Analysis of Terms and Conditions of Contract between Lisa Pitt and Sleek Cheeks Limited - Case Study Example

Employment Law There are several principles which provide a framework for gauging whether a worker is an employee or a privatecontractor. They are essential in determining the real nature of an employer /employee relationship. The first step would be to analyze the terms and conditions of service that the worker and the “employer” agreed on before the contract. The true intention of both parties at the time of contract engagement is very essential in determining their relationship. The parties’ statement as to whether they are employees or independent contractors is not validly taken as criteria. The true nature of employer /employee relationship can be established by exploring various tests which have been historically applied to determine such as relationship. The tests are control, “fundamental” and integration tests. Analysis of terms and conditions of contract between Lisa Pitt and Sleek Cheeks Limited According to S6 (3) (b) of the ERA, the law is clear that express statement of the relationship by any of the parties does not determine the true nature of their relationship. However, in the in s6 (3) (a) of the same Act, the law is clear that relevant matter which are included in the terms of contract either orally or in written form between the two parties is taken to be an indication that it was a mutual intention of both parties in determining the status of their relationship. The contractual rights and obligation between Lisa Pitt and Sleek Cheeks Limited was agreed between them mutually. Lisa Pitt was working for Sleek Cheeks Limited as fitness instructor and was paid a fixed amount per hour for each of the classes she offered. She takes at least six sessions a week, most weeks. Lisa is also paid more depending on the amount of people who sign up to the classes. She receives an engagement letter headed ‘consultancy agreement’ every thrice a year stating that she is an independent contractor and the other content reads: “It is hereby declared that it is the intention of both Sleek Cheeks Limited and Lisa Pitt that the latter is a self-employed person and is not entitled to any pension, bonus or any other such benefit from Sleek Cheeks Limited.” In this agreement, the relevant conditions indicate expressly that Lisa in an independent contractor as the fact that the ‘consultancy agreement’ was issued three times a year, Lisa was aware of the contents and it was done with her approval. This gives very reliable information that the nature of relationship was that of an independent contractor. The Intention of the Parties: Parties can decide the nature of their relationship. An “employer” can expressly tell a worker that it is either employment or independent contractor. Lisa’s contract is that of an independent contractor because Sleek Cheeks Limited engaged her services of a flexible basis and on a contract that expressly relayed their intentions. Lisa is paid on a flexible basis depending on the amount of people that sign up for her classes, she does not receive paid holiday, sick pay and pension contributions, there are no deductions on her salary and she is allowed to substitute herself when she is unwell. Furthermore, a contract expressly states that she is an independent contractor. Control test: The control tests seek to examine the level of control that an “employer” exerts over its workers. Workers who are under strict and rigid control are more likely to be in an employment relationship than workers who are very free in their workplace. In Lisa’s she is very free in how she conducts her work, that management of Sleek Cheeks Limited doesn’t interfere, manage or control her work. She works six sessions a week, most weeks which is even not guaranteed. She is very flexible that she also works for other health clubs, schools and organizations. She does not even wear work clothes with logos like other employees. Furthermore, she is free to substitute her sister when she is not available. We can conclude that Sleek Cheeks Limited exercised no control on how, when or what was expected of Lisa. She was guided by the terms and conditions of worked. As long the work was done, she would get paid. The Integration test: The Integration test examines how much a worker is assimilated to the entire work of the “employer” . A worker who is much assimilated in many aspects of an “employer” ’s work can be regarded more as an employee than an independent contractor. On the other hand, workers who only functions other accessory aspects of the “employer” ’s worker and not integrated into he mainstream business in an independent contractor. In our case, Lisa is not integrated to the mainstream and core business of Sleek Cheeks. Her business entails working only few hours a week as opposed to employees who work about eight hours a day. The fundamental test: The fundamental test purposes to establish if a worker performs their functions knowingly on their own account or for someone else. This can be evaluated by considering the tax status of Lisa. Lisa’s wage is not deducted of tax or national insurance. She makes files her own tax returns and makes her own payments after being paid by Sleek Cheeks. She also chooses and supplies her own music and compact discs and pays for a copyright performance license amounting to £200.00 per year for her own capital. An employee would not go a mile as paying that amount unless it was an independent contractor. Lisa in by all means an independent contractor and not an employee. Advantages for Sleek Cheeks Limited if Lisa is self-employed An independent contractor has several advantages to the “employer” as opposed to having an employee. First, they save financial resources of an “employer” . Up-front financial requirements of an independent contractor may be high but in aggregate they are very cheap and they rate depend on their productivity to the company. Sleek Cheeks Limited saves a lot of money by having Lisa as an independent contractor as opposed to her being an employee. They are not given the responsibility of remitting taxes and national insurance and holding the payroll taxes, insurance and they are also saved the task of determining the correct amount of money to remit to the government as she is paid monthly without tax and national insurance deduction and is responsible for paying her own taxes. Lisa also makes payment for a copyright performance licence amounting to £200.00 per year. In the contract, Sleek Cheeks Limited makes it clear that she is an independent contractor and therefore, she is not eligible for pension, bonus or any other such benefit, she is also not entitled to normal payments on paid holiday, sick pay and pension contributions which accrue to employee of a company. The company also pays her a fixed rate but her pay increases depending on the number of people who sign up for her classes. This enables Sleek Cheeks Limited to pay her according to her performance. According tot his analysis, it is evident that Lisa saves Sleek Cheeks Limited a lot of money as opposed to if she was an employee as she would be entitled to all the benefits mentioned above. Independent contractors are selected because of their abilities, professionalism, competent and reputation. That is what makes them famous and attract a lot of attention from the customers. Independent contractors are highly skilled and trained with regular update of skills. Therefore, an “employer” does not need to contact a trainer to train his employees so as to be doing the training. This saves the company time and resources. Lisa is a fitness and aerobics trainer of repute. She has many clients for her services in Sleek Cheeks Limited and a number of other health clubs, schools and organisations. She also hires a hall where she provides local children with a one hour dance class twice a week. It is obvious that Lisa is a very competent trainer and also productive as opposed to if Sleek Cheeks Limited was to offer training to their own employees so that they could be training their clients. In this case Sleek Cheeks Limited is paying for the actual worth of the output instead of training. Independent contractors keep the staff flexible. There are a lot of regulations which control the employees do not function which independent contractors because they are not employees. The “employer” is saved from liabilities and expensive regulations as a result of non-compliance especially if the business deals with high rates of seasonality which means there will be alternating seasons of employment and unemployment. By working with Lisa, Sleek Cheeks Limited is able to determine when her services are not popular and thus can easily let her go until a time when they need her again. Sleek Cheeks Limited is also able to hire Lisa only for training fitness and aerobics and lay her off without counting on expensive costs and procedures of firing and pensions. Working with independent contractors reduces exposure to lawsuits. Employees have a lot of rights and privileges under law. They are thus able to bring law suits against the “employer” in case of violation of such rights. But independent contractors are not covered by such rights and privileges. Lisa would not have any right to bring lawsuits against Sleek Cheeks Limited after termination of her services as she is not an employee. She is not entitled to take a leave unless she can substitute her services with someone else; she is not entitled to a minimum wage as her services are paid according to her productivity. Potential claims Ethel may have against Sleek Cheeks Ltd Ethel can sue Sleek Cheeks Ltd for unfair dismissal. This right is guaranteed for her under the Employment Rights Act 1996. Unfair dismissal claims are heard in the Employment Tribunal. Employees must have worked for that “employer” for 1 continuous year and Ethel has worked for Sleek Cheeks Limited for six years which qualifies her to claim for unfair dismissal. Furthermore, Ethel did not receive any notice for termination of her services. Her “employer” are just frustrating her job as cleaner yet she has been doing the same job for six years straight. Ethel should present her claims to the employment tribunal within three months from the time of termination of her services. Ethel will be required to show proof of her dismissal by her “employer” as a condition for establishing a dismissal claim. In this case, she has very tangible evidence as her “employer” gave her a letter stating that she has been dismissed and the company does not wish to see her again. She can establish a constructive dismissal where she was forced to resign as a result of frustrating behaviour of the “employer” impacting negatively on her work. Ethel has been working for Sleek Cheeks Limited for six years and despite the fact that they are very specific about their cleaning, she has always done a good job all this while. Ethel operates with a duty rota which dictates what she is supposed to be doing and at what time. However, her “employer” would leave her notes listing specific jobs and how they must be done. Ethel did not take this lightly which promoted her to reply to her saying “Clean your own toilets if you don’t like the way I do it.” She received a wring from her boss who made her very angry and she decided to go slow on cleaning the toilet for a whole week. This is what earned her a dismissal letter. There is no lawful reason for her dismissal as her “employer” did not establish any fair reason for her dismissal. Sleek Cheeks Limited would only have a fair dismissal of Ethel if they can establish a fair reason for dismissing her. Fair reasons include but not limited to; Capability; this refers to the fact that an employee does not serve the purposes of which he was employed in the first place with the same competence an diligence as expected by the “employer” at the time of entering into a contract with the “employer” . This could not be the reason for dismissing Ethel considering she has been competent for six years. Conduct; this refers to the behavior of an employee. If an employee is behaving unethically and immorally while in employment, the “employer” can establish conduct as a fair reason for dismissal. This is not the case with Ethel as she has not been reported to engaging in unethical behavior. Redundancy; this refers to a situation where the company is forced by close down or reduce some of its employees as their work can comfortably be handled by less employee. In this case, an employee can fairly dismiss some of its employees. Redundancy will not be established in this case as Sleek Cheeks Limited is not laying off workers as a result of redundancy. Once Ethel has established that she was unfairly dismissed, she should seek legal redress from an Employment Tribunal. The procedure at the Employment Tribunal Although the employment tribunal is impartial, its initial assumption is that the “employer”, Sleek Cheeks Limited, has a case to answer for unfair dismissal of its employee, Ethel. The unfairly dismissed employee is required to submit a form (ET1) together with a fee to a regional tribunal office. They also explain their grievances explaining whether other dispute resolution mechanisms have been employed on the case in the workplace. Ethel will therefore present her documents and indicate that there have not been any dispute resolution measures at the workplace to handle her case. The date of the hearing is then set after this. Before the main hearing, the tribunal will set dates for the exchange of documents between Ethel and Sleek Cheeks Limited, another one for the exchanges of witness statements. Both Ethel and Sleek Cheeks Limited will need to collect witnesses, take their statements and also present them to the tribunal at the time of hearing since the employment tribunal prefers to use witnesses as opposed to only their statements. The date of the main hearing will then be set outlining the hearing date, estimated time and the directions for preparing for the hearing. The main hearing of the employment tribunal claim will be done before a tribunal comprising of 3 members which are two lay members and an Employment Judge. This proceeding will take place in a public place and the media is also invited. During the trial, the two parties will be cross-examined by either eh other or their representatives. Ethel’s cross-examination will be aimed at establishing her claim while that of Sleek Cheeks Limited would be to defend themselves. Other parties involved in this tribunal would be staff members who will issue their statements as witnesses. Evidence will be given by sworn statement on oath. After cross-examination by each party, the tribunal reserves the right to re-cross-examine the witnesses and ask either arties questions any time. The parties wrap up their submissions after all evidence have been given. At the end of the hearing or at a later date, the tribunal will present their judgment in writing. The settlement will them take place privately between Ethel and Sleek Cheeks Limited or they would be assisted to settle their claim through the help of Acas. Cause of action in relation to the outcome of the Employment Tribunal decision After losing in the employment tribunal, Ethel has an opportunity to seek for a review of the case and the decision by giving reasons for why she thinks justice was not served. For example, Ethel may feel that the tribunal made a mistake by not considering some of the most material evidence in the case, she may have been absent at the time of hearing of the case by some unavoidable circumstances, also, she may have realized new evidence which was not presented in the hearing but has just appeared. This step must be taken within 14 days after the final decision of the tribunal. Another step Ethel can take is to appeal to the Employment Appeal Tribunal. Ethel should seek legal redress from the Employment Appeal Tribunal if she strongly feels that the employment tribunal committed a huge legal injustice by making a decision in favor of Sleek Cheeks Limited. Decisions of the employment tribunal can only be reviewed when Ethel feels that the mistake made was minor such as clerical errors or other human errors. But, if she feels that the employment tribunal misapplied the law or acted irrationally to favor the Sleek Cheeks Limited for any reason, she cannot seek for a review as it will produce the same results. Such case can only be solved by an Employment Appeal Tribunal which will have fresh application of law. The appeal is time- constrained and therefore does not take a lot of time for the hearing to take place. Ethel will be required to pay a fee for the rehearing of the decision. There will be a complete re-hearing of the case where a decision has been reached against Ethel when she presents evidence to the Employment Appeal Tribunal that the Sleek Cheeks Limited treated her very badly she was forced to resign. The tribunal procedure takes the same process as the tribunal case. The hearing date is set where both parties appear before the tribunal either in person or through their representatives. As the “employer” , Sleek Cheeks Limited will present their evidence first then followed by Ethel. Cross-examination will follow where both parties will have an opportunity to examine the other party. The new evidence or issue brought under appeal is examined during cross-examination and the witnesses will be questioned well on this matter to present their views. The tribunal will then question the two parties relating to the unfair dismissal. After closing with their submissions, the tribunal will request for written submissions of the evidence. 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