Thursday, April 18, 2024

EVERYDAY LAW: Contracts need evaluation


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From our discussion in previous articles, it should have become clear that no single factor will determine whether a contract of service exists. Various factors will have to be weighed and will assume greater or lesser significance, depending on the facts and circumstance of the case.
The British case of Ready Mix Concrete (South East) Ltd vs Minister Of Pensions And National Insurance (1968) illustrates the importance of considering the different elements of the contractual relationship. In that case Mackenna J. propounded what has come to be known as “the multifactor” or “multiple test”.
In Ready Mixed Concrete, the minister had argued that the company was liable to pay National Insurance contributions in respect of a driver who was engaged by the company for the purpose of delivering concrete.
The driver took a lorry on hire-purchase from an associated hire-purchase company; the lorry was painted in the company’s colours and insignia; the driver wore the company’s uniform; he was responsible for the maintenance and repair costs of the vehicle; if he was ill and unable to perform his duties, he could hire a substitute driver.
In a judgment that is very often cited, Mckenna J. laid down the criteria for a contract of service.
He observed: “A contract of employment exists if these conditions are fulfilled: (i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service to his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with a contract of service.”
Based on the fact that several of the factors under (iii) above pointed to a contract for services (for example the driver being required to paint the vehicle and his ability to hire the substitute driver), the judge held that there was a contract for services.
In explaining condition (iii) above, Mackenna J. gave some examples, four of which are set out in the following extract from his judgment.
“The third and negative condition is for my purpose the important one, and I shall try with the help of five examples to explain what I mean by provisions inconsistent with the nature of a contract of service. (i) A contract obliges one party to build for the other, providing at his own expense the necessary plant and materials. This is not a contract of service, even though the builder may be obliged to use his own labour only and to accept a high degree of control: it is a building contract. It is not a contract to serve another for a wage, but a contract to produce a thing (or a result) for a price. (ii) A contract obliges one party to carry another’s goods providing at his own expense everything needed for performance. This is not a contract of service, even though the carrier may be obliged to drive the vehicle himself and to accept the other’s control over his performance; it is a contract of carriage. (iii) A contract obliges a labourer to work for a builder, providing some simple tools, and to accept the builder’s control. Notwithstanding the obligation to provide the tools, the contract is one of service. That obligation is not inconsistent with the nature of a contract of service. It is not a sufficiently important matter to affect the substance of the contract. (iv) A contract obliges one party to work for the other, accepting his control, and to provide his own transport. His is still a contract of service. The obligation to provide his own transport does not affect the substance. Transport in this example is incidental to the main purpose of the contract. Transport in the second example was the essential part of the performance.”
Since the above decision, very often courts have applied the approach of weighing the several factors present in the employment relationship.
It should not be thought that it is merely an arithmetical approach where one counts the factors in the contract for and against a contract of service.
In Sagicor vs Carter et al (2007), Sir David Simmons makes the point by his approach to the decision in that case. He observed:
“I have avoided an evaluation of the contracts based upon a mechanistic or arithmetic calculation of the factors pointing towards a contract of service vis-a-vis a contract for services.
Rather, I have allowed myself to stand back from the mass of information provided by counsel in order to understand the business realities and to make an informed, considered and qualitative appreciation of the entire arrangements as disclosed in the evidence. I think that the answer to the question raised in the originating summons [that is, whether the defendants were employees or independent contractors] required an evaluation of the overall effect of the detail, which is not necessarily the same as the total of the individual details.”
• Cecil McCarthy is a Queen’s Counsel.


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