Employment status is central to the employment law rights and tax obligations of businesses and their respective workforces. In recent years, we have witnessed significant developments, in the gig economy in particular, where Tribunals and Courts have determined that a number of self-employed casual contractors were in fact ‘workers’ and even ‘employees’ with employment rights.
In a recent Employment Appeal Tribunal decision in Exmoor Ales Ltd v Another & Herriot, a “self-employed” accountant was found to be an employee. Mrs Herriot provided accountancy services for Exmoor Ales brewery for 27 years. She submitted quarterly invoices in the name of her partnership (with her husband). The brewery then paid her a quarterly payment of £1,000 from 2011 onwards. Following a deterioration in the working relationship on 2017, Mrs Herriot brought a number of claims to Tribunal including unfair dismissal and age discrimination. The brewery disputed that she was a worker or an employee.
The tribunal held that Mrs Herriot was an independent contractor under a contract for services up until April 2011 but that there was a material change in the relationship at that juncture and thereafter she became an employee of the company. The Tribunal preferred her evidence that the quarterly payment required her to work exclusively for the brewery from 2011 onwards, that she had no right to appoint a substitute in her absence and was required to provide her services personally. The Tribunal found that Mrs Herriot was regarded as “fully integrated” into the business from April 2011, there was a mutuality of obligations between the parties and that the brewery exercised a high level of control over her whilst at work. She was even allocated an individual work space on the premises.
The brewery appealed the decision allegeing that the tribunal had not looked at all the relevant factors on employment status, including her tax arrangements in that she accounted to HMRC on a self-employed basis, that she had prepared employment contracts for other staff but not herself, and was not a member of the employee share scheme. The EAT rejected the appeal. It held that Tribunal had been aware of the tax arrangements and the other factors, but these had been overridden by other factors including mutuality of obligation, control and substitution. These factors, and the exclusivity obligation from 2011, were decisively in the Claimant's favour.
It remains a matter for an Industrial Tribunal to weigh up all the relevant evidence and decide as a matter of fact whether the parties particular arrangements constitute a contract for services or a contract of service. In this case the EAT was satisfied that the Tribunal had weighed the evidence correctly and that whilst the factors pointing in the direction of self-employment prevailed until April 2011, those factors were then outweighed form April 2011 onwards by the factors pointing toward the direction of employee status.
To avoid unexpected liabilities, businesses should consider carefully the nature of working arrangements within their organisations, endeavour to have signed written contracts of employment or contracts for services in place that accurately reflect the intentions and contractual relationship between the parties and finally ensure that those contracts are periodically reviewed and amended where necessary, to take account of any material changes in the working relationship over the passage of time.
Louise McAloon is a Partner in Worthingtons Solicitors specialising in employment law. For legal advice in relation to employment status or the drafting or updating of contracts, policies or procedures; Louise can be contacted on 02890434015 or firstname.lastname@example.org.