Employee or not employee – that is the question
A landmark ruling in the case of Meghan Gorman versus Terence Paul has, once again, put the spotlight on when someone is an employee and when are they not.
In this case, a 'self-employed' hairdresser claimed she was an employee because of how she was required to operate even though the contract between herself an the salon where she worked claimed she was self-employed. The preliminary hearing to decide whether her further claims could be heard agreed that she was an employee and her further claims can proceed.
Why is this so important? Because, as an employee, she can claim national minimum wage, sick pay, holiday pay and has other rights that she would not have as a self-employed person.
The key to her case was the tight control the salon operated over how she was able to work. They dictated the hours of work and when she needed to be present including making her feel uncomfortable when she tried to take time off.
This case reinforces that it is how a business behaves with its workers and employees that determines the contractual situation rather than what the paperwork says is the contractual situation. It is likely to have an impact on many businesses who claim to have self-employed people working within their business.
There is a lot of confusion about employment status, partly because there are differing determinations in employment law and tax law. Some self-employed contractors may be workers for employment law purposes, even if they have self-employed status for tax purposes.
Control is a key test in determining employment status so examine:
who controls what work is done
who controls where the work is done
what control is exercised over how the work is done
who controls when the work is done
who controls who does the work, particularly with respect to the right to delegate, send a replacement or hire staff to help.
Another key factor in determining employment status is whether there is mutuality of obligation – simply put is there an obligation for the business to offer work and can the individual choose to accept or refuse the work?
Defining the employment status of people who work with your business is a tricky legal path to negotiate and case law is defining it all the time. Tomorrow will see the Supreme Court make another ruling that is likely to have a big impact when they decide on the employment status of Uber drivers. If you are in any doubt, seek advice.
And for those businesses who are clear about the employment status of their employees, it is another reminder to make sure that how you are requiring your people to operate is in line with the contractual information and vice versa.
For example; if an employee's written contract says that they re required to work Monday to Friday 9am – 5pm yet you have allowed the employee to work Monday to Friday 8am – 4pm for a significant period, you will not be able to rely on the written contract and will, in fact, have varied that element of the contract.
People can often misunderstand what the employment contract is and assume it is that document they are issued at the start of any employment relationship – often referred to as Terms & Conditions or Written Statement of Particulars. Unfortunately, it is not that clear cut.
The employment contract is often a non-tangible set of layers which encompasses that document, any subsequent variations (such as pay increases), statutory rights and legislation, verbal commitments and how people carry out their work. It can be a complex issue and a costly one if you get it wrong.
If you need any help in this area, get in touch.