Contracts, Employment Status and Dismissal
Some recent case law has provided employers with useful guidance on the employment status of those employees working on a casual basis. In Drake v. Ipsos Mori Ltd, a useful reminder has been served that casual workers may be ‘employees’ during the periods in which they are actually conducting work for you. Mr Drake worked as a market researcher and was contracted on an ‘assignment by assignment’ basis between 2005 and 2010. He was told that there was no obligation on the company to offer him work or any obligation on him to accept any work that was offered to him (‘mutuality of obligation’) and was not issued with a contract of employment or a statement of terms and conditions of employment.
When Mr Drake was removed from the panel of interviewers, he brought an unfair dismissal claim and argued that each individual assignment was in fact a separate contract of employment, which gave him sufficient continuity of service to bring the claim.
However, the Tribunal agreed with the employer that, given that there was no 'mutuality of obligation', Mr Drake was a worker, not an employee. When the case was referred to the EAT, they felt that there was sufficient mutuality of obligation for an employment relationship to exist during each period of work. Whilst undertaking each assignment, Mr Drake was obliged to work personally for the company until either he completed the assignment or it was withdrawn. The fact that the assignment could be brought to an end at any time did not mean there was no contract in existence while the assignment was ongoing.
The case has now been sent back to the employment tribunal to consider his actual employment status and whether he had sufficient continuous service to pursue a claim for unfair dismissal and so we await the outcome of this case to further define the employment status issue...
A second case on this has provided some useful guidance as to the definition of a ‘client’ or ‘customer’ as well as defining ‘self-employed’ versus ‘employed; this case is The Hospital Medical Group Ltd v. Westwood.
In this case, the Court of Appeal decided that a doctor who was integrated into a business will be a worker even if carrying out a business in his own name. Dr Westwood provided surgical services (hair restoration procedures) to a private clinic on a part-time basis. His contract specified that he was self-employed; but when it was terminated he claimed employment status and unfair dismissal or alternatively, that he was a 'worker' and entitled to unpaid wages.
The Employment Rights Act 1996 defines a worker as an "individual who has entered into a contract of employment...or any other contract under which they undertake to perform personally any work for another party to the contract whose status is not that of a client or customer". Dr Westwood was clearly required to provide the services personally, but the question was whether the patients he treated were his customers or clients, or those of the clinic.
The employment tribunal said that he was a 'worker'. The EAT agreed, as did the Court of Appeal who upheld the EAT's conclusion that the patients were not Dr Westwood's customers or clients but were those of the clinic. Dr Westwood did not personally market his services to the wider population but had merely contracted to provide professional services to another business. He was an integral part of the clinic's business, being promoted as "one of our surgeons". So even though he was in business on his own account, he succeeded in his claims for unlawful deductions from wages and accrued holiday pay.
This second case reinforces the need to ensure that the contract which is place, whether it is a ‘contract for services’ or a ‘contract of employment’ reflects the working arrangements and relationships that are actually in place. There are in fact, two very different ways in which being ‘self-employed’ is defined; the HMRC’s definition focuses purely on the payment of PAYE and National Insurance and where the liability for payment of this lies, whilst an Employment Tribunal will look much more broadly at the working arrangements that are in operation. If any of these statements applies, your ‘worker’ is likely to be self-employed and will be considered as such by an Employment Tribunal: -
they can hire someone else to do the work you have given them, or take on helpers at their own expense
they can decide where to provide their services, as well as when and how to do the work you have given them
you pay them an agreed fixed price - it doesn't depend on how long the job takes to finish
they can make a loss or a profit
Even if none of the statements in the previous list applies, your worker is still likely to be self-employed if most of the following apply to them:
they use their own money to buy business assets, pay for running costs, etc
they are responsible for putting right any unsatisfactory work at their own expense and in their own time
they provide the main tools and equipment needed to do their work