THE NATURE OF EMPLOYMENT CONTRACT
Labor law statutes in Tanzania (i.e. Employment and Labor Relations Act (Act No 6 of 2004) the Labor Institutions Act (Act No 7 of 2004) and the Public Service Act, 2002 (Act No 8 of 2002) regulates the relationship between the employer and employee under the contract of employment. So the laws take care of the contract of service and not the contract for services. There have been problems as in the distinction between contract of service and contract for service; while the former is the relationship between the employer and employee the latter involves the relationship between the employer and independent contractor.
DISTINCTION BETWEEN THE CONTRACT OF SERVICE AND THE CONTRACT FOR SERVICES
In distinguishing between the contract of service and the contract for services there have been tests which have endeavored to make a clear distinction between the two. They include
2.1 Control test
2.2 Organizational test
2.3 Multiple test
In the case of STEVENSON JORDANS AND HARRISON LTD V MACDONALD AND EVANS [1952] 1 TLR 101 Lord Justice Denning at pp 110-111 stated it raises the troublesome question of distinction between a contract of service and a contract for services. The test usually applied is whether the employer has the right to control the manner of doing work. Thus in COLLINS V HERTS COUNY COUNCIL Mr. Justice Hilbert said
“The distinction between the contract for service and a contract of service can be summarized in this way: In one case the master can order or require what is to be done while in the other case he can not only order what is to be done but how it shall be done”.
2.1 Control test
This test determines the extent of control the employer has over the employee. This test was once dealt with in the case of GOULD V MINISTER OF NATIONAL INSURANCE AND ANOTHER (1951) ALL E.R 368 at 371in which the principles laid down in determining the control of the employer to the employee were stated reference been made from the case of SHORT V HENDERSON a case in which the House of Lords under the Workman’s Compensation Act Lord Hankerson (115 L.J.P.C) recapitulated with approval the four indicators of the contract of service i.e.
a) the master’s power of selection of his servant
b) the payment of wages and other remuneration
c) the master’s right to control the method of doing the work
d) the master’s right of suspension or dismissal
In the contract for service, the independent contractor is given what to do, how to do it remains on his own responsibility provided that he abides with the description and quality of the work so agreed upon by his employer.
In the case of WALKER V CRYSTAL PALACE (1910) 1 KB 87
A professional footballer was held to have a contract of service with the club. He was paid 3.50 pounds per week for a year contract, in which he was supposed to provide his playing services exclusively to Crystal Palace Football Club. He was given detailed rules about training and under whose direction he was during training. He was also expected to be available for training and matches. The club argued that he did not have a contract of service because, it asserted, it was essential that in such a relationship the master should have the power to direct how work should be done. In YEWENS V NOAKES Bram well J had defined a servant as
A person subject to the command of his master as to the manner in which he shall do his work
It was argued that this definition should not be applicable to a professional footballer who was hired to display their talents and skills. The control of the club is limited to deciding whether the player is picked for the team or not. Farewell J dismissed the argument on the basis that many workmen display their own initiative, like footballer, but were still bound by the directions of their master. In this case the player had agreed to follow detailed training instructions and to obey his captain’s instructions on the field.
“I cannot doubt that the is bound to obey any directions which the captain, as the delegate of the club, may give him during the course of the game – that is to say, any directions that is within the terms of his employment as a football player.”
It is difficult now, perhaps, to comprehend the attempts to fit a professional footballer into this concept of control.
The problem with this control test is limited in its application especially in distinguishing an employee and a self –employed.
In the case of LANE V SHIRE ROOFING COMPANY (1995) IRLR 493 at 495 the Court of Appeal recognized this
“First, the element of control will be important; who lays down what is to be done, the way in which it is to be done, the means by which it is to be done, and the time when it is to be done? Who provides (hires and fires) the team by which it is to be done, and who provides the material, plant and machinery and tools used?”
In situations which lacks clarity as whether a person is an employee or self –employed the court have reiterated to apply control test to determine the fate of the employee. The control exercise need not be done directly. In MOTOROLA LTD V DAVIDSON; (2) Melville Craig Group Ltd [2001] IRLR 4 concerned an individual who was engaged by an agency to work at Motorola’s premises. The individual was dismissed by the agency at the request of the company. The level of the control, even though exercised by a third party, was sufficient to establish an employment relationship between the company and individual.
2.2 Organisational test
This is sometimes termed as “Integration test”
Sometimes it is difficult to establish categorically the nature of employment relationship just by looking on control test.
Some of employees, because of their professional skills, the employer cannot be said to be controlling each and every conducts of such employees.
In the case of CASSIDY v MINISTRY OF HEALTH, Lord Justice Somerville pointed out that there are many contracts of service where the master cannot control the manner in which the work is to be done as in the case of captain of ship.
Lord Justice further stated that under the contract of service a man is employed as part of the business whereas under the contract of services his work although done for the business is not integrated to it but only accessory to it.
In the case of STEVENSON JORDANS AND HARRISON LTD V MACDONALD AND EVANS [1952] 1 TLR 101 Lord Justice Denning when he was trying to distinguish between the contract for service and contract of services stated that in the contract of service a man is employed as part of the business and his work is done as an integral part of the business.
A good example of a situation where an organizational test can easily be tested is in Hospital workplace.
◦ It is hard to see how the hospital management can exercise control over doctors who in surgical room.
◦ The only visible possibility of control here is in selection process other than in operation.
◦ However, it has to be distinguished here between a doctor who has been hired as an expert for a certain specific task (Independent contractor) and one who is employed as an employee.
In modern conditions the application of control test has diminished due to developments in production process. An employee can be highly skilled and qualified, and employed specifically because he has professional training and competence of a particular job so that the employer is frequently unable to instruct the employees as to how the work has to be done. This has paved the way for the development of Organizational test. In the case of CASSDY V MINISTRY OF HEALTH, Lord Justice Somerville pointed out that there are many contracts of service where the master cannot control the manner in which the work is to be done as in the case of captain of ship. Lord Justice further stated that under the contract of service a man is employed as part of the business whereas under the contract of services his work although done for the business is not integrated to it but only accessory to it
In the case of STEVENSON JORDANS AND HARRISON LTD V MACDONALD AND EVANS [1952] 1 TLR 101 Lord Justice Denning when he was trying to distinguish between the contract of service and contract of services stated that in the contract of service a man is employed as part of the business and his work is done as an integral part of the business.
The good example of the situation where a person is employed under the contract of service but the employer can not exercise control as stated by the control test is in the situation of hospital cases. In these cases the control of employees is done at the time of the selection of employees only. At this point the employer has to exercise due diligence in the selection of the employee, he must be satisfied with the skills of say a doctor or a nurse as it is difficult to exercise control as to how they are supposed to do their works. Take an example of a doctor who is the conduct operation to a patient there is no way in which the employer can control such an employee. In works of this kind which requires the professional know-how of the employee the employer can not intervene. Further that one has to note that where a doctor is called on by the employer as the consultant cannot be in the same footing as the doctor who is employed under the contract of service. He remains to be the independent contractor despite the fact that he uses the tools and premises of the employer.
2.3 Multiple tests
The emergence of organisational test did not automatically wither away the control test, there are situations in which the courts are faced with cases in which they fail to apply either of the two tests to solve them.
This has led to the formulation of another test i.e. multiple test. According to labour law scholars they argue that multiple test means the use of common senses.
The test is the combination of the control test and organisational test.
Several factors are considered under multiple test in order to draw a distinction between contract of service and contract for service. These are like;
◦ The power of selection of employee by the employer
◦ The payment of wages by the employer
◦ National insurance stamps
◦ Income tax
◦ Holiday monies and pensions; and
◦ The power to suspend and dismiss
This test was propounded by Lord Wright YOUNG V MONTREAL LOCOMOTIVE WORKS [1974] 1 DLR 161 at 169 that in many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties.
See also the following cases;
◦ READY MIXED CONCRETE (SOUTH EAST) LTD V MINISTER FOR PENSION AND NATIONAL INSURANCE [1968] 2 QB 497
◦ DPP V ELIATOSHA MOSHA & ANOTHER [1984] TLR 28
2.4 Multiple test
The emergence of organisational test did not automatically wither away the control test, there are situations in which the courts are faced with cases in which they fail to apply either of the two tests to solve them.
This has led to the formulation of another test i.e. multiple test. According to labour law scholars they argue that multiple test means the use of common senses.
The test is the combination of the control test and organisational test.
Several factors are considered under multiple test in order to draw a distinction between contract of service and contract for service. These are like;
◦ The power of selection of employee by the employer
◦ The payment of wages by the employer
◦ National insurance stamps
◦ Income tax
◦ Holiday monies and pensions; and
◦ The power to suspend and dismiss
This test was propounded by Lord Wright YOUNG V MONTREAL LOCOMOTIVE WORKS [1974] 1 DLR 161 at 169 that in many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties.
See also the following cases;
◦ READY MIXED CONCRETE (SOUTH EAST) LTD V MINISTER FOR PENSION AND NATIONAL INSURANCE [1968] 2 QB 497
◦ DPP V ELIATOSHA MOSHA & ANOTHER [1984] TLR 28
• Reflection under the Statute
S.61 of the LIA (Act. No. 7 of 2004) sets presumptions of who is an employee. The factors considered are;
◦ The manner in which the person works is subject to the control or direction of another person;
◦ The person’s hours of work are subject to the control or direction of another person;
◦ In the case of a person who works for an organisation, the person is a part of that organisation;
◦ The person has worked for that other person for an average of at least 45 hours per month over the last three months;
◦ The person is economically dependent on the other person for whom that person works or renders services;
◦ The person is provided with tools of trade or work equipment by the other person; or
◦ The person only works for or renders services to one person
See the definition of who is an employee under s.4 and 98(3) of ELRA, 2004.
The definition of an employer is provided under s.4 of ELRA.