Contract of service relates to a person in employment as in the case of a domestic servant who is described as being in service whereas contract for services relates to a person who is self-employed and who provides services to clients.
The distinction between an employee and an independent contractor is important as certain legal rules apply to the parties in a relationship of employment which do not normally apply to other relationships. For instance, an employer is vicariously liable for the torts committed by an employee in the course of his/her employment, whereas an employer is not normally liable for torts by an independent contractor. Apart from that, there are certain obligations imposed on employers and employees as implied terms in a contract of employment which may not be owed by or to independent contractors. Furthermore, there are a number of statutes that apply only to employees and not to independent contractors, e.g. the Employment Ordinance, the Employees’ Compensation Ordinance and the Protection of Wages on Insolvency Ordinance.
To distinguish between these two concepts, the courts have developed some tests to help make this distinction, namely the control test; the organizational test and the entrepreneurial test.
To commence with, the control test implies that the greater degree control for a person in the manner of his work, the more likely employer and employee relationship. The test of control is not based on actual exercise of control, but the ability or right to exercise such control over the manner by which duties are done. Questions including what needs to be done; who decides how jobs are to be done; who decides the time and place for the job to be done; and whether the company has the right to select and dismiss the worker will be enquired for this test. In this case, although Anna paid tax and MPF as self-employed person, no evidence shows that she can control her time of work. It is also required by the music centre that her working hours last from 4:00 pm to 7:00 pm Monday to Saturday. Therefore, for the first test, the control lies in the music centre.
The organization test, a person under a contract of service the work done is an integral part of the business but not only carry out his own business as an independent contractor, the work done is not only accessory to it. This test is appropriate for skilled professional workers such as a doctor in the hospital. The concept of being integral to an organization can be analyzed from various angles. The questions such as is the person in reality running the business; does he share in the profits or losses as a result of providing his services; how is he remunerated; what degree of financial risk does he take. In this case, Anna got paid even when she is sick and she has no risk to bear due to her incapability in offering her service. She is also paid monthly with no extra profits from the music centre indicated even when more students took her courses. This test also demonstrated that Anna is employed by the music centre rather than self-employed.
The entrepreneurial tests are a modern approach and recognize that neither the control test nor the integration test will be adequate in all cases. It will be necessary to look at the entire arrangement, including the wording of contract, the measure of control and who pay the social security contribution. In this case, Anna is the person who pays her own MPF but it is rather difficult to determine comprehensively whether the test results are contract for service or contract of service as there is no further evidence including the wording of contract for analyzing.
It is said that no single test can be used to determine whether it is a contract for service or contract of services. The case should be analyzed as a whole by the court, and yet, all possible tests except entrepreneurial tests which has insufficient evidence, point to the fact that Anna is being employed by the...
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