With more employers embracing flexible working arrangements, it is important to understand what rights and obligations arise from different types of working relationships. In this article, we consider some of the key legal issues associated with common atypical working relationships, so employers can avoid the common pitfalls.
The primary risk for a company engaging contractors is that the contractors will be deemed to be employees of the company, and therefore entitled to the protection of employment law. This may also give rise to significant tax liabilities for the company. In determining whether or not the individual is, in reality, an employee, the Courts and Tribunal will look at a number of factors, including:
- the level of control exercised by the company over the individual;
- whether or not the individual is in business on his or her own account;
- the tax arrangements in place;
- the ability of the individual to subcontract the work; and
- the contractual agreement between the parties.
To reduce the risk of a contractor being deemed an employee, companies should ensure that the service contract governing the relationship is well-drafted, and free from provisions normally associated with an employment relationship, e.g. clauses dealing with holiday entitlements, sick pay, overtime etc. If possible, require the contractor to obtain independent legal advice before entering the agreement. Take steps to ensure that the reality of the situation reflects the contract, and that the contractor is not, in practice, being treated as an employee of the company.
Fixed Term Employees
Fixed term or specified purpose employment contracts are popular amongst employers, because they allow for the lawful termination of the contract once the fixed term expires, or the specific purpose has been achieved. However, employers must be aware of the protections afforded to fixed term employees under the Protection of Employment (Fixed Term Work) Act 2003 (“the 2003 Act”).
Fundamentally, the 2003 Act prohibits employers from treating fixed term employees less favorably than comparable permanent employees, unless the difference in treatment is objectively justifiable.
The 2003 Act also limits the use of successive fixed term contracts, by providing that the total duration of two or more successive fixed term contracts cannot exceed four years, unless there are objective grounds to justify the renewal. Objective justifications include the need to cover periods of protective leave, and to provide workers for a short-term project. Somewhat controversially, the moratorium on hiring in the public sector has been deemed not to constitute objective justification.
Employers can exclude the application of Unfair Dismissals legislation to a dismissal which arises solely by reason of the expiry of the fixed term contract, by including a term in the employment contract to this effect. However, this exclusion will not necessarily apply in the case of successive fixed term contracts. Further, the non-renewal of a fixed term contract may constitute a redundancy, if the role in question is not being replaced.
The Protection of Employees (Part-Time Work) Act 2001 prohibits employers from treating part-time employees less favourably than a comparable full-time employee in relation to conditions of employment, without objective justification.
While employers are under no legal obligation to allow a full-time employee work part-time, employers should always consider, and be seen to consider, any request made by an employee for reduced hours. Where an employer is not in a position to facilitate the employee, the employer should explain the reasons for this, in so far as possible. The Labour Relations Commission 'Code of Practice of Access to Part-Time Working' offers useful guidance for employers in this respect.
Agency workers are protected by the Protection of Employees (Temporary Agency Work) Act 2012 (“the 2012 Act”). The 2012 Act prohibits a hirer from treating an agency worker less favourably than a comparable directly hired employee in relation to basic working and employment conditions. The 2012 Act further requires hirers to ensure agency workers are afforded access to collective facilities and provided with information on job vacancies within the hirer.
Under Unfair Dismissals legislation, the hirer, and not the employment agency, will be liable for the unfair dismissal of an agency worker. Accordingly, every hirer should ensure that its contract with the employment agency contains appropriate indemnities in this respect.
Top Tips for Employers
• Consider what type of working arrangements best suit the needs of your business.
• Familiarise yourself with your obligations under the relevant legislation.
• Review your contractual agreements to make sure they are fit for purpose and contain appropriate language, exclusions, and indemnities, where applicable.
• If in doubt, seek legal advice.
The content of this article is provided for information purposes only and does not constitute legal or other advice.