Employment Status – the continuing saga
Many of you will no doubt be aware of the ongoing litigation concerning “employment status” which has in recent times become synonymous with large organisations such as Uber, Pimlico Plumbers and, more recently, the World Champion cyclist Jess Varnish case. In short, this complex area of law concerns whether an individual is classified as either an ‘employee’, a ‘worker’ or as ‘self-employed’. The importance in the distinction lies in the enhanced rights and protections received by both employees (such as the right not to be unfairly dismissed) and workers (e.g. holiday pay).
This issue has again cropped up in the recent decision of Chatfield-Roberts v Phillips & Universal Aunts Limited in the Employment Appeal Tribunal (“EAT”). The case concerned a live-in carer who worked for Mr Phillips’ uncle, known in the case as ‘the Colonel’. The Colonel was described in evidence as “an irascible old man” for whom the Claimant cared.
The Claimant began work in 2013 and continued to do so until she was issued with a letter of termination in 2016. As a result, she brought various claims against both Mr Phillips and the agency which introduced the Claimant to the family. A preliminary issue arose as to whether the Claimant was actually employed by Mr Phillips. This was because the Claimant had been paid gross by submitting invoices, taking care of tax and NI herself.
After a year the Claimant was paid by standing order, albeit still receiving her pay gross. As part of its decision, the EAT made it clear that just because an individual was paid without deductions of tax or NI this is not conclusive as to their self-employed status. This is established law. But one of the main issues in the case was the Claimant’s right to appoint a substitute if she was unavailable to care for the Colonel. The right of substitution is normally an indication that the individual is self-employed (because they do not have to personally carry out the work).
In this case, substitution only took place on the Claimant’s scheduled days off (normally every Saturday), for holidays and for a one-off occasion of jury service. The EAT concluded that because the Claimant had only ever exercised the right of substitution when she was unable to work (as opposed to if she did not want to work), this can still be consistent with carrying out work personally and so the Claimant was still able to be considered an employee.
This case is yet another example of how employment tribunals are consistently looking behind what was agreed between parties in writing and examining what the relationship is in reality. Often, this is leading to findings that individuals are employees rather than self-employed. Indeed, there appears to be a consistent chipping away at self-employed status which will not only assist workers in whose interests it may be at some point to claim they were actually employees, but also the tax-take for HMRC!
This is an important reminder for all businesses who use individuals on a self-employed basis that they should regularly review how their arrangements work in practice. It’s also an opportunity for me to remind you of the following:
IR35 Changes 2020
From 6 April 2020, where an individual provides their personal service through an Intermediary to a client (whether directly or via an agency), the client, rather than the Intermediary, will be responsible for determining whether IR35 applies. If the client decides that IR35 applies, generally the person paying the Intermediary rather than the Intermediary will be responsible for deducting income tax and employee NICs and accounting for employer NICs. We will have more on this in future editions of The Update.