ESM7030 - Case Law: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance
Point at issueWhether an owner-driver of a vehicle used exclusively for the delivery of a company’s ready mixed concrete was engaged under a contract of service or a contract for services.
FactsReady Mixed Concrete (South East) Ltd (“RMC”) was in the business of making and selling ready mixed concrete. The company had engaged an independent haulage contractor to deliver the concrete to customers but that contract was terminated and RMC decided to introduce a scheme whereby concrete was delivered by owner- drivers working under written contracts. The owner-drivers entered into a hire purchase agreement with Readymix Finance Ltd to purchase a lorry but the mixing equipment on the lorry was the company’s property. In 1965 the company asked the Minister of Social Security for a determination of the employment status of one of the owner-drivers, Mr Latimer.
Mr Latimer’s written contractual terms included the following
- he was entitled with the consent of the company to appoint a competent and suitably qualified driver to operate the truck in his place but this was subject to the company’s entitlement to require him to drive the truck himself unless he had a valid reason for not doing so
- he was responsible for paying any substitute
- he had to wear a company uniform
- he had to carry out all reasonable orders from any competent servant of the company
- he had to maintain the lorry at his own expense and pay its running costs
there was a mutual intention that Mr Latimer was an independent contractor.Other facts found were
- he did not work set hours and had no fixed meal break
- the company did not tell him how to drive the truck or what routes to take
- the nine owner-drivers in the depot arranged the dates of their own holidays to ensure that only one driver was away at any time and between them. They engaged a relief driver contributing equally to his weekly wage of £25.
- during the busy season the company engaged three or four additional drivers under contracts of service.
DecisionThe Minister decided that Mr Latimer was employed under a contract of service but, on appeal to the High Court, MacKenna J held that he was running a business of his own. In summing up MacKenna J said that Mr Latimer was a “small business man” and not a servant. He concluded that the contract was not one of service but of carriage.
CommentaryIn his judgment, MacKenna J considered what is meant by a contract of service. He said
“A contract of service exists if these three conditions are fulfilled.
(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.
As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job by one’s own hands or by another’s is inconsistent with a contract of service, though a limited or occasional power of delegation may not be….”This established that in order for there to be a contract of service there must be
- The worker has to be subject to a right of control. If there is no right of control of any kind then you will not have a contract of service. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor;
- Personal service must be given. However, the court did make the important point that a limited right of delegation was not inconsistent with a contract of service. This has been reaffirmed by later case law (see ESM7220); and
- the other factors present are consistent with a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.