Mutuality of Obligations and the Contract of Employment: Carmichael and Another v National Power plc

Abstract

Whether or not an employment relationship is characterised as a contact of employment, rather than a contract for services, or indeed some other type of contract (or even as not contractual at all) is a question which has consistently been answered inconsistently. The various tests proposed by the courts include the 'control' test,' the 'integration' test,2 the 'mixed' test3 and the 'economic reality' test.4 The question is of considerable practical significance, as many of the most important statutory rights, such as the right to a redundancy payment and the right to claim unfair dismissal, depend upon the existence of such a contract. In addition to satisfying one of the tests propounded in the cases cited, the courts have also required that the relationship contain 'mutuality of obligations'. This has been described as a second level of obligation, beyond the exchange of work for remuneration: 'the promises to employ and be employed'.5 Deakin and Morris have described this test as 'an exclusionary one the absence of mutuality will most likely defeat a claim of employee status without in itself being a sufficient condition.'6 The question of mutuality of obligations is of particular importance in respect of casual workers and homeworkers. Such workers may be able to establish that they work under a contract of employment in respect of each individual period of working, however short: so, in Mc Meecham v Secretary of State for Employment7 the Court of Appeal held that a worker working through an employment agency and described as a 'temporary self-employed worker' was an employee in respect of a single assignment, and was thus entitled to a payment from the Secretary of State on the insolvency of the agency. However, key statutory rights, notably redundancy and unfair dismissal, are dependent not only upon working under a contract of employment, but also upon establishing a period of continuous service. This can be done in two ways. Firstly, sections 210-212 of the Employment Rights Act 1996 provide that in certain circumstances continuity of employment is preserved, even though there are periods (of a week or more) where there is no contract of employment in existence. As long as for part of a week 'the employee's relations with his employer are governed by a contract of employment'8 that week counts towards