Dear Editor,
I thought that the letter under the caption ‘An employment conundrum’ by Mr EB John in your edition of June 26, 2009 would have generated some discussion amongst trade unionists, human resources experts and specialists, and most importantly employers, especially those from within the private sector.
Indeed, Mr John’s letter tacitly and indirectly refers to two broad types of employment relationship which exist in the business world and which are covered under either (i) a contract of service, more commonly known as the employment contract or (ii) a contract for services, which is used to describe a self-employment or independent contractor relationship.
The simple crux of the matter is that under the contract of service the obligations of the employer are huge, to the extent where he (employer) is said to be vicariously liable for the employee; however, his obligations are minimal under a contract for services.
It is not convenient to discuss the finer and more important distinctions between the two contracts at this forum, but I could say that under the employment contract the employer is obliged to pay the agreed wages, make all statutory deductions such as PAYE and NIS and remit them to the relevant authorities, grant leave with pay, and generally compensate the employee for all injuries sustained during the course of employment. However, under the contract for services the employer is not saddled with those responsibilities. In other words, under the latter, the employee or the workman, has to pay his own PAYE and NIS and if he is injured on the job the employer is not responsible or obligated to compensate him. Therein lies the mischief in this arrangement.
It is a known fact that many employers and businessmen, in an attempt to escape their legal responsibilities, skillfully lure the unsuspecting employee into entering into contract for services, the immediate benefits of which are always intended to be more attractive and enticing. Unfortunately, the ‘employee’ or workman only becomes aware of the precarious position he occupies when the relationship comes to an end, when the workman applies for leave or severance benefits, or when he is injured. It is only then that his folly is revealed. It is only then that the workman realizes that what really faces him is an employment conundrum engineered purely through deceit.
Trying to determine whether the workman is operating under a contract of service or a contract for services has occupied the attention of the courts, and many of the cases have concluded that it does not matter what name or label the parties attach to the relationship, but the nature and operation of the relationship. Thus some businessmen end up cheating themselves instead of the workman.
In this regard I find the speech of Lord Denning in the case of Massy v Crown Lift Insurance Company (1978), very informative. He said:-
“The law, as I see it, is this, if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it… An arrangement between two parties to put forward a dishonest description of their relationship so as to deceive the revenue would clearly be illegal and unenforceable.”
These remarks should need no amplification, but I wish to add in an earlier case, Ferguson v John Dawson & Partners (1976) when Lord Justice Lawton said:
“Maybe the law should try to save workmen from their folly, but it should not encourage them to change a status which they have freely chosen when it suits them to do so. In my judgment it would be contrary to public policy to allow a man to say that he was self employed for the purpose of avoiding the incidence of taxation but a servant for the purpose of claiming compensation.”
In common parlance Justice Lawton is saying that the workman cannot have two sweets out of one joint, but he is suggesting that there should be laws to prevent employees from being entangled by the conundrum being created by the businessman. I wish to reiterate by saying that it is easy to lure employees – especially the young ones – with tax-free wages, but the problem comes when they are injured or require compensation of some sort. Don’t be trapped.
Yours faithfully,
Francis Carryl
