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Contract of Service

There must be a contract, either express or implied.  

Why do we need a definition?  Tort law doctrine of respondeat superior holds employer liable for the torts of an employee; while taxation statutes require employers to deduct certain taxes from wages/salaries to employees

Various tests formulated to establish existence of a contract of service

Control test
To what extent is a person under the direction and control of the other person with regard to the manner in which the work is done?

Formulated in Performing Right Society, Limited v. Mitchell and Booker (Palais de Danse), Limited [1924] 1 KB 762, where McCardie J opined at p.767 that, “It seems, however, reasonably clear that the final test, if there be a final test, and certainly the test to be generally applied, lies in the nature and degree of detailed control over the person alleged to be a servant .”

Ready Mix Concrete vs Minister of Pensions [1968] 2 QB 497, ‘control includes the power of deciding the thing to be done, the means to be employed in doing it, the time when and the place where it shall be done’ at 515.

Works best in contemporary employment situations.
E.g. CPC Industrial Products (K) Limited versus Samuel Kirwa Kosgei High Court Civil Appeal 7 of 2003 (Eldoret) “the place of work was the premises of the appellant; the work was assigned by an employee of the appellant, Mr. Wendo; and the supervision of the work was also done by the same employee of the appellant.”

See the definition of an employee under the Income Tax Act, Cap 470 – “… employer has the power of selection and dismissal of the employee, pays his wages or salary and exercises general or specific control”
Issues – what about professionals?  Doctors, lawyers etc?

Integration Test
Formulated due to the pitfalls in the control test where the employee possesses skill that the employer does not have.

Stevenson, Jordan and Harrison Ltd v MacDonald and Evans [1952] 1 TLR 101 “Under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business.” Denning L.J.

Useful for those instances of specialised employees e.g. doctors and nurses in hospitals where control test is inappropriate, e.g. in Cassidy v Ministry of Health (1951) 2KB 598,  a resident surgeon in a hospital was held to be an employee, so that the hospital was liable for his negligence.

Multi Factor Test
No single factor is dispositive in defining employment status of a person

As the needs and practices at the workplace change, so too must the tests to be used in defining employment status.

Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance  laid out three conditions necessary for a contract of service to exist.
Provision of own work and skill in a performance of service for an employer
Element of control exercisable by the employer
Other terms of the contract are not inconsistent with the existence of a contract of employment
Multi Factor Test
1. The power of selection, the payment of wages, income tax, holidays and leave, power to suspend and dismiss
2. Mutuality of obligation and control and an irreducible level of personal service.
3. Factors such as
Contractual provisions
Degree of control exercised by the employer
Obligation of the employer to provide work
Obligation of the employee to do the work
The duty of personal service
Provision of tools, equipment, instruments
Taxation arrangements
Opportunity to work for other employers
Welfare provisions
Degree of financial risk assumed etc

Economic Reality or Entrepreneural Test
Analysis from a self-employed perspective – Is he in a business of his own?

Who bears the risk – the economic risk of being in business

Market Investigations vs Minister of Social Security [1969] 2 QB 173 – A company employed women on a part time basis to do market research.  They could work as they chose, but according to a set pattern.   Held to be employees
All relevant factors must be considered, none of the factors used are dispositive

 
 
 

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