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Status Anxiety? - Part II

25 July 2017

This is the second in a series of articles on employment status in English law. In Part I we provided some background information as to the law on employment status and looked at the various statutory definitions.

We will now take a tour through the case-law in an attempt to further untangle this knotty issue, and provide examples of cases in which courts and tribunals have found an individual’s employment status to be that of an employee, worker or self-employed independent contractor, respectively.

Autoclenz

The Supreme Court in the case of Autoclenz v Belcher and others [2011] upheld a decision of the Court of Appeal (“CA”) that the cross-appellant valeters were employed under contracts of employment.

The valeters’ contract stated that the company wished “to engage the services of car valeters… on a subcontract basis”, that “as an independent contractor” a valeter was “entitled to engage one or more individuals to carry out the valeting on [the valeter’s] behalf” and that the valeter would “not be obliged to provide… services on any particular occasion, nor… [did] Autoclenz undertake any obligation to engage [the valeter’s] services on any particular occasion”.

The valeters were paid on a piecework basis, submitted weekly invoices and were responsible for payment of their tax and National Insurance contributions. In 2004, HMRC undertook a review and was satisfied that the valeters were self-employed.

However, the company provided all the cleaning products and equipment and arranged group insurance cover, and deducted a fixed sum for the provision of cleaning materials and insurance from the payment due each week.

HMRC’s review notwithstanding, the Supreme Court upheld the CA’s decision to reinstate the finding of the Employment Judge of first instance, who held that the degree of control exercised by the company fully integrated the valeters into its business, and that the terms permitting the valeters to provide substitutes and suggesting a lack of mutual obligations did not reflect the reality of the situation.

In reality, the valeters were required to attend work every day and to notify the company in advance if they were unable to work.

The CA, in reinstating the initial decision, held that when determining an individual’s status, tribunals should look at the actual legal obligations of the parties. In following Autoclenz we can expect that tribunals will be astute to detect sham written agreements.

Pimlico Plumbers

In the case of Pimlico Plumbers Ltd and Mullins v Smith [2017], heard in the CA earlier this year, a plumber engaged by the appellant company was considered to be a statutory “worker”.

The CA approved the employment tribunal’s analysis in finding that the plumber was required to provide personal service and, weighing correctly all the relevant factors, including that the plumber’s level of integration into the company’s business and control by the company was inconsistent with the plumber carrying out his own business undertaking.

The court found that the plumber was required to provide personal service on a full-time basis, was required to wear a uniform and drive a van bearing the company’s logo, had only a limited right to provide a substitute and was subject to highly restrictive covenants.

The plumber was deemed a “worker” notwithstanding the fact that he had to raise invoices in order to be paid, was VAT registered and personally accounted for tax and national insurance, and the contract stated that he was an independent contractor.

Suhail

On the other hand, in the Employment Appeal Tribunal (“EAT”) case of Suhail v Herts Urgent Care [2012] Judge Serota QC found that an out-of-hours GP was in business on his own account and was therefore neither a “worker” nor an employee.

The factors considered by EAT included the fact that Dr Suhail was required to provide his own equipment and exercised complete clinical independence, that there was no mutuality of obligation and that the contract included an effective substitution clause.

Pegg

As we mentioned in Part I, a further definition of “worker” exists in the context of discrimination law, which, under section 83(2) Equality Act 2010 (“EA 2010”) protects those who are in or applying for “employment under a contract of employment… or a control personally to do work”.

This definition, like that in the ERA 1996, also covers employees and “workers”, but it does not expressly exclude those providing services to a client or customer in the course of practising a profession or running a business, provided there is a contractual obligation to perform the work personally.

The EA 2010 definition of “worker” is therefore wider and more inclusive than that found in the ERA 1996.

In the case of London Borough of Camden v Pegg and others [2011] the EAT found that a “worker” supplying services to an end-user through an employment agency was “employed” for the purposes of the discrimination regime under the EA 2010.

The obligation to do work personally – a requirement under the EA 2010 – only arose where she accepted an assignment, at which point she was in the employment of the agency for discrimination purposes.

Windle

Conversely, in last year’s case of Windle v Secretary of State for Justice [2016] two interpreters providing services to Her Majesty’s Courts and Tribunals Service (“HMCTS”) were found by the CA not to have been employed for the purposes of the EA 2010.

The terms of the contracts did not guarantee work and did not oblige the interpreters to accept work when offered, whilst the interpreters entered into a contract personally to do work each time they accepted an assignment, there was no “umbrella contract” providing mutuality of obligation between assignments and in any event the interpreters were not in a position of subordination when providing services to HMCTS.

What can we learn from the case law?

So what conclusions can we draw from the existing case-law? Whilst the issue of employment status is still unclear – particularly in respect of the distinction between a “worker” and a self-employed contractor – there are some useful points to bear in mind when considering the question of status.

Autoclenz reminds us that simply stating in a contract that the status is to be that of a self-employed contractor (or, indeed, a “worker” falling short of employee status) will very likely not be definitive. Although the intention of the parties and the wording of the contract will be one factor the judge will consider, courts and tribunals will look at the actual legal obligations of the parties, rather than confining themselves to the text of the contract.

It is therefore advisable to consider what the genuine relationship between the parties will be and then draft a contract to accurately reflect this, rather than attempt to draft a contract to reflect an arrangement which, whilst it may be more convenient for one or both of the parties, does not reflect reality.

Pimlico Plumbers and Suhail remind us that the court or tribunal will consider a wide range of factors in reaching a conclusion on status based on all the circumstances, and these cases shed some light on the factors which courts and tribunals will specifically bear in mind when doing so. Pegg reflects the fact that simply because an individual is not an employee or even a “worker” for the purposes of other legislation, they may well be “employed” for the purposes of the EA 2010, though Windle reiterates the fact that there is a category of individuals in this country who are genuinely self-employed, and that the recent case law has not opened the gates for all self-employed contractors to enjoy rights intended for “workers” or employees.

Part III coming soon

Having examined some of the case-law, in the final part in this series we will look at the recently released government-commissioned Taylor Review of modern working practices, and consider how the ever-evolving landscape of employment status may change further in the near future.

For further advice on the above topics, please call us on 01483 543210 or alternatively email enquiries@barlowrobbins.com

By Will De Fazio-Saunders

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