It is reported in today’s Guardian that Baroness Scotland identified the sanction imposed on her by UKBA in connection with employing an illegal worker as civil. She told Sky News:

“This is a civil penalty, just as if you drive into the city and you don’t pay your congestion charge or you overpay. It is not a criminal offence. I have made an administrative, technical error for which I am bitterly, bitterly sorry.”

Well, as highlighted in this month’s Employment Solutions newsletter, most people would regard the imposition of a fine and the issue of a penalty notice as falling within the scope of criminal penalties rather than civil damages. Baroness Scotland might also wish to consider that the most serious sanction available for contravention is two years’ imprisonment – a civil sanction?

It is well-known that many workers in the construction industry are treated as self-employed for tax and employment law purposes whereas the reality is that they are employees.

“Employers” of these people are reluctant to pay Employers’ National Insurance Contributions and do not want to be burdened with the employment protection which is available to employeees.

In 2000 the Government introduced IR35 which was described at the time as a way for the Revenue to tax contractors “as though they are employees”. For those caught out the tax penalties were often very severe.

However, many people who are undoubtedly employees for both tax and employment law purposes are still being treated as self-employed contractors. It was therefore no great surprise that in this year’s budget the Government announced that it remained committed to the problem of “false self-employment in the construction industry” and proposed new legislation to tackle the problem head on.

The Government has recently issued a consultation document which is called “False Self-employment in Construction”. As a result, we can safely assume that the consultation is not about whether the problem exists. Rather, the Government is obviously fed up with the way in which people in this sector continue to classify themselves as self-employed when plainly they are not.

As a result the Government is going to turn the tables by starting from the premise that payments made are “deemed income” unless the paying and receiving parties can demomstrate otherwise.

The issue is significant from an employment law purpose because, although an individual can be an employee for employment law purposes and self-employed for tax purposes, if a person is classed as an employee for tax purposes this is a strong indicator that they will also be treated as an employee for employment law purposes.

The consultation closes on 12/10/09.

The House of Lords has today delivered its decision in the case of Stringer -v- HMRC which concerns whether or not an employee accrues holiday entitlement while off sick.

The Court of Appeal had held that employees on sick leave did not accrue holiday entitlement while they were off sick but this decision has been overturned by the House of Lords, taking into account guidance from the European Court of Justice earlier this year.

The decision also means that employers cannot reduce termination payments on account of sickness.

What this means for employers is that their employees must be allowed to take holiday entitlement accrued during a period of sickness absence or be paid in lieu if their employment comes to an end. To the surprise and dismay of many employers, this means that an employee could delay returning to work by using accrued holiday entitlement at the end of an extended period of sickness absence.

This development will come as no surprise to those used to dealing with maternity leave. It is common for maternity leave periods to be extended by accrued holiday entitlement. However, unlike the maternity leave provisions applied by most employers which cover the minimum statutory entitlement, there is no statutory entitlement for employees to be paid during sickness absence above the very limited SSP entitlement.

It is likely that this decision and the sense of injustice which is likely to be felt by some employers may well lead to reviews and reductions of sick pay entitlements.