…and finally for 2012

Posted on December 21, 2012 by Martin Malone

In May this year I reported on the thorny issue of whether a lapdancer is an employee and consequently entitled to employment protection. At that time the Employment Appeal Tribunal took the view that she was an employee but Stringfellows counter-appealed on the basis that the contract was illegal because Ms Quashie had not disclosed all her earnings in tax returns. If that was established then the claim may fail anyway because the claim for unfair dismissal would be tainted with illegality on the part of the claimant.

Today the Court of Appeal has had its say and the question of illegality is now academic because Lord Justices Ward, Elias and Pitchford have overturned the decision of the EAT in finding that she was not an employee and consequently cannot claim unfair dismissal. She was a contractor because she paid the clubs (Stringfellows and Angels) for the opportunity to entertain clients. Continue reading →

does discrimination law protect volunteers?

Posted on December 20, 2012 by Martin Malone

It is fairly unusual for employment law cases to escalate all the way to the Supreme Court so to have two in one month is particularly notable.

Our second case for December 2012, X -v- Mid Sussex Citizens’ Advice Bureau concerns an HIV positive volunteer who, following frequent absences from work, was asked to stop volunteering.

As Lord Mance pointed out in his lead judgment, any responsible organisation aims to combat discrimination of the grounds of disability (or any other discrimination for that matter) but this case is not about the moral imperative. Rather, it is about whether, as a matter of law, discrimination against volunteers is unlawful.

The claimant started work as a volunteer for the CAB in May 2006. Her contract stated:

This agreement is binding in honour only and is not a contract of employment or legally binding.

Training having been completed by November 2006 she commenced work. She was asked to volunteer on Tuesdays, Thursdays and Fridays. As it turned out she was absent between 25% to 30% of the proposed times and in practice attended between one and three days a week.

In May 2007 she was asked to stop volunteering and claimed that she was a victim of disability discrimination. This was disputed by the CAB and the claim was rejected by an Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal, in all cases on the basis that they lacked jurisdiction because she was a volunteer and therefore not protected by the relevant legislation.

On appeal to the Supreme Court the case attracted a good deal of attention Continue reading →

are you are are you not a worker? It’s a simple enough question, isn’t it?

Posted on September 17, 2012 by Martin Malone

The difference between employee, self-employed and “worker” – a category somewhere between the two – is a crucial one, given that many employment protection rights depend on employment status – yet there is no single test to establish which is which.

In Hospital Medical Group v Westwood a doctor engaged as a surgeon to undertake hair restoration procedures for a private clinic was dismissed. After dismissal, he made claims for accrued holiday pay, and unpaid wages, to which he would be entitled if he were a “worker”. His contract indicated that he was self-employed and he paid tax and NI on that basis, and indeed he had other two contracts elsewhere for different work neither of which were of any relevance to the question of his employment status with the clinic. The question to be determined was whether he was nevertheless a “worker”, that is working under a contract to carry out services personally (which was not disputed) who provides those services to another who is not a client of his, in a professional context, or a customer of a business undertaking of his. Continue reading →

“consultant” transferred under TUPE

Posted on July 26, 2012 by Martin Malone

Freedman gives us an example of the difference between a person being accepted as self-employed for the purposes of tax and national insurance but in fact being an employee. Dr Freedman operated a business as a sole trader, and in 2009 incorporated it as Career Energy Ltd (CEL). A new company, Career Energy Consultancy Services Ltd (CECSL), was formed and 52% of its shares were sold to an investor. As part of the overall transaction, CEL was put into liquidation and its employees, assets and contracts were transferred to CECSL. Dr Freedman then continued to act as Chief Executive under a new service agreement until February 2010 when the investor who controlled the majority shareholding replaced him as Chief Executive. Thereafter Dr Freedman continued as a director and carried out the same duties; however he was described as a consultant and was paid salary and commissions gross against invoices submitted. In October 2010 CECSL went into insolvent liquidation.

An employment tribunal found that there had been no transfer of Dr Freedman’s employment in 2009, that he had ceased to be an employee in February 2010 and so declined to consider a claim for unfair dismissal and accrued holiday, on the ground that it had no jurisdiction to hear the case. The Employment Appeal Tribunal overturned this decision, considering that in focusing on the share transfer, the employment tribunal had failed to take into account the transfer of assets and contracts, and had been wrong to decide that there had been no transfer of his employment. Further, when Dr Freedman became a consultant he had in fact continued to be an employee regardless of the label put on the relationship by the parties.

Continue reading →

is a lap dancer an employee?

Posted on May 21, 2012 by Martin Malone

The Employment Appeal Tribunal has considered the employment status of a lap dancer, Nadine Quashie, who worked at a Stringfellows club. She had made a claim for unfair dismissal, which had been rejected by an employment tribunal on the ground that she was not an employee and therefore not entitled to claim. Overturning this decision, the EAT looked at the three essential elements of an employment contract – the obligation to carry out work personally, the element of control over work by the employer, and mutuality of obligation and found all of these were present.

Continue reading →

watching weight – and employment status

Posted on March 23, 2012 by Martin Malone

Employment status often falls to be considered by courts and tribunals, not least because so many important consequences flow from it – employment rights, for example, and tax and NI treatment. Weight Watchers v HMRC is a decision of the Upper Tribunal (Tax and Chancery Chamber) concerning the employment status of Weight Watchers leaders. It examines the key three ”tools for identifying an employment relationship” of mutuality of obligation, control, and that the terms are otherwise consistent with an employment contract, and makes some interesting observations on how these apply in the particular case.

Weight Watchers leaders have contracts with the Weight Watchers organisation (WWUK) which specifically state that leaders are independent contractors. Under these contracts they run meetings, arrange hire of premises by WWUK, recruit clerks and “weighers”, receive a commission based on numbers attending meetings, and are reimbursed some of their expenses.

Continue reading →

like one of the family…

Posted on February 27, 2012 by Martin Malone

Domestic workers living as part of the family for whom they work can fall under the “au pairs and nannies” exception to the right to be paid minimum wage. Other exceptions listed in the Regulations include members of the armed forces, share fishermen, prisoners and, fairly obviously, volunteers and the self-employed. Of course, interns or trainees are not excepted and this has generated a good deal of recent media interest. The au pair exception – and how to determine whether a person falls within it, was recently examined by the Employment Appeal Tribunal (EAT) in Jose v Julio (and other linked cases).

The National Minimum Wage Regulations 1999 provide particular guidance as follows: Continue reading →

vicarious liability extended to non-employees

Posted on December 8, 2011 by Martin Malone

Sometimes respondents in employment cases raise arguments in their defence which, although perfectly arguable in law, do not reflect particularly well on them. One of these is the defence, in a discrimination claim, that any other employee would have been treated just as badly. JGE v (1) The English Province of Our Lady of Charity (2) Trustees of Portsmouth RC Diocesan Trust [2011] is an example of another type of defence which some might think leaves a nasty taste in the mouth. It concerns the concept of vicarious liability – where an employer can be found liable for wrongs committed by its employees in the course of their employment. The case concerned allegations of sexual abuse of a young child by a Catholic priest. When the claimant sought to hold the Diocese in which the priest worked responsible for his actions, the counter argument was that he was not an employee of the church, and it therefore fell outside the scope of vicarious liability. Generally speaking, in the past, the clergy of both the Catholic church and the Church of England have not been regarded as employees, in that they do not have a contractual relationship with the relevant churches, although nonconformist ministers are generally employed under a contract of employment. Continue reading →

employee or self-employed

Posted on August 14, 2011 by Martin Malone

Many employment law rights (such as unfair dismissal and statutory redundancy pay) are restricted to “employees” as defined. It is usually obvious whether a person has a contract of employment (i.e. a contract of service between an employer and an employee) or a contract for services (i.e. made by an employer with an independent contractor/self-employed person). Perhaps a simple and straightforward example of the difference is the contrast between the jobs of chauffeur and taxi-driver.

In some ways, the debate over whether someone is an employee (or worker) or self-employed has perhaps become something of an “old chestnut”. Yet no matter how many cases give guidance on how to approach the question, grey areas remain. One such common grey area has been the extent to which any written contract should provide the answer. Many outside the law would be surprised to learn that the contract is, in itself, by no means determinative. Continue reading →

HMRC’s view as to whether an individual is an “employee” is not conclusive

Posted on March 24, 2011 by Martin Malone

We have commented on many occasions that HMRC and employment tribunals can reach equally valid but contrary views that a person can be both employed and self-employed at the same time. A recent case re-emphasises that just because the taxman regards a person as being an employee it does not follow that that is the correct position in law.

Mark Fitzpatrick is a designer in the aerospace field. He set up his own company, of which he was the sole director and only employee, to provide his services. The company (MBF Design Services Ltd) then contracted with Airbus, via two intermediaries, to provide his services to Airbus in connection with the design of their A380 aircraft. MBF received “fee income” from Airbus.

MBF had a history of contracting out Mr Fitzpatrick’s services of the kind featured in this appeal to a number of different clients, including Westland Helicopters, Strachan & Henshaw and Western Design Systems, both before and after the period when he worked for Airbus.

HMRC considered that Mr Fitzpatrick was liable to PAYE income tax and employee NICs on the monies received by MBF from Airbus in the years 2001-02, 2002-03, 2005-06 and 2006-07. He worked a 35 hour week for Airbus under the direction of Airbus management at the Airbus factory at Felton, using the company’s equipment. HMRC took the view that under what is known as “IR35″ monies paid to MBF were for tax purposes employment income of Mr Fitzpatrick personally.

Mr Fitzpatrick appealed to the tax tribunal.

The issue before the tribunal involved applying what is called the statutory hypothesis to the facts of the case. The statutory hypothesis required the tribunal to establish whether, if the arrangements with Airbus had taken the form of a contract between Mr Fitzpatrick and Airbus, they would have resulted in his being (i) an employed earner of Airbus for the purpose of National Insurance Contributions and (ii) an employee of Airbus for income tax purposes. It was agreed that for the purposes of the appeal the two tests are not materially different.

Mr Fitzpatrick, or more accurately, MBF Design Services Ltd, won.

The tax tribunal found that, on applying the statutory hypothesis, Mr Fitzpatrick was not a hypothetical employee of Airbus but was an independent contractor providing services to Airbus. In other words, the hypothetical contract between Mr Fitzpatrick and Airbus was a contract for services, not a contract of service.

The critical point was that the tribunal found that there was no “mutuality of obligation”, essential for a finding of employment as an employee rather than as an independent contractor. The tribunal pointed out that an obligation on the employer to provide work, or in the absence of available work to provide pay, is a touchstone or feature one would expect to find in an employment contract and whose absence would call into question the existence of such a relationship. An important point was that Airbus had no obligation to provide payments in the absence of available work.

Other key points were that Airbus was entitled to cancel MBF’s contract without notice and that there had been occasions when due to computer failure Mr Fitzpatrick was sent home without pay whereas Airbus’s own employees had to remain on-site. Mr Fitzpatrick worked alongside Airbus employees and other contractors and while the proportion of one to the other varied, it was mostly about four to five contractors to one Airbus employee. Also Mr Fitzpatrick was entitled to do his own research (and did so both at Airbus and at home in his own time) and he was not subject to Airbus disciplinary or grievance procedures. Keeping core hours was strictly speaking a definite requirement by Airbus but in practice was not enforced so long as work done by Mr Fitzpatrick and other contractors was effectively coordinated with work done by the rest of the establishment.

A link to the full text of the tribunal judgment is available here for those interested. It must be borne in mind however that this type of case is very fact specific – in particular systems in the aircraft building industry are not typically replicated elsewhere. Nonetheless the case has been hailed by the anti-IR35 Professional Contractors’ Group as “a significant victory for the freelance community” and is clearly of considerable significance, not only in the context of IR35 but also in other situations (such as unfair dismissal claims) where the question of whether a worker does or does not count as an “employee” is relevant. Given the increasing use of freelance workers generally, this is an important question of law which has to be considered quite frequently and you should contact us for expert professional advice if there is any doubt.