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Not easy to have single test on what constitutes contract of service

  • The Straits Times (4 January 2019): Employee or independent contractor - law needs to be clear
  • The Straits Times (8 January 2019): Not possible for law to be exact in classifying workers

Not easy to have single test on what constitutes contract of service
- The Straits Times, 16 January 2019

  1. We refer to Ms Corinna Lim and Mr Heng Cho Choon’s letters (“Employee or independent contractor – law needs to be clear”, Jan 4; “Not possible for law to be exact in classifying workers”, Jan 8) on the legal test to distinguish between an employee and a self-employed person (SEP).
  2. Whether a worker is an employee depends on the level of control that the company exercises over the worker. As noted by Mr Heng, given the wide variety of work situations, no single factor can be used.
  3. Rather, a range of factors is used such as whether a) the company has the obligation to provide work for the worker, b) the worker is obliged to accept work assigned by the company, c) the individual is required to personally carry out the work, d) the equipment and tools used to perform the work are provided by the company, and e) the extent to which the worker needs to comply with the company’s procedures and prescribed method of work. Whether the work is performed part-time or full-time is not a relevant factor. It is also irrelevant whether the contract itself stated that the worker is an independent contractor.
  4. This practice is consistent with other developed economies, and also reduces the risk that some companies may alter their work arrangements to avoid employment obligations while substantively still retaining control over the worker.
  5. In most situations, individuals work for employers under a clear contract of service with no ambiguity about their employment status or rights. Where parties are unclear about the nature of their contract and their rights and obligations, they should seek clarifications before accepting the contract. They can also approach the Ministry of Manpower or the Tripartite Alliance for Dispute Management for assistance.
  6. We take stern action against employers who misclassify their employees as SEPs in order to avoid their statutory obligations, and have helped about 100 such employees in the last three years recover their statutory entitlements.

Then Yee Thoong
Divisional Director
Labour Relations and Workplaces Division
Ministry of Manpower 


 Employee or independent contractor - law needs to be clear
- The Straits Times, 4 January 2019

  1. The recent case in which the Central Provident Fund (CPF) Board applied to recover nearly $417,000 in alleged CPF arrears from Jurong Country Club highlights the highly unsatisfactory state of the current legal distinction between employees and independent contractors (Judge rejects CPF Board's bid to recover $417k in alleged arrears; Dec 25, 2018).
  2. District Judge Jasbendar Kaur said that an inquiry into whether a person is an employee or independent contractor has to be fact-based, where a multi-faceted test is applied.
  3. The complexity of this legal test is unsatisfactory as it means that in many cases where workers are in less-structured working arrangements, parties are not able to say if the worker should be legally treated as an employee or independent contractor.
  4. We have encountered this question in our work with low-income women engaged in part-time work.
  5. For example, are cleaners who come in on a part-time but regular basis independent contractors or part-time employees?
  6. What about child minders who come in on an ad hoc basis?
  7. We tried to ask CPF and the Ministry of Manpower for advice, but they found it difficult to give a definitive answer due to the complexity of the legal test.
  8. This uncertainty makes it difficult for employers to do the right thing and, from our experience, some employers do take advantage of such situations to deny workers their rights.
  9. This law needs to be reviewed urgently, given the sharp rise in gig contracts in the new economy.
  10. In doing this, we should keep in view the need to promote practices that are fair to low-income workers.
  11. If the Government prefers not to change the current legal test, it can consider providing that, regardless of type of work contract, people who work a certain number of hours per month must be given CPF contributions and have certain other rights such as annual leave.

Not possible for law to be exact in classifying workers
- The Straits Times, 8 January 2019

  1. Statutes cannot be thoroughly explicit in classifying a worker as an employee or an independent contractor (Employee or independent contractor - law needs to be clear, by Aware; Jan 4).
  2. A worker is an employee when the business has the right to direct and control the work performed by the worker, even if that right is not exercised.
  3. Prima facie, a contract stating whether a worker is an employee or an independent contractor is not sufficient to determine the worker's status.
  4. Classifying an employee as an independent contractor with no basis for doing so makes employers liable for employment taxes.
  5. Certain employers who can provide a basis for not treating a worker as an employee may have the opportunity to avoid paying employment taxes.
  6. An individual who faces financial risk, bears all responsibility for profit or loss and accounts for all costs incurred in the pursuit of profit is likely to be determined a contractor.
  7. A contractor is paid per job as opposed to receiving an annual salary and uses his own equipment.
  8. An employee is obliged to accept work offered and won't be able to get someone else to do the work for him.
  9. Even the United Kingdom has not consolidated a comprehensive definition of the people to whom employment rights and duties apply.
  10. The contractual hallmark of the employment relation is the standardised implied terms that accompany it. The courts will construe the implied terms to reflect the reasonable expectations for the parties.
  11. Today, the employer is given the ability to vary the terms of work in accordance with business need. The courts have allowed this to continue so long as it does not contradict a contract's express terms.

 

Last Updated: 16 January 2019