The common law answers the question of who is an employer straightforwardly. The employer is one party to a contract that has the characteristics of a contract of employment. The employer is the party that issues instructions and pays the wages. Dr Prassl calls this the ‘unitary concept’ of the employer. The main objective of his book is to challenge this ‘unitary concept’ as no longer fit for purpose in modern labour market conditions. While many will agree with that contention, it is much harder to know how best to replace it. Dr Prassl argues for a modest development rather than a radical replacement of the ‘unitary concept’ of the employer. That pragmatic approach has many attractions, and Dr Prassl argues his case with great learning and panache. The question remains, however, whether his proposals for reform, tied closely as they are to the current law, will serve to address the major problems that must be addressed by a new concept of the employer.
What exactly are the problems that need to be addressed? Ever since the beginning of industrialisation, and perhaps earlier, the unitary model encountered difficult fact situations, where the precise identification of the employer or master was problematic. For instance, in many lines of business a foreman actually did the hiring and firing and paid wages to a gang of workers, but all of them worked for a business owned by a master. Who was the employer? – the foreman who managed the men or the master who supplied the capital and received the profits? Was the foreman a sub-contractor or more like an agent of the main employer? No-one was sure. Uncertainties of this kind generate two major kinds of problems in the application of employment law.
The first kind of problem may be labelled the ‘no employer black hole’ or NEBH for short. This problem arises, for example, in connection with temporary agency workers. Such workers may or may not have a contract with the agency, though it is almost certainly not a contract of employment despite the agency undertaking to pay wages in the event that any work is done for a client. And the agency workers certainly don’t have an express contract with the client for whom they are working, though the client does direct and control their work. Aside from a few anomalous cases, the English courts have concluded that agency workers in general do not have a contract of employment with anyone. It follows that they also do not have anyone against whom they can claim any statutory rights including basic rights such as those provided by the law of unfair dismissal and anti-discrimination laws. They are in the NEBH : the no-employer-black-hole.
The second kind of problem is a kind of mirror image. Here a worker does have an employer, but there are several businesses that cooperate to perform the functions of an employing entity. The difficulty here is that the employer identified by the contract test or unitary concept is not in reality the business entity that is taking adverse action against the worker. Any claim against the employer under the contract might be defeated on the ground that this immediate employer is not responsible for the unlawful conduct. Instead the business that is really making the decision may be a parent company or some other entity that has effective control over the employer. This avoidance of responsibility for decisions and actions is not an accident: on the contrary, in my view, a great deal of the legal framework of business organisations, from the limited liability company, to the group of companies, to the prevalence of sub-contracting is all constructed through legal forms to minimise responsibility for an employer’s obligations, whether those be employment rights or tax. For instance, an employer is under a legal obligation to consult workers in the event of planned redundancies, but if the decision to shut down a plant is made by a parent company, there is little point in the workers talking to the local managers rather than head office, but unless special rules are developed, the obligation to consult is confined to the immediate employer. All these business structures are created to ensure structures of organised irresponsibility, and the reason why they are often successful is a consequence of the primary role given to the unitary concept of the employer. If the only business entity that can be regarded as the employer is the party to the contract, other business entities that are performing employment functions cannot be held responsible for adverse actions against the employee.
Having described these two problems (and some variants), albeit in different terminology and in much greater detail over 150 pages of helpful and fruitful analysis of a wide range of cases, official reports, and scholarly literature, including an excursus into German law, in the second half of the book Dr Prassl proposes to offer a solution to what he calls at the beginning of the book a ‘tension’ – that is the tension between the unitary idea of an employer and the reality of multiple employing entities – though by page 152 it becomes a ‘contradiction’. He acknowledges that he will be adopting a normative approach, that is, to make proposals for reform of the law. However, he insists that his proposals for reform will do no more than build on existing foundations of the law, though taking them in directions that will address the two problems highlighted above. It is worth reflecting for a moment on this methodology and the ambitions for his study.
Dr Prassl firmly rejects the idea of determining the identity of those entities responsible for each piece of employment protection legislation in an entirely ad hoc purposive manner, such as saying that for the purposes of worker consultation a parent company must also consult the workers, or for the purposes of the law of unfair dismissal in connection with an agency worker the client or end user should be regarded as the employer. He rejects this approach of ad hoc fixes through legislation and judicial interpretation. Instead, he wants to cling to the idea that there is (or should be) an entity that might be described as the employer. In other words, he wants to hold onto the baby, which is the concept of an employer, even whilst throwing out most of the bath water of dysfunctional law, because he thinks that otherwise the law would become ‘hopelessly imprecise and unworkable’. (159) He proposes instead to change the meaning of the term ‘employer’ in such a way as to overcome or at least abate those problems described above.
At the same time, although Dr Prassl proposes to change the legal concept of an employer, he hotly denies any ambition to develop the law so that it might be better for workers, though he concedes that any improvements in the legal position of workers might be a not unacceptable side-effect. Instead, he is merely going to sort out a more coherent (ie non-contradictory) concept of an employer. His proclaimed normative value orientation is therefore legal coherence, not lending a helping hand to workers who are systematically being denied the employment law rights that Parliament probably intended to give them. Ostensibly lacking this vocation about concern about the position of workers, it seems to me that he verges on excluding himself from the fraternity of labour law scholars. But it seems to me that we should view with scepticism these claims regarding neutrality between employers and workers. As far as I can see, the problems of ‘tension’ or ‘contradiction’ are not really problems of coherence: the law is clear and makes sense. The problem is rather no more and no less than cases where arguably the worker deserved protection but the current legal concept of employer blocks any legal remedy. There would be no tension or contradiction if the current law produced sensible results. The law can only be described as incoherent because it promises one thing – namely worker protection – and then, owing its concept of employer, does the opposite. So despite his protestations to the contrary, I think Dr Prassl is writing as a labour lawyer with a vocation. The normative stance of expanding the concept of employer can only serve the goal of improving worker protection.
The description of the thesis in terms of the normative value of coherence may also be attractive because it appears to suggest that the thesis will propose either minor or no significant deviations from the current doctrinal position regarding the concept of employer. In fact, the whole book can be seen, I suggest, as an attempt to derive an ‘ought’ from an ‘is’. The new concept of an employer proposed in the thesis ought to be accepted, according to Dr Prassl, because it is almost already accepted, albeit only obliquely and unconsciously by the common law, though rather more explicitly in statutes (though statutes are, of course, it should be noted, in Dr Prassl’s eyes possibly dangerously ad hoc and inconsistent). This attempt to derive an ‘ought’ from an ‘is’ presents some serious difficulties for the proposal, as I shall now explain.
Dr Prassl’s main idea for a new concept of an employer is to define the concept not in terms of the parties to the contract of employment, but rather by reference to a list of functions that employers perform, which range from hiring and firing, personnel management, payment, and controlling the enterprise more generally. He suggests that the legal concept of an employer should be: ‘the entity, or combination of entities, playing a decisive role in the exercise of relational employing functions, as regulated or controlled in each particular domain of employment law.’ The implications of this definition include the points that a worker may have multiple employers, that one particular entity may be an employer for some purposes and not others, and that the tests for determining who is the employer will vary according to the employment right concerned. So, under this proposal, it is possible that entity A might be the employer for the purposes of wages and tax, another entity B would be the employer for the purposes of discrimination law, and a combination of A+B would be the employer for the purposes of the law of unfair dismissal. For instance, in the case of agency workers, the agency A might be responsible for payment and tax, the client B might be the employer for the purposes of discrimination law, and both of them might be liable jointly for claims for unfair dismissal.
There are many attractive features of this functional approach. Certainly the current approach of the courts leaves a lot to be desired and it may be fruitful to question some of the basic concepts that are being used, not least the under-theorised concept of an employer. However, a number of questions spring to mind as we reflect upon the ramifications of this proposed functional concept of employer. We can sum up these questions by asking whether Dr Prassl throws out the baby with the bathwater?
Recall that Dr Prassl insists that he must keep a single concept of an employer if his theory is not going to be hopelessly imprecise and unworkable. But does he avoid the complete collapse of the concept of employer into merely functional interpretations for each piece of legislation? How does he prevent a situation from arising where there is one servant with 2 or many more masters, combinations of which will be held responsible for a variety of wrongs, depending on the precise bit of legislation or type of liability being considered. It requires little imagination to conceive of a situation for an agency worker where the agency pays wages, the client or end-user effectively makes the hiring and firing decisions and operates practical management functions, but another contractor has primary responsibility for health and safety, and another business organisation, a parent company, makes decisions about the future manpower requirements of the business. In that scenario any of four entities in various possible combinations might be held to be the employer according to the precise legal question posed. In what way, we should ask, does this functional approach avoid the problem being ‘hopelessly imprecise and unworkable’ if there are sixteen possible answers to the simple question of who should the worker sue?
Dr Prassl has an answer to that question. He says that an entity should be regarded as the employer if it either actually carries out the relevant employment function or if it is legally entitled to perform that function. Let us consider the example of the dismissal of a temporary agency worker. What happens in such cases is typically that the client or end user tells the agency that it no longer requires the services of this particular worker without giving any reasons, so the agency tells the worker not to report to the client any longer. So the question posed by Dr Prassl is which entity is carrying out the function of the employer of terminating employment (or is entitled to do so)? The answer to that question seems to me to be indeterminate: we could make a case for saying that either the client or the agency or both together terminated the job; or we could even say that no-one was performing that function since no-one understood their actions to be a dismissal as opposed to the termination of an assignment. It is possible that the parent company actually initiated the decision by requiring the end user to reduce staff costs. So mere observation of the facts of the matter will not answer the question of who is the employer and certainly no entity is going to volunteer for the role of being the employer.
At this point, Dr Prassl comes up with a further suggestion to narrow down our list of sixteen possible employer entities. He asserts that ‘there will usually be one lead or primary party responsible’ for the exercise of a particular function (p.187). How convenient. But, how do we tell who is the responsible entity in a particular case? It is, we are told, the entity who was performing the function or failing to do it when it was its responsibility. Again this is presented as if it were a question of fact. Yet this is no answer to our question at all. The problem is on the facts that we are in the territory of The NEBH or ‘organised irresponsibility’, where either nobody is performing employer functions or a number of business entities are contributing to the performance of employer functions though none claim pre-eminence or primary responsibility. But if no-one was performing the function of employer at all or nobody was taking the lead responsibility, the facts will simply not tell us the answer the question of who is the employer. We will not find a resolution to the contradiction by simply looking harder at the contradiction. We cannot decide who should be held responsible simply by looking at facts where everyone concerned is denying any responsibility.
In my view, therefore, though it may be possible to discover a solution to some problems concerning organised irresponsibility by looking harder at the facts of cases and cutting through legal forms to discover who is actually performing the relevant employer function, in the hardest cases of organised irresponsibility we will not be able to answer the question of which employer entity should be held to be responsible by looking at the facts more closely. We cannot decide who ought to be responsible from evidence of who accepts responsibility when no business entity apparently accepts any responsibility at all. At best, therefore, it seem to me that a reconfiguration of the legal concept of employer, as proposed by Dr Prassl, can only provide a partial solution and will not address satisfactorily the most complex cases.
In my view, the ultimate problem that needs to be considered in this context is not so much the legal concept of employer but rather the criteria by which we will allocate responsibility for compliance with labour law standards. How should we allocate responsibility for employment standards when confronted by the problems thrown up by organised irresponsibility? A number of factors will be relevant to the answer to that question including control over the relevant decisions and work practices. But where control provides scant guidance because of the multiplicity or network of employer entities, an important ingredient may well be the criterion that responsibility should be allocated to the entity or entities that can achieve compliance with the pertinent employment law standard at the least cost.
In general, therefore, I agree with Dr Prassl’s critique of the current unitary test for allocating responsibility is not addressing the issues correctly. I also agree that the courts have normally stuck too closely to the formal requirements of the unitary test when it was probably possible to achieve greater flexibility in practice. Where I may disagree with him is whether or not radical reform is needed, including ad hoc solutions provided by legislation, in order to address the most egregious problems thrown up by modern production networks.