Employment status: what is it and why does it matter?

“(1)      For the purposes of this Act, “employee” means—

(a) a person who is employed wholly or mainly in Bermuda for remuneration under a contract of employment;

(b) any other person who performs services wholly or mainly in Bermuda for another person for remuneration on such terms and conditions that his relationship with that person more closely resembles that of an employee than an independent contractor…”

Under s.4(2), the following specific categories of staff are expressly excluded:

(a) a person who is under the age of sixteen years;

(b) a casual worker;

(c) a part-time employee (someone employed for less than fifteen hours a week);

(a) a temporary employee (someone employed for no more than three months in any year);

(b) a student;

(c) a voluntary worker;

(d) Such other class of persons as may be prescribed by regulations.

The statutory definition therefore tells us that an “employee” can be someone expressly employed under a contract of employment, but can also be someone whose contract does not define them as an employee (they may, for example, be called a ‘consultant’, ‘contractor’ or ‘freelancer’) but whose terms of engagement in reality are closer to those of an employee.

In effect, clause (1)(b) allows an Employment Tribunal to disregard the label applied to a particular person’s contractual relationship and to instead examine its true substance. If that substance more closely resembles an employment relationship then the individual will be able to benefit from the rights set out in the EA 2000.

There is a lack of reported case law on this issue and so it is not certain how a Tribunal would go about this analysis, or what particular factors in its view would point in favour of the relationship being one of employment. However, there may soon be developments in this area which could provide some clarity. As discussed in last month’s article, the EA 2000 was amended last year to introduce a power for the Manager of Labour Relations to issue guidance as to the question of whether a relationship more closely resembles that of an employee than an independent contractor, although no such guidance has been forthcoming to date.

In the absence of Government guidance, it may be instructive to look at how the issue has been approached in other jurisdictions. In the UK, for example, the distinction between employee and self-employed status has been explored extensively. Workers in the ‘gig economy’ (ride share drivers and bicycle couriers, for example) in particular have achieved a number of notable successes before the courts in recent years.

From the wealth of case law in the UK, it is apparent that there are three key features of a relationship that must be present in order for it to be considered one of employment:

• Personal service: An employee is required to provide personal service, whereas the ability to send a substitute or subcontract the work would be consistent with self-employed contractor status;
• Control: In an employment relationship, the employer will generally control how the work is carried out and provide the necessary tools and resources. On the other hand, a contractor will generally be able to exercise a greater degree of autonomy in the performance of their contractual duties;
• Mutuality of obligations: This is the obligation on an employer to provide work and the corresponding obligation on an employee to accept it. The ability to reject work that is offered is more consistent with contractor status.

It is quite possible that a Tribunal in Bermuda faced with this issue would take similar factors into account. As such, and although the panel can look beyond the express wording of the contract, there are nonetheless certain helpful clauses that a company should consider including in its contracts with consultants, such as:

• A right for the consultant to subcontract the work or send a substitute in their place. The less power the company has to influence or overrule the choice of substitute/subcontractor, the less likely the relationship will be one of employment;
• A provision giving the consultant complete or partial authority to determine when, where and how the work is carried out and stipulating that they must provide their own tools and equipment;
• An indemnity from the consultant in favour of the company in respect of any losses or liabilities (including legal costs) that the company may incur as a result of the consultant seeking to bring claims based on an allegation that they have employee status (such as claims for paid leave, overtime pay or unfair dismissal).

While not determinative, such provisions may help the company defend a claim based on employee status, or at least act as a deterrent against a consultant seeking to bring such a claim.

This is an interesting – but as yet uncharted – area of employment law in Bermuda, and it is quite possible that the coming years will see notable developments in this space. Practitioners would be well-advised to keep abreast of this topic.

If you would like to discuss the issues addressed in this article please contact Bradley Houlston ([email protected]), the head of Appleby’s employment law practice.