TORT 133 Employee and Independent Contractor — Law of Torts Notes for Judiciary

Employee and Independent Contractor: A Contract of Service and a Contract for Services

The distinction decides whether an employer answers vicariously at all, and it is therefore the first question in every claim against an enterprise for the act of a person working for it. An employee works under a contract of service and his employer is liable for his torts in the course of the employment. An independent contractor works under a contract for services and his employer is, as a general rule, not liable for his torts at all. The old test asked who controlled the work; it collapsed as soon as the courts had to deal with skilled work, because nobody in a hospital can tell a surgeon how to operate and yet the hospital plainly answers for him.

1. The Comparison

	Employee	Independent contractor
The contract	A contract of service	A contract for services
Control	The employer may direct what is done and how it is done	The employer may direct what is done, not how
Integration	His work is done as an integral part of the business	His work is done for the business but is accessory to it
Tools and equipment	Ordinarily supplied by the employer	Ordinarily his own
Remuneration	Wages or salary, at intervals, with deductions	A price for the job, or a fee
Risk of profit and loss	None. He is paid whatever the outcome	His own. He gains by efficiency and loses by delay
Delegation	Cannot send a substitute in his place	May ordinarily send a substitute
Hours and place	Fixed by the employer	Ordinarily his own to arrange
Other engagements	Usually exclusive	Free to work for others
Liability of the employer	Vicariously liable for torts in the course of employment	Not liable, subject to the exceptions

2. The Tests, in Order of Development

The test	What it asks, and why it was superseded
Control	Could the employer direct not only what work was to be done but the manner of doing it. Adequate for manual labour and useless for skilled work, since nobody directs a surgeon, a pilot or a chartered accountant in the manner of his work, and yet all may be servants
Integration or organisation	Was the work done as an integral part of the business, or merely accessory to it. Better for professionals, but the metaphor is difficult to apply at the margins
Multiple factor, or economic reality	The modern approach. No single element is decisive, and the court weighs control, ownership of tools, the chance of profit, the risk of loss, the power to delegate, the method of payment, the exclusivity of the engagement and the incidents such as leave, provident fund and tax deduction

Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance, [1968] 2 QB 497 states the modern position: a contract of service exists if the servant agrees to provide his own work and skill in return for a wage, agrees expressly or impliedly to be subject to the other's control in a sufficient degree, and the other provisions of the contract are consistent with its being a contract of service.
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, AIR 1957 SC 264 adopts the control test in India, holding the prima facie test to be the existence of a right of control in respect of the manner in which the work is to be done, while recognising that the nature of the control varies with the nature of the work.
Silver Jubilee Tailoring House v. Chief Inspector of Shops and Establishments, (1974) 3 SCC 498 moves away from control as an exclusive test, treating it as one factor among several and looking to the degree of integration and the economic realities of the relationship.
The parties' own description is evidence and is never conclusive. A document describing a person as a contractor does not make him one if the incidents of the relationship are those of employment, and the courts look at the substance.

3. Why an Employer Is Not Liable for a Contractor

He does not control the manner of the work, and vicarious liability rests on the enterprise's ability to direct, select, train and supervise.
The contractor runs his own business and carries his own risk, takes the profit of his own efficiency, and is expected to insure against his own liabilities.
The employer has discharged his responsibility by choosing a competent person, which is what the law asks of someone who engages a specialist precisely because he lacks the skill himself.
And the contractor is himself liable, so the injured person is not left without a defendant, which is the answer to the obvious objection.

4. The Exceptions: Where the Employer Answers Notwithstanding

The exception	Why the employer answers
He authorised or ratified the wrongful act	He is then a joint tortfeasor in his own right and the question of vicarious liability does not arise
He was negligent in selecting the contractor	This is direct and not vicarious liability. He engaged a person he knew or ought to have known was incompetent, or gave inadequate instructions
Extra hazardous or inherently dangerous work	Where the work carries a special risk of harm however carefully it is performed, the duty to guard against that risk cannot be handed over
Work on or near a highway	The duty in respect of operations on a public highway is non delegable, so a corporation answers for an excavation made by its contractor: TORT 106
Withdrawal of support and interference with a neighbour's rights	The duty not to withdraw support from a neighbour's land or building is owed personally
Strict liability under Rylands v. Fletcher	The occupier answers for the escape whoever brought the thing on to the land or allowed it to escape
A statutory duty cast on the employer	Where the statute places the obligation on him, the engagement of a contractor does not transfer it
The employer's own personal duties	The Wilsons and Clyde Coal duties to his workmen, and the duties of a hospital to its patients and a school to its pupils: TORT 103 and TORT 132

The exceptions are not really exceptions to vicarious liability at all. In each, the employer is answering for a non delegable duty of his own, and the contractor's carelessness is simply the occasion of its breach. That is why reasonable care in selecting the contractor is no answer: the duty was not to choose carefully but to see that the thing was done.
Collateral or casual negligence is outside them. Where the contractor's carelessness is incidental to the work rather than inherent in the risk the duty addresses, the employer is not liable, so an employer answerable for the danger of an excavation on a highway does not answer for a workman who drops a tool on a passer by.

5. Borderline Relationships

The hospital and its consultants. A hospital answers for the doctors, nurses and technicians it employs, and increasingly for those it engages, because its duty to the patient is treated as personal and non delegable: TORT 042.
The lent or borrowed servant. Where a general employer lends a servant to another, the presumption is that the general employer remains liable, and it is a heavy burden to show that the entire control has passed.
The owner and the driver of a vehicle. A person driving on the owner's business and with his authority makes the owner liable although there is no contract of service, agency supplying what employment does not.
Agency workers and labour supplied through a contractor. The court looks at who directed and controlled the work in fact, and dual vicarious liability is now recognised where the employee was so much a part of both organisations that each should answer.
Partners. A firm answers for a partner's wrongful act in the ordinary course of the business, the relationship being one of mutual agency rather than employment.
Relationships akin to employment. Vicarious liability now extends beyond the strict contract of service to relationships sufficiently similar to it, which is how religious and charitable institutions have been held liable for those who serve them without wages.

6. What a Plaintiff Should Do

Sue the wrongdoer and the enterprise together, and plead the employment relationship and, in the alternative, the exceptions and the enterprise's own personal duty.
Do not rest on the label in the contract. The description is evidence only, and discovery of the actual working arrangements, the payment records, the tax and provident fund treatment and the supervision in fact is what decides the question.
Plead direct liability alongside, since negligent selection, a non delegable duty and a defective system are all failures of the enterprise itself and survive a finding that the wrongdoer was a contractor: TORT 132.
Identify the risk the duty addresses, because the extra hazardous and highway exceptions extend only to the inherent risk and not to collateral carelessness.
And check the statute, since a statutory obligation cast on the occupier, the owner or the principal employer will often make the question of employment irrelevant.

⚠ Why the category has been stretched rather than replaced

The control test was built for a world of masters and servants in which the employer really did know how the work should be done, and every attempt to apply it to modern working arrangements has required a further qualification: control means the right to control rather than its exercise, and then ultimate rather than immediate control, and then control over what is done if not how. The courts could have abandoned the category and asked directly who ought to bear the risk, and occasionally they come close to doing so. They have not, for a practical reason. Vicarious liability is strict, and it can produce an enormous liability in an enterprise that did nothing wrong, so it needs a boundary that can be identified in advance, by the parties, by their insurers and by their advisers. A multi factor test applied to a known set of working arrangements gives an answer most of the time; an open enquiry into who should bear the loss would give one only after judgment. What the courts have done instead is to keep the category and relieve the pressure on it from two directions: by extending it to relationships akin to employment, and by developing the non delegable duty, which reaches the enterprise directly and makes the classification of the wrongdoer beside the point in exactly those cases, hospitals, schools, hazardous works, where the classification was doing the most damage.

7. The Position Stated Shortly

1. An employee works under a contract of service; an independent contractor under a contract for services.

2. An employer is vicariously liable for his employee's torts in the course of employment, and is not liable for a contractor's, subject to the exceptions.

3. The control test asks whether the employer could direct not only what was done but the manner of doing it, and fails for skilled work.

4. The integration test asks whether the work was an integral part of the business or merely accessory to it.

5. The modern multiple factor test weighs control, tools, the chance of profit, the risk of loss, the power to delegate, payment and exclusivity, and no single element is decisive.

6. Ready Mixed Concrete states the modern formulation, and Dharangadhara Chemical Works and Silver Jubilee Tailoring House chart the Indian movement away from control as an exclusive test.

7. The parties' own description of the relationship is evidence and never conclusive.

8. The exceptions cover authorisation or ratification, negligent selection, extra hazardous work, work on a highway, withdrawal of support, Rylands, statutory duties and the employer's personal duties.

9. The exceptions are in truth non delegable duties of the employer, which is why reasonable care in selecting the contractor is no answer.

10. Collateral or casual negligence by the contractor, incidental to the work rather than inherent in the risk, falls outside the exceptions.