Contract Of Employment And For Service

CONTRACT OF EMPLOYMENT AND FOR SERVICE CONTRACT OF EMPLOYMENT AND FOR SERVICE By M. Irfan Arif Sheikh; Advocate, Lahore In the prevailing business atmosphere of the country, there are a lot of problems in the field of employment. The relationship between both, the employer and the employee is not clear vis‑a‑vis the duties and obligations they are to perform. The problems have arisen because, we sometimes become unable to distinguish as .to what kind of a contract is a contract of service. Hence, this problem gives rise to a mass of litigation in the Courts. The lack of clarity of law on the point creates social problems. It is utmost necessary to consider the salient legal rights and duties given or imposed by the contract of employment, an agreement sometimes also called the contract of service. The first question would be that, who is an employee? Our starting point must be, therefore, to find out who is bound by that contract? The question may seem both simple and unnecessary, but it is in fact fundamental to an understanding of the labour law. The difficulties arise on the one hand because many people work for others without being their employees and on the other because if the employment relationship does exist, a mass of legal and financial responsibilities apply. The burdens upon employers include, for example their own and their employees' national insurance contributions deductions, payments to redundant employees, liability for unfair dismissal, and various stringent safety duties. A direct result has been a tendency among some employers to use the services of the self‑employed and so to try to escape some or all of these liabilities. But this development has created certain social and legal problems. The Acts of Parliament impose many of the employer's duties, but the Acts do not address our original question. In effect they say only: 'Where there is a contract of employment the following obligations arise ....' and leave others to decide exactly what sort of contract exists in any given situation. In the last resort this task falls to the Judges. To enable them to decide whether a particular contract is one of service' ‑‑ made with an employee‑‑ or 'for services' ‑‑made with an independent contractor ‑‑ the Judges have put forward a number of different tests or standards. These can perhaps best be understood if first we look more closely at the nature of the problem. . A person is not an employee simply because he receives and obeys orders, or is paid for his work. When a householder engages a contractor to paint the house or to build an extension, he or she will probably give the contractor very precise instructions and supervise his work very closely, but the contractor does not thereby become the householder's employee. A person who takes a taxi and directs and pays the driver accordingly is not then the driver's employer. The contractor and the driver are either someone else's employees or in business on their own account. In either event so far as the person who buys their services is concerned they are clearly what the law calls independent contractors. But if orders and payment do not of themselves prove employment, what does? Certainly the question is not resolved by finding which tax schedule the worker is in, or by asking whether someone pays National Insurance contributions on his behalf. The second question shall be the test of control? The Judges therefore recognize that they must look at all aspects of the relationship to see what its legal effect is‑‑the type of work, the nature of the orders given, the method and frequency of payment‑‑whether by price or lump sum or by a wage, the length of service, power to dismiss, the understanding between the parties and so on. No one factor by itself is likely to be decisive, this effectively means that the answer to the question will depend on the particular facts of each case. However, in so far as we can find any basic test or standard by which to begin to assess the facts, it is probably the long‑ established one of 'control'. The basic proposition is quite straightforward‑ the more control A exercises over B's work, the more likely A is to be the employer and B his employee. This is sometimes called the 'What to do and how to do it' test. If one person can tell another not only what job to do but how it is to be done‑‑and when, where, and with whom‑‑he has such a degree of control as makes him in law the employer. But if in effect A can only say 'Do this', and must then leave B to decide how it is done, the contract is probably for services and the relationship that of principal and independent contractor. This inquiry is of course all a matter of degree. In contracts for services the buyer or principal may well specify in considerable detail the standards he requires, which may represent a substantial element of control. And conversely in a technological era most do not have the technical knowledge necessary to tell each and every employee how to do his or her work. Sometimes it helps to rephrase the question as: 'who has the ultimate right to tell this worker what to do and how to do it?' An illustration is Mersey Docks and Harbour Board v. Coggins, 1947. the Board hired a crane and driver to a firm of stevedores. While working under the stevedores' supervision the driver negligently injured a third party. The Board was held liable because the driver's expertise was such that the stevedores could not direct him as to how to do his job, and in any case the Board supplied and continued to control the use of capital equipment, the crane. The tests can again be divided into integration and multiple tests. Often enough, however, it is clear that the control test is inadequate. Other ways of looking at the same problems have been put forward. For example, the test was said to be whether the work done was an integral part of the enterprise (resulting in a contract of employment) or only an incidental or ancillary part, e.g., such as might be provided by a consultant (and so a contract for services). But while an employee's work may well be an integral part of the enterprise, does it follow that all integral work can only be done by employees? Under a 'multiple' test, all relevant factors must be considered. Latterly the question has even been "Was this contract a contract of service within the meaning which an ordinary person would give the words? Which is perhaps as good a way as any of admitting defeat. Whatever approach is taken, the decision in each case is regarded as a question of fact, and so cannot be appealed against, unless clearly perverse. In the circumstances then the best we can do is just to look at some particular sets of facts and see the Judges response to them. For example Hamid is a taxi driver working for Shahid, who owned the taxi. The arrangement between them was that Shahid maintained the vehicle and paid for all the petrol, while Hamid worked as a night driver for as long as he thought fit, paying Shahid a fixed percentage of his takings. Hamid is assessed for tax purposes as self‑employed, but on the other hand paid an employed person's contribution towards the cost of the National Insurance stamp. Eventually Shahid sold the vehicle and Hamid claimed redundancy pay (pension ‑‑ which he was only entitled to if he were an employee. Very much influenced by Hamid's ability to decide when he would work and for how long, the Court can conclude that he was an independent contractor. The example illustrates in passing that payment of an employee's National Insurance Contribution does not ‑of itself prove the relationship of employer and employee. The issue of control versus self‑determination is well‑illustrated in Davis v. New England College, 1977 Mr. Davis was taken on at the college as a freelance teacher, responsible for his own tax and insurance. He was nonetheless, held to be protected against` unfair dismissal because from day to day he was supervised to the same extent as other teacher employees. It may be particularly difficult to determine the status of company directors. A director self‑employed on the basis that he made his own national insurance contributions, received 'fees and emoluments' and not a salary, and there was no written service agreement (though that is not of itself conclusive). In such a case the director is normally an office‑holder and not an employee, and that positive evidence is needed to displace that presumption. Now to look on the temporary and agency work. Temporary or periodic work is another, problem area. For example, a market research company used a particular woman's service as interviewer. There being no continuing relationship between them‑‑the company did not promise to call upon her and she did not promise to be available‑‑‑nor was there any agreement as to notice, holidays, etc. As and when she did the work, however, she was instructed in the technique and the type of questions to be asked. She will certainly be considered as an employee because although the job lasted only a few days at a time the company had complete control over the way it was done. This situation may contrast with the situation where 'regular casuals' working from time to time as waiters were held not to be employees despite the high level of supervision over them. The determining factor is the absence of any obligation to provide work or on their part to accept what was offered. The same question will arise, where a person is sent to a job by an agency. Who if anyone is the employer? Again there can be no overall answer. A person on an agency's books does not necessarily bind him or herself to accept, all offers, nor does the agency usually control the conditions of work. But the hirer may not be the employer either, since, among other reasons, the 'temporary' may work unsupervised or be so highly skilled as to make it impossible for the hirer to supervise his work. Now let us ponder upon the 'lump' problem. Many different tests or criteria have been suggested any where. Any one test may in my view be substantially relevant in one case but largely irrelevant in another. This is as we have said essentially a question of interpreting the facts of each particular relationship. One should bear in mind that it is the realities of the situation that one must look at, not the express or implied declarations by the parties concerned as to what they consider to be its legal attributes. Dealing with the business industry circumstances in which it is contended that A is an independent contractor and not the servant that one would expect him to be. One suspects that this is an arrangement, which is beneficial to both sides. It is, therefore, not perhaps surprising to find two participants purporting to come to an arrangement with the outward and visible labels of independence, with the absence of income‑tax and other levies. These again, however, are indications but no more. They are in no way conclusive and have to be taken into account with all the other indications. The tax aspects of self‑employment have, to some extent, been resolved by Finance Act rules. Basically the requirement is that a main contractor shall deduct tax and insurance from any payment made to a sub contractor who sub‑contracts to others. A sub‑contractor is any‑one engaged in construction contract work, including a labour agency or supplier of equipment, but not just a person who delivers material or provides canteen or office staff. Construction operations include building and demolition work, power line development drainage, and other similar jobs, but not interior or exterior decorating, landscape development, or professional services. The tax deduction rule does not however apply to sub‑contractors in the building industry who are companies or who holds exemption certificates. Now to discuss the divided liabilities. Once the evidence establishes a contract of employment, all the consequential rights and duties usually attach to the person or company who is the employer. But by law, at least, it is possible for a man to serve two masters.. So for example while the duty to pay and the right to dismiss the employee usually remains with his regular or general employer, someone who uses his labour might temporarily assume a similar degree of responsibility for his safety. As far as the law is concerned, it seems safe to say that the general employer will have considerable difficulty in proving that the duty of care has passed from himself to the particular of temporary employer. In principle, the duty is one that cannot be delegate and so he remains liable for the system of work adopted by the temporary employer. When labour is hired out, the general and particular employers usually agree as to who shall be liable for injury or loss. The only point to note here is that a third party, which suffers such injury, is not bound by their terms of that contract. He sues whoever appears to be the employer under the general rules of law considered above, and the two employers then settle their liabilities in accordance with the contract. MR. JUSTICE MIAN MUHAMMAD AJMAL, JUDGE, SUPREME COURT OF PAKISTAN Mr. Justice Mian Muhammad Ajmal son of H.M. Muhammad Din Sahib was born on 15th August, 1939. lie took Master Degree in Economics in 1963 and did LL.B. in 1965. He was enrolled as Pleader on 4‑8‑1965; as Advocate High Court on 21‑10‑1968 and Advocate Supreme Court on 16‑11‑1976. He has served as Part‑time Lecturer in Provincial Civil Service Academy, Peshawar (1972); Special Public Prosecutor for D. P. R. cases (1976‑77); Special Government Pleader for Government cases (1978‑80); Legal Advisor and Standing Counsel of Cantonment Board, Peshawar (1979‑80); Law Officer, Advocate‑General's Office, Peshawar (1980‑84); Assistant Advocate -General, N.‑W.F.P. (1984‑88); Additional Advocate‑General, N.‑W.F.P. (1988‑90); Deputy Attorney‑General for Pakistan (1990‑91); Visiting Professor, Islamia Law College, Peshawar (1990‑91); Appointed as Additional Judge of the Peshawar High Court on 29‑9‑1991 and Judge of the Peshawar High Court on 29‑9‑1993. Mr. Justice Mian Muhammad Ajmal, as Judge of the Peshawar High Court has served as Judge Special Court for Speedy Trials, Peshawar; Judge Banking Court, N.‑W. F. P.; Chairman of the Tribunal of the‑N.‑W. F. P. Bar Council, Peshawar; Chairman, Labour Appellate Tribunal, N.‑W.F.P.; Member, N.‑W.F.P. Subordinate Judiciary Service Tribunal; Member, Syndicate, N.‑W.F.P. University of Engineering and Technology, Peshawar; Member, Review Board, N.‑W.F.P. Election Tribunal for disposal of election petitions relating to General Elections 1993 and 1997 and Acting Chief Justice, Peshawar High Court, Peshawar from 18‑3‑1999 to 22‑3‑1999. He was nominated for the title 'Man of the year 1998' by International Board of Research American Biographical Institute Inc., U. S. A. He was appointed as Chief Justice, Peshawar High Court, Peshawar on 6‑1‑2000. During the period from 6‑1‑2000 to 27‑4 2000 he remained Member of the Supreme Judicial Council, Pakistan Law Commission, Chief Justices' Committee and. Al‑Mizan Foundation as senior‑most Chief Justice amongst the Chief Justices of the High Courts. Mr. Justice Mian Muhammad Ajmal was elevated as Judge, Supreme Court of Pakistan on 28-4-2000. MR. JUSTICE HAMID ALI MIRZA, JUDGE, SUPREME COURT OF PAKISTAN Mr. Justice Hamid Ali Mirza was born on 14‑9‑1940 at Jacobabad, Sindh. Did his matriculation, B.Sc. and LL.B. in 1954, 1959 and 1961 respectively from Sindh University, Jamshoro. Practised as an Advocate from 1961 to 9‑12‑1973 before joining the Provincial Judicial Service on 10‑12‑1973 as Senior Civil Judge and Assistant Sessions Judge; promoted as Additional District and Sessions Judge on 20‑2‑1976 and served in this capacity at Karachi, Sukkur, Nawabshah and at many other places of the Province of Sindh. During his eight years' stay as Additional District and Sessions Judge, he had the privilege of serving as O.S.D. Law Reforms, High Court of Sindh, Karachi for around two years. During this period he also attended the Advance Course conducted by NIPA, Lahore. He was promoted as District and Sessions Judge on 26‑1‑1983 and served in this capacity for over twelve years. He also served as Judge Small Causes Court, Karachi from 26‑1‑1983 to 25‑3‑1983 and from 10‑9‑1984 to 1‑7‑1985. He had the distinction of remaining the Registrar of the High Court of Sindh twice from 26‑3‑1983 to 9‑9‑1984 and from 6‑6‑1994 to 9‑4‑L995. He remained the Solicitor, Government of Sindh for five years from 18‑9‑1985 to 18‑9‑1990, and Chairman, Appellate Tribunal for Local Councils of Sindh from 26‑9‑1991 to 25‑9‑1992. Mr. Justice Hamid Ali Mirza was elevated as Judge, High Court of Sindh on 10‑4‑1995. In addition to duties as Judge, he also remained as Member Syndicate, University of Sindh, Jamshoro twice from 28‑5‑1995 to 23‑12‑1997 and from 3‑6‑1998 to 27‑4‑2000; Trustee Agha Khan Medical University and Hospital, Karachi from 24‑2‑2000 to 27‑4‑2000; and is holding the post of Member, Election Commission of Pakistan since 1‑12‑1996. Mr. Justice Hamid Ali Mirza was elevated as Judge, Supreme Court of Pakistan on 28‑4‑2000. He has visited Saudi Arabia, the United Kingdom, the United States of America, France, Turkey and Syria.