ESM1071 - Detailed guide to determining status: mutuality of obligation

There must be an irreducible minimum of mutual obligation for there to be a contract of service. That irreducible minimum is

• that the engager must be obliged to pay a wage or other remuneration, and
• that the worker must be obliged to provide his or her own work or skill.

(See the reference to the concept of mutuality of obligation in Nethermere (St Neots) Ltd v Gardiner and Taverna at ESM7110.)

But the irreducible minimum could be present in either a contract of service or a contract for services and therefore, by itself, it will not determine the nature of a contract.

It is necessary in some cases to ascertain whether there is a contract, which is an “umbrella” contract linking together a series of engagements, or whether there are separate contracts for each single engagement (see ESM1072).

The concept of mutuality of obligation is often considered in more detail in employment protection law situations where many benefits and rights only accrue after a specific period of continuous employment. In employment protection law it will often be very relevant whether work is carried out under a separate series of contracts (where no benefits may accrue) or under a single 'umbrella' contract which amounts to a continuing contract of employment (where benefits and rights may well exist). This is the reason for the case law on the subject.

In deciding whether an “umbrella” contract exists, the courts will consider whether there is an ongoing obligation on the part of the engager to provide work (or at least to pay the individual if no work is available) and an ongoing obligation on the part of the individual to do work that is provided (see ESM1073).