain these rights from day 1 of employment. They become entitled to claim certain rights as they build up their continuous service with the employer. So, for example, an employee (generally speaking) has the right not to be unfairly dismissed in terms of the Employment Rights Act 1996 if they have completed 2 years of continuous service with the employer.

Meanwhile, on the other side of the world …

… or California dreamin’

It’s not just in the UK that debates about employment status are currently playing out. At the tail end of 2019, it was with particular interest that I read about a story from the United States which highlighted many of the issues which I have just been discussing in this Blog.

A study, carried out in 2015/16 by economists (Professors Lawrence Katz and Alan Krueger at Harvard and Princeton Universities respectively) calculated that “12.5 million people were considered independent contractors, or 8.4% of the U.S. workforce.”

https://scholar.harvard.edu/files/lkatz/files/katz_krueger_cws_v3.pdf

Interestingly, in 2019, Professors Katz and Krueger appeared to disown or play down certain of their findings – especially in relation to the number of American gig economy jobs:

https://edition.cnn.com/2019/01/07/economy/gig-economy-katz-krueger/index.html

Assembly Bill 5

The US State of California has just enacted a law, Assembly Bill 5 2019 or AB5 (known more popularly as the gig economy law) giving those individuals working in the gig economy more employment rights. The law came into force on 1 January 2020.

A link to AB5 as enacted by the California State legislature can be found below:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB5

In theory, AB5 makes it much more difficult for employers to classify individuals as independent contractors for services meaning that many more people will be treated as employees with the right to claim the minimum wage and the right to receive sick pay.

The Supreme Court of California laid down very strict criteria for determining whether an individual was an employee or an independent contractor in what is being referred to as the ‘landmark’ decision of Dynamex Operations West, Inc v the Superior Court of Los Angeles County 30 April 2018 Opinion S222732.

The case establishes the ‘ABC Test’ which operates on the presumption that individuals hired by an organisation or business are employees unless the hirer can show otherwise. In this case, the Supreme Court moved away from the ‘seminal’ Borello Test which had been the standard way of determining a person’s employment status since the 1980s. Critically, AB5 reflects the Dynamex criteria.

Essentially, the hirer must satisfy all three parts of the ABC Test in order to prove that an individual is a genuine independent contractor.

The criteria in ABC Test (as contained in AB5) can be set out as follows:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

The Dynamex decision is regarded as a landmark judgement because it overturns the Borello Test which had been the leading precedent for determining employment status in California since the late 1980s (see S. G. Borello & Sons, Inc. v Department of Industrial Relations (1989) 48 Cal.3d 341).

In Dynamex, the Californian Supreme Court made the following statement:

Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair competitive
advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees.

The Court noted, moreover, that:

In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees
is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled
.”

A link to the Dynamex judgement can be found below:

https://scocal.stanford.edu/opinion/dynamex-operations-west-inc-v-superior-court-34584

Legislators in other US States (New Jersey and New York particularly) have expressed a desire to follow the Californian example and Democratic US presidential candidates, Bernie Sanders and Elizabeth Warren are strongly in favour of this type of law.

As you would expect in such a litigious society as the United States, AB5 has already been the subject of a legal challenge (which was unsuccessful). Predictably, Uber and another company, Postmates, were at the forefront of this action.

This legal challenge was hardly surprising, given that The Los Angeles Times reported in August 2019 that Uber and Lyft intended to establish a campaigning fund worth $60 million to fight AB5.

A link to the story can be found below:

https://www.latimes.com/business/technology/story/2019-08-29/ab5-uber-lyft-newsom-lorena-gonzalez-ballot-tony-west

Conclusion

So, even in the land of free enterprise, it would seem that not everyone wants to be their own boss and many people would, in fact, be more than happy to welcome the recognition of their status as employees.

That said, AB5 has, surprisingly, not met with the approval of every worker or potential employee. The California performing arts community has experienced problems with the new law, mainly because of its use of the term ‘fine artist’ which was not defined. Fine artists are exempt from the provisions of AB5, but who exactly is a fine artist? No one seems to be sure and The Los Angeles Times reported that one opera company had cancelled performances because they were unsure whether performers were to be classified as employees (with the additional costs that this would entail) or whether they were genuinely independent contractors.

Lorena Gonzalez, the Californian Assemblywoman who drafted AB5 said that a definition of the term was deliberately omitted from the law and that it the responsibility of the State’s Employment Development Department to clarify this issue.

Readers will find links below to media articles about AB5:

https://apple.news/A_pjrttPvTDSMSpV-VMet8w

https://www.bbc.co.uk/news/business-49659775

https://www.latimes.com/entertainment-arts/story/2020-01-29/ab5-independent-contractor-california-2020-arts

Related Blog Articles:

https://seancrossansscotslaw.com/2019/04/19/the-gig-economy/

https://seancrossansscotslaw.com/2019/07/22/good-work/

https://seancrossansscotslaw.com/2019/03/22/hello-im-lorraine-and-im-definitely-self-employed/

https://seancrossansscotslaw.com/2019/12/21/employee-or-not/

https://seancrossansscotslaw.com/2019/01/17/employment-status/

https://seancrossansscotslaw.com/2019/05/08/call-me-an-uber/

https://seancrossansscotslaw.com/2019/03/25/strippers-are-workers-too-discuss/

https://seancrossansscotslaw.com/2019/02/14/horses-for-courses-the-equine-flu-affair/

https://seancrossansscotslaw.com/2019/04/30/paternity-leave/

https://seancrossansscotslaw.com/2019/02/25/the-work-life-balance-or-utopia-reimagined/

Copyright Seán J Crossan, 13 February 2020