Hand Morgan & Owen Employment Bulletin – December 2018
For December’s Employment Bulletin by Hand Morgan & Owen we concentrate on what status an individual has when doing work for a business, and why this is important.
If as a matter of law an individual is an Employee then he/she is entitled to the most comprehensive range of statutory protection and benefits.
If that individual is a worker then he or she is entitled to some protection and benefits under the law.
If, however, the individual is self-employed then a range of protected measures and benefits are not available.
Status has become a burning issue. Readers will be familiar with the Uber case, and the Pimlico Plumbers case. In these cases the business was seeking to defend claims brought by individuals doing work for the businesses. The claims were for payments available to “Workers” and “Employees” but not to those who were “self-employed”.
Key employment rights are only available to those who are deemed to be employees. Examples are the right to claim unfair dismissal, maternity leave and redundancy pay.
An individual will fall under the broader status of “worker” if that individual undertakes work under a contract of employment (known as limb a) or when work to be done is to be done by the individual personally so that there is no right of substitution (“limb b”). This is the definition in the Employment Rights Act 1996 and this is repeated in other subsequent employment legislation such as the National Minimum Wage Act 1998.
The bar to establishing that an individual is a worker rather than an employee is lower. For example to prove that an individual is an employee it is necessary to show a mutual obligation to provide work and to perform that work or control as to how when and where the work is to be done.
Tribunals and Courts have talked about taking a realistic view of the true agreement as compared with the written agreement.
Against this background within the last month we have had another gig economy case pitting individuals against the business by which they were engaged. The case is Addison Lee v Lange and Others. The individuals were private hire drivers. They buoyed by the Pimlico Plumbers case sought holiday pay (under the Working Time Regulations 1998) and payments under the National Minimum Wage Act 1998. The Employment Tribunal Agreed.
Addison Lee contended that the drivers were independent contractors – self-employed. The individuals were able to cite numerous characteristics that had been highlighted in the Pimlico case including rigorous recruitment, high level training, full weeks of work, dress codes and other controlling features such as requirements to work exclusively for Addison Lee. The original Tribunal had taken a “realistic and worldly wise” approach and found the individuals to be workers as a result of which the individuals succeeded in their claims.
So the practical effects of finding an individual to be a worker rather than self employed can be far reaching. The more so because the compensation to be awarded may be back dated.
For Income Tax and National Insurance purposes HMRC still categorise individuals in “engaged” circumstances as either employed or self-employed. In Pimlico Plumbers, however, the Court found it necessary to state that an individual could be regarded as self-employed for the purpose of the Tax Acts and a worker for the purpose of the legislation which gives workers specific rights. So once an individual is determined a “worker” then that individual will get pension auto-enrollment rights or holiday pay.
Given that a worker can claim 5.6 weeks holiday pay for each year worked (back dated to the start of the relationship) the stakes are high for individuals who believe they have been short changed and businesses who are required to justify their labelling of individuals who may have engaged as self-employed and not workers.
If you would like to read other articles, fact sheets and bulletins on Employment Law go to our Employment page and our News page.
For advice and assistance in respect of Employment matters contact Nigel Pepper, Consultant or Patrick Nelson, Associate on 01785 211411.
The contents of this article are for the purpose of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.