Tests For Determining Employment Status And Vicarious Liability In A Case Study

Control test and integration test

Question:

Discuss about the Minister of Pensions and Insurance System.

In the case of Pipe Industries Ltd v Occidental Life Nominees Pty Ltd[1] it had been stated by the court that when an act is done in the course of employment by an employee, the act is binding upon the employer even if the act had not been authorized by him. Thus through the provisions of this case it is clear that if it is provided that a person A is an employee of a person B, than any act which is done by A during the “course of employment” would bind B in a way as if the act has been done by B. The injured party has the right to claim compensation from B where the negligence has been committed by A[2].

At common law whether a person is an employee or not is determined by putting in place particular legal tests which have been provided through and used by various cases. The cases and the test which have been provided by them in relation to the determination of employment status of a person are as follows.

Control test- The control test had originated from a landmark case in employment law which is -- Yewens v Noakes[3]. In this case the control test had been initiated by the court. It had been stated by the court in this case that the extent of control which a person has in relation to the work of other is used to determine whether the person in a contractor or an employee. The more the degree of control the employer has the likelier it is that the person employer for doing the work is an employee. Conversely if the person has less degree of control over the work done by the other the other person is likely to be a contractor.

However in the case of Cassidy v Ministry of Health[4] the court ruled that merely establishing control does not make a person an employee of the other. Thus the case provided another test which is called the business integration test. The court in this case stated that the more the work is integrated into the business the more likely the person would be an employee.

In the case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance[5] the court ruled that a single test cannot be used to determine whether a person is an employee or a contractor. Various elements needs to be analyzed together to determine the employment status of the person.  This test is known as the Multiple factor test. According to the principles of the test in order to ensure that a person in an employee or an independent contractor a three step analysis needs to be applied. In the first step it has to be analyzed that whether the person had the duty of providing personal services to the employer. In the second step the degree of control which the employer has on the person is analyzed. In the final stage it has to be established that all terms of the contract are in accordance to the contract for service and not for contract of services[6].

Multiple factor test

In the case of Digby v The Compass Institute Inc and Anor[7] it had been ruled by the court that the employer is liable the injury caused to the employees during the course of employment where the employer has failed to exercise reasonable care to protect the employees from such injuries[8].

Further it has been stated in the court of Scott v Jackson Garden Landscape Supplies Pty Ltd[9] that the employer cannot be held liable for the injury which has been caused to the employee where proper measures had been taken by the employer to avoid such injury such as a cleaning system being present in this case.

As defined by Holland, Burnett and Millington (2015) vicarious liability which is also associated to the Latin phrase “respondeat superior,” is the rule through which a person or entity is held responsible for the acts which have been done by any other person[10]. The rule is most commonly applied in the relationship between an employee and employer. The provisions have also been discussed in the case of Prince Alfred College Incorporated v ADC[11].

In the case of In Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd[12] the judge stated that the employer is liable to be held responsible in relation to the conduct of the employee during his or her job. However for the act to be considered in the course of employment the act must have been directed or authorized by the employer or the employer must have to be associated with the conduct. However it is not within the scope of liability of the employer to be held responsible for actions which have not been done in the course of employment[13].

The elements of vicarious liability have to be present in order to make an employer liable for the conduct of the employee. The main element which needs to be established in order to prove vicarious liability is that the agreement which was present between the employee and the employer has a condition which requires the employee to work under the control of the employer. The action must however be within the scope of employment of the employee[14]

In the given situation it has been stated that Tom has injured Annie and Fred has been injured due to the assumed negligence of Tom at the workplace owned by Will. In order to determine that whether Annie can claim compensation from Will, the provisions of Vicarious Liability along with the tests to determine employment has to be applied. If it is provided that Tom was an employee of Will and the act has been done in course of employment Annie would be entitled to claim compensation from Tom.

Employer's liability

It is been discussed through the above discussed cases that whether a person is an employee or an independent contractor is determined by deploying the control test, the integration test or the multiple factor test. It has only been discussed above that the above that the control or integration test are not alone capable of effectively determining employment. Thus the multi factor test has to be applied in the situation to analyze the relationship of Tom and Will.

It has been provided through the scenario that Tom is a house painter and uses his own work van and equipments to do his job. He also has a registered business.  Tom has been invited by Will to paint his shop. However for this he does not pay him cash but only beer bottles to which Tom agrees. Will has control over the way in which Tom will paint his shop as he directs him how to paint or what paints to use for the Job.

The case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance provides a three step test in relation to determining employment status. In the first step it has to be analyzed that whether the person had the duty of providing personal services to the employer. In the second step the degree of control which the employer has on the person is analyzed. In the final stage it has to be established that all terms of the contract are in accordance to the contract for service and not for contract of services.

Through the application of the first stage of the three fold test it can be stated that Tom has agreed to provide personal services to will in relation to painting his shop. Therefore the first stage of the three fold test is satisfied that Tom is an employee of Will. Through the application of the second stage of the three fold test the degree of control which the employer has on the person is analyzed. In the given situation it has been provided that Will controls the way in which Tom does his work and also directs him on what paints to use. Therefore it can be stated that Will has sufficient control over the way in which Tom works and the second stage of the three fold test is also satisfied in favor of the conclusion that Tom is an employee of Will. According to the third stage in the three fold test it needs to be proved that the terms of the contract between Tom and Will are predominantly in compliance with a contract for service rather than a contract for services. In the given situation Tom is not provided weekly or monthly remuneration by Will and is only being paid on a one time basis in form of the beer bottles. This suggests that Thomas nearly an independent contractor as he is not provided with regular remuneration. In addition it has been provided that Tom uses his own tools and van for the purpose of completing the paint work. An employee is usually provided with tools and equipments to do the work by an employer. Therefore in the given situation it can be stated that the type of the contract between Will and Tom also indicates that Tom is an independent contractor and not an employee. The facts of the case study further provide that Tom has a registered business under which he operates the painting job. An employee cannot have a registered business of his own and has to work under the control of the employer. Thus this provision of the arrangement between Will and Tom also suggest that Tom is an independent contractor rather than an employee. Thus through the application of the above discussed multiple factor, 3 fold test it can be stated that Tom is not an employee of Will but rather an independent contractor.

Conclusion

Thus through the application of the case of Prince Alfred College Incorporated v ADC it can be stated that as Tom is not the employee of Will he cannot be held liable for the actions which has been committed by Tom. The provisions of vicarious liability are only applicable when it is proved that the person who has indulged induction is under the control of the employer. In this case study it has been further stated that Will did not authorize Tom to be drunk and go on a bicycle. The act has been committed by Tom against authorization provided by Will therefore in the given situation Will cannot be held liable for the accident which Annie and Tom has been indulged into. Any loss which has been faced by Annie can be claimed against Tom but not Will as there was any employment relationship between them.

Through the analysis which has been discussed above I would like to advice Annie that she does not have any claim against Will as Tom was not in an employment relationship with Will when the accident took place.

Cassidy v Ministry of Health [1951] 2 KB 343

Craven, Judith A. "The Employment Relationship." NY Practice Guide: Business and Commercial 4 (2016).

Digby v The Compass Institute Inc and Anor 30 October 2015 [QSC 308]

Garrison, Joseph. "The New Restatement of Employment Law." Judicature 100 (2016): 30.

Holland, J. A., Burnett, S., & Millington, P. (2015). Employment Law 2016. Oxford University Press.

Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78

Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253

Prince Alfred College Incorporated v ADC [2016] HCA 37

Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497

Rose, Emily. "David Cabrelli, Employment Law in Context." (2016): 105-106.

Schipani, Cindy A., Frances J. Milliken, and Terry Morehead Dworkin. "The Impact of Employment Law and Practices on Business and Society: The Significance of Worker Voice." U. Pa. J. Bus. L. 19 (2016): 979.

Scott v Jackson Garden Landscape Supplies Pty Ltd [2015] QDC 018

Walsh, D. J. (2015). Employment law for human resource practice. Nelson Education

Yewen v Noakes [1880] 6 QBD 530