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Imposition of Employee Obligations on a Contract for Services Results in a Contract of Services Relationship

Imposition of Employee Obligations on a Contract for Services Results in a Contract of Services Relationship

Ms M Dewhurst v Citysprint UK Ltd

Central London Employment Tribunal

2202512/ 2016

JL Wade, J

January 5, 2017

Reported by Linda Awuor & Faith Wanjiku

Download the Decision

Employment Law-Employees and workers-self- employed contractors-whether a self-employed contractor could be taken to be an employee on having been imposed on obligations of an employee by the employer-Employment Rights Act, 1996,section 230 (3)(b)

Brief Facts

The Claimant worked for the Respondent that ran as UK’s largest and fastest-growing same day courier business. It operated 365 days of the year and used about 3,200 self-employed couriers in Great Britain. It provided courier services for regular clients under service agreements, and also for one-off customers. The Claimant, who trained in architecture, agreed to the contractual document namely, Confirmation of Tender, on October 14, 2014 and since then she had worked as a cycle courier, latterly in the Respondent’s medical fleet which consisted of about 10 couriers. She had also worked for the Respondent on a couple of previous occasions.

The Claimant typically, though not invariably, worked four days a week, starting on circuit, as both sides called it, at around 9.30 in the morning and ending around 6.30 at night.  It was agreed that during that time she was generally busy moving from job to job, mainly in central London. Gaps in between jobs occurred sometimes and could range from 10 minutes to an hour around lunchtime if things were quiet. During that time she waited for work and, apart from perhaps having something quick to eat, was on standby.  That was how she wanted it because once on circuit she did nothing else except work. It was the Respondent which had the power to regulate the amount of work available and keep the couriers busy by limiting the size of its fleet.

The Claimant was working not for herself with the Respondent as her customer but on the Respondent’s behalf. Couriers out on the road on their own bicycle enjoyed a certain amount of freedom (sometimes that was the freedom to get very cold and, at worst, have an accident for which they received no sick pay) but the network of connections back to the Respondent was very sturdy. The Claimant and her cycle courier colleagues were:

  • Expected to work when they said they would.
  • Directed throughout the time that they were on circuit.
  • Instructed to smile during greetings and wear uniform.
  • Told what to do if the parcel could not be delivered as instructed.
  • Told when they would be paid and paid according to the Respondent’s formula after it had made deductions.
  • Told that they were part of the family who the Respondent described as their couriers on many occasions.

The Claimant’s documented working pattern was not fully unpredictable. She did quite often stick to the pattern which she argued for as Monday, Tuesday, Thursday and Friday her estimation being that she stuck to the agreed arrangement 95% of the time. Sometimes an irregularity in pattern would be holiday if that was recorded. Though there was a substitution clause in the contract, the Claimant provided personal performance to the Respondent and could hardly delegate it in a fundamental nature. The claim before the tribunal was that she had not been paid for two days’ holiday pay in respect of holiday which she took.

Issues

         i.            Whether the agreement between the parties amounted to a contract of services or one for services.

       ii.            Whether the Claimant was a worker under the Employment Rights Act.

      iii.            When the Claimant on being a worker was entitled to the amount of holiday pay she claimed and perhaps the amount that was payable for a day’s holiday.

Relevant Provisions of the Law

Employment Rights Act, 1996

Section 230 (3) (b) -Employees, workers etc…

(3)In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;

Held

  1. It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee. The argument of the employee is rather less attractive where, for many years, he accepts that he is a self-employed contractor and benefits from the rather more favourable taxation arrangements which are available to people running their own businesses. However, it seems that even where the arrangement has been allowed to continue for many years without question on either side, once the courts are asked to determine the question of status, they have to do so, on the basis of the true legal position, regardless of what the parties have been content to accept over the years. An employee cannot be estopped from contending that he is an employee merely because he has been content to accept self-employed status for some years.
  2. The legal test was whether the Claimant was contracted personally to carry out the work, which she was. Influenced  by European Union  law,  the emphasis  had moved  from  the  requirement  forensically  to  analyse  the  components  of  the contract to looking at its main purpose. An alternative way of putting it could have been to say that the courts were seeking to discover whether the obligation for personal service was the dominant feature of the contractual arrangement or not. If it was, then the contract lay in the employment field; if it was not, if for example, the dominant feature of the contract was a particular outcome or objective-and the obligation to provide personal service was an incidental or secondary consideration, it would lie in the business field. That was persuasively argued for as the dominant purpose approach. The substitution  clause  in the tender  document did not have the effect  that  the  Respondent  argued  for  thus  the Claimant  was contracted  to perform personal service.
  3. The natural and ordinary meaning of employed by was employed under a contract of service. The law drew a clear distinction between those who were so employed and those who were self-employed but entered into contracts to perform work or services for others. It drew a distinction between two different kinds of self-employed people. One kind were people who carried on a profession or a business undertaking on their own account and entered into contracts  with  clients  or  customers  to  provide  work  or services for them. The other kind were self-employed people who provided their services as part of a profession or business undertaking carried on by someone else.
  4. It was more difficult to have known whether the Claimant was a worker under an overarching agreement for four days a week. She did not always work those days and her days did not have set beginnings and ends. That question was complicated by the fact that some of the time she was not working was holiday time which would have counted as part of her working period had she been granted holiday pay. It seemed wrong to edit that period out of the calculation but it was impossible to tell what that period looked like precisely because there was no distinction between holiday and unpaid leave. She understood that she could not have logged on until she was ready to cycle in the direction requested by the controller.  She was a worker of the Respondent during the time that she was on circuit and it unlawfully failed to pay her for two days’ holiday.

Claim upheld.

Parties were to apply with suggested directions if they needed a remedy hearing.

 

Relevance to the Kenyan Situation

Kenya has laws regulating its employment sector, whether it’s self-employed or independent contractors or the basic employee-employer relationship. The Constitution of Kenya, 2010 provides in article 41(1) that every person has the right to fair labour practices. Article 41 (2) (a) goes on to state that every worker has the right to fair remuneration.

The Employment Act, No. 11 of 2007 is the main governing statute on matters employment. Section 2 on interpretation defines an employee as a person employed for wages or a salary. It goes on to define an employer to mean any person, public body, firm, corporation or company who or which has entered into a contract of service to employ any individual. Contract of service is then defined as an agreement, whether oral or in writing, and whether expressed or implied, to employ or to serve as an employee for a period of time.

There are also various tests to be employed when there is doubt whether a person is an employee. These tests have been used in some Kenyan cases. One of those tests is whether the person’s duties are an integral part of the employer’s business as decided in Beloff vs Preddram Limited [1973]. In Simmons Vs Heath Laudry Company [1910], it was stated that the greater the direct control of the employee by the employer, the stronger the ground for holding it to be a contract of service.

Halsbury’s Laws of England Vol I 26, 4th edition states that there is no single test for determining whether a person is an employee. The question whether the person was integrated into the enterprise or remained apart from and independent of it has been suggested as an appropriate test, but is likewise only one of the relevant factors, for the modern approach is to balance all of those factors in deciding on the overall classification of the individual. The factors relevant in a particular case may include, in addition to control and integration: the method of payment; any obligation to work only for that employer, stipulations as to hours; overtime, holidays; arrangements for payment of income tax and national insurance contribution; how the contract may be terminated; whether the individual may delegate work; who provides tools and equipment; and who, ultimately, bears the risk of loss and the chance of profit. In some cases the nature of the work itself may be an important consideration.

There are also Kenyan cases on the same that have decided on the difference between a contract of service and a contract for service. In Kenneth Kimani Mburu & Another v Kibe Muigai Holdings Limited [2014], the Respondents claimed to have employed the Claimants in contracts for service but the Court found that the Claimants’ roles were integral to the business thus were contracts of service. One was designated as the General Manager; the other as the Food and Beverage Manager. They would continue in their respective roles once the business re-opened. That indicated that the Respondent considered their roles integral to the business and was thus liable for their unlawful termination.

 In Maurice Oduor Okech v Chequered Flag Limited [2013], the Court found that there was no contract of services relationship between the Claimant and the Respondent. It was evidenced by job cards, local purchase orders and job contracts. It was not in contest that the Claimant was paid per each completed job. The documentation and mode of payment were not ordinarily found in an employer/employee relationship and the Claimant was not an employee of the Respondent but an independent contractor under a contract for services. The Claimant’s claim for unfair employment termination was therefore dismissed.

The above UK case is essential as it will serve as another important precedent in Kenya as to how the Courts are determining the difference between contracts of service and contracts for service in the employment sector.

  1. May 24, 2018

    its very important for every citizen to know the Kenyan Law

  2. June 22, 2018

    This is very interesting. What would be the best choice, if one had a one year project, and wished to employ staff for just that period?

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