Contract of Services v Contract for Services

What is the difference between a contract of service and a contract for service?

In essence, a contract of service refers to the existence of an employer-employee relations. A contract of services is more commonly known as a contract of employment. A contract for service refers to the provision of a service by one party to another, without the existence of an employment relationship. Under a contract for service, the person providing the service is typically self-employed. 

What is a contract of service? 

A matter recently came before the Workplace Relations Commission on foot of a maintenance engineer bringing an unfair dismissal claim against a printing and packaging company. In short, the complainant claimed he was on a contract of services and was therefore an employee whereas the respondent argued that the complainant was on a contract for services and was therefore self-employed.

In short, the complainant began working with the respondent company as an apprentice in 1983. On completion of his apprenticeship, his employment was terminated. However, he subsequently established himself as a sole trader and approached the respondent company for maintenance work. This was agreed and the complainant spent the next 30 years working on the maintenance of the respondent company’s extensive equipment range.

The respondent company decided to install a full-time maintenance manager and therefore informed the complainant that his services were no longer required. On foot of this, the complainant initiated a complaint for unfair dismissal, arguing that the termination of his employment was grossly unfair and that he was afforded no natural justice.

When is a worker employed or self-employed? 

The Workplace Relations Commission accepted that defining an individual as either employed or self-employed is often far from clear cut.

The Adjudication Officer noted that “the landscape of legal precedents is extensive here and all academic & legal commentators agree on one key point - that there is no definite rule of Universal Application.”

Ryan in Chapter 3 of Redmond on Dismissal Law Bloomsbury 3rd Edition 2017 Page 35 refers to the issue as being “exceedingly difficult” to answer and has been debated in “Courts for Centuries”.

A range of legal Tests are referred to “but none is determinative”. Accordingly, each case has to be seen “in the light of its own facts and unique context”. The case of Denny v the Minister for Social Welfare [1998] I IR 34 is a good example of a case that had multiple legal outings and examinations by Courts and Tribunals and reached as far as the Irish Supreme Court.

Nonetheless ,in considering carefully to how to assess the work relationship, Edwards J. in Minister for Agriculture and Food v Barry - Minister for Agriculture and Food v Barry [2009] 1 I.R. 215 stated that it is unhelpful to speak of a “control test”, an “integration test”, a “fundamental test”, an “essential test” or a “single composite test” because none of these approaches constitute a test to deliver a definitive result. He further stated:

“The important thing to remember, however, is that every case must be considered in the light of its particular facts and it is for the court or tribunal considering those facts to draw the appropriate inferences from them by applying the general principles which the courts have developed. That requires the exercise of judgment and analytical skills. In my view it is simply not possible to arrive at the correct result by ‘testing’ the facts of the case in some rigid formulaic way.”

Accordingly, cases must be seen in their own lights and a degree of reasonable common sense applied.

Application of self-employment tests to the present case

In this instance, taking a reasonable common sense approach, the Workplace Relations Commission established that, on foot of the hours worked as well as the invoicing and taxing arrangements, the complainant was self-employed. 

The Workplace Relations Commission noted that the respondent company paid the complainant an annual sum that approached approximately €340,000. The Workplace Relations Commission held that this figure could never be construed as a wage or remuneration for a maintenance fitter. It noted that the complainant regularly supplied engineering parts and spares as requested, sourcing the parts and then applying a mark-up in price. Travel time was also charged by the complainant as well as VAT being applied to both labour costs as well as engineering part costs. 

In conclusion, the Workplace Relations Commission, noting the example of Mr Justice Keane above, determined that the complainant was effectively managing his own business, possibly unwisely in the long term, as he saw fit. For that reason, the Workplace Relations Commission found that the complainant could not avail of the protections afforded under the Unfair Dismissals Act.



Further Information

For further information, please contact the author of this article, Barry Crushell.