Mutuality of obligation – the employer employee relationship

There are two distinct scenarios that can apply when considering mutuality of obligation. One is where the work is carried out on a regular, uninterrupted basis. The other is where it is carried out intermittently with breaks between engagements.

In the second scenario there are often two issues:

(1) is the person an employee or a worker b(or neither) when carrying out each engagement? and (2) if the person is an employee, does s/he have a global contract of employment that applies between engagements?

Context

We are frequently reminded that mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment. However, the real kingpin here is mutuality because without it, there can be no contract of any sort.

Only after the necessary mutuality has been identified and the existence of a contract thereby established, can one move on to consider whether that contract is a contract of employment or some other kind of contract. Where a person is actually working and being paid, there ought to be no difficulty in identifying the requisite mutuality. This is because the individual will normally be under a duty to do the work and the potential employer will be obliged to pay for it. The only issue will be whether the nature of the relationship between them is such that the individual is an employee or a worker or a fully fledged independent contractor.

Casual or intermittent workers

The question of whether there is a contract at all tends to arise more frequently where a person works for an employer but only on a casual or intermittent basis. The issue then is whether a global or overarching contract of employment exists in the gaps between the intermittent periods of actual employment. It is in that context that the courts, have emphasised that for such a contract to exist, there must be an ongoing mutuality of obligation between the parties. What the courts specifically look for in that situation is a positive obligation on the employer to provide the employee with work (or at least to offer work to the employee as and when it becomes available) and a positive obligation on the employee to accept work when offered.

Case examples

In the case of Younis v Trans Global Projects Limited the claimant appealed a tribunal decision that he was neither an employee nor a worker because of the absence of the necessary mutuality. He had worked for the respondent for 2 years under the terms of a letter of appointment which referred to his providing “consultancy services”. He was required to introduce the respondent to his contacts in the Middle East. The opportunity to work on those introductions had been unlimited. Although the respondent had agreed to pay him a daily rate when performing that function, the claimant had from the outset been paid a regular monthly retainer irrespective of the number of days worked. Whilst the test of mutuality had been satisfied, absent was the necessary degree of control for an employer-employee relationship.

In another case, the claimant worked as a home tutor for the respondent between 1988 and 1998. During that period she taught many pupils, each under a separate engagement. The length of the various engagements she took on during that period varied from a few months up to about 5 years. At no stage was the respondent obliged to offer the claimant work nor did she have to accept engagements that were offered. However, once she accepted an engagement, then, subject to normal termination provisions, she had to complete it and the respondent had to allow her to do so. For much of the 10 year period the claimant had a number of engagements in place concurrently but there were times when she had none in place. The issue was whether the claimant had been continuously employed by the respondent between 1988 and 1998. The tribunal had decided that she was. It found that during each engagement she was working under a contract of employment and that each of the times when she had no engagements in place was a temporary cessation of work. The respondent argued that the claimant was merely a casual worker who had a series of short, discrete, individual engagements and none of these were contracts of employment as they lacked the minimum of continuing mutual obligations. The Court of Appeal found that it did not matter that after the end of each contract the respondent was not obliged to offer the claimant another teaching engagement or that she was not obliged to accept one.

The upshot?

Temporary cessations of work can be a very effective way of getting around the mutuality test where there is expressly no obligation to offer work to a casual and no obligation on the casual to accept work that is offered.

Beyond that, though, when trying to categorise working arrangements and applying the mutuality test (to see if there is any contract at all), there are different questions to be asked depending on the circumstances.