Contract of Employment

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LG102 Principles of Commercial Law in Ireland 2007-2008
Dr Olivia Smith

Employment Law: Identifying the Contract of Employment

Reading: M. Forde, Employment Law 2nd ed. (Dublin: Roundhall Sweet and Maxwell, 2001) Chapter 2.

History
▪ the move from status to contract. Query whether a move back to status?

The protection afforded to individual employees under Irish employment law depends on a legal paradigm whereby the rights provided for are implied into the terms of the contract between the employer and the employee. Thus the starting point before any examination of these protections must be a consideration of the employment contract itself. While there is invariably an exchange of labour for capital in the arrangements made by the parties, we must identify the distinction between a contract of services and a contract for services in order to ascertain whether the relationship between the alleged employee and employer is in fact a contract of service and thus within the protection of the legislation.

The statutory definition of employee is based on the common law contract of service. An employee will be defined in such terms under the general run of employment legislation.

The criteria for distinguishing between a contract of service and a contract for services have been developed by the courts. Whilst the early tests propounded were based on the command and subordination element of the employment relationship, it soon was realised that the “control test” was an outmoded manner of determining the legal status of persons who work for others. A more flexible, mixed test has been preferred by the courts of late, of which control will only be one element. Thus, the approach today is hybrid in nature where a number of general principles (considered below) will be applied to the cases on an individual basis.

Importance of Contract of Service

1. Statutory protection. Statutory rights are generally given only to employees. For example, only employees with a contract of service may claim under the Unfair Dismissals Acts 1977 and 1993. It is important to check the wording of each piece of legislation carefully.

2. Vicarious Liability. Save in exceptional circumstances, an employer is not vicariously liable for the wrongs of an independent contractor.

3. Preference in winding up. When a company is in receivership or liquidation, debts to employees are treated as preferential debts, and will be paid before floating charge holders.

4. Tax and Social Welfare. Under tax legislation, employees are on tax schedule E and have PRSI deducted at source. Independent contractors are self employed, and make their own tax returns under schedule D. See the Leaflet: ‘Employed or Self-Employed: A Guide for Tax and Social Insurance’ (1998)

5. Trade union representation. In most circumstances, only those under contracts of service are represented by trade unions.

The Control Test.

In Roche v Kelly [1969] IR 108, it was stated that “the principal and determining test is the master’s right to direct servants as what is to be done and how to do it”. This test was developed in the nineteenth century, when the parties were still known as master and servant. It is still used in cases of vicarious liability. The control test has a number of problems. It is not suited for skilled workers, who are told what to but have discretion and responsibility as to how they do it. This point was made in In the matter of the Sunday Tribune (1984), where Carroll J. stated:

“The control test is no longer of universal application. In the present day when senior staff with professional qualifications are employed, the nature of their employment cannot be determined in such a simplistic way.”

It should also be noted that the control test is inconsistent with current ideas of “empowering” employees, and with concepts such as teleworking and e-working.

The Integration Test

The issue considered here is...
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