The spotlight on the gig economy continues to shine. In the latest of a series of high profile employment status cases, the UK Supreme Court ruled that one of 125 plumbers engaged by Pimlico Plumbers was a ‘worker’ for the purposes of the relevant UK employment legislation and not an independent contractor as had been claimed by the company. This and similar cases have the potential to have a significant financial impact on companies and the wider economy.
The emergence of the gig economy has sparked much debate, with the apparent flexibility of short-term ‘gig’ work being weighed against the perceived unfairness of these workers being treated as self-employed. The statutory definition of ‘worker’ in the UK expressly envisages that a person other than one holding a contract of employment can be a worker for the purposes of many abridged employment rights. The critical aspect of the provision is that it expressly requires personal service. In the UK, a ‘worker’ is entitled to some but not all of the statutory rights enjoyed by an employee. The statutory benefits enjoyed by a ‘worker’ include minimum wage, rest periods and holiday pay. However, this hybrid employment status, between an employee and an independent contractor, does not have a statutory basis in Irish law and self-employed persons have no protection under employment legislation, including the right to a minimum wage, annual leave, protection against unfair dismissal etc. Notwithstanding this difference, the principles set down in this case are still relevant for Irish employers.
In essence, the UK Supreme Court in the Pimlico Plumbers case looked at the reality of the relationship in place and whether the contractual arrangements accurately reflected this position. In reaching its decision, the Court concluded that Mr Smith was a worker and not self-employed on the basis of: (i) the level of control exercised by Pimlico over him, including in relation to company branding, vehicle tracking requirements and minimum number of working hours; (ii) the fact that personal performance was a dominant feature of his contract; (iii) the mutuality of obligation; and (iv) the ability (or inability as the case may be) of Mr Smith to carry out an independent enterprise. These considerations are in line with the traditional legal tests employed by the Irish Courts in assessing the employment status of an individual.
While many of the high profile gig economy cases have come before the UK Courts, the question of employment status is gaining momentum in Ireland too. At the end of last year, the Workplace Relations Commission (“WRC”) found, in claims, under the Payment of Wages Act 1991, the Organisation of Working Time Act 1997 and the Terms of Employment (Information) Act 1994, that six plasterers employed by a plastering and construction business were employees rather than self-employed contractors and awarded each individual €18,000 in compensation. In this case, the WRC applied the same tests as those set out in the Pimlico Plumbers case, namely the level of control and mutuality of obligation tests, as well as the ability to appoint a substitute, rather than focusing on the labels used by the parties to describe the contractual arrangements. The WRC found that the plasterers worked hours specifically set by the business, which also supplied all of the necessary material and equipment, instructed the plasterers at all times as to what they were to work on and moved them from task to task. In reaching its decision, the WRC noted that it was guided by the Code of Practice for Determining Employment or SelfEmployment.
In May of this year, the Department of Employment Affairs and Social Protection launched a campaign to raise awareness of self-employment and false self-employment amongst the general public. As part of the campaign, individuals can apply to the Department for an assessment of their employment status.
In addition, there are two Private Members’ Bills slowly progressing through the legislative process. The Prohibition of Bogus Self-Employment Bill 2018 provides that a bogus contract for services exists where, notwithstanding that the parties or one or other of them purports to confer some other description to the engagement, in truth a contract of employment subsists between the parties. The Bill then sets out twenty factors which should be considered in determining the existence of a bogus contract for services, including:
1. the degree of autonomy and control that the person performing the work has over the tasks to be performed and how they are to be performed;
2. the degree of supervision over the person performing the work and his or her working methods;
3. the degree to which the person performing the work is integrated with others in a relevant workplace or undertaking;
4. whether the person performing the work supplies his or her own tools, equipment or other capital items for the performance of the work; and
5. the extent, if any, to which the person performing the work has invested capital or other items related to the work performed.
The Protection of Employment (Measures to Counter False SelfEmployment) Bill 2018 provides that, for the purposes of determining whether an employment relationship exists, an individual shall, notwithstanding any belief or intention or any decision, transaction, course of action or conduct or arrangement by or of any of the persons concerned, be determined to be an employee, where that individual:
1. executes for another person under a contract (whether express or implied and if express, whether orally or in writing), the same work or service as an employee of the other person would do;
2. has a relationship of subordination in relation to the other person for the duration of the contractual relationship;
3. is required to follow the instructions of the other person regarding the time, place and content of his or her work;
4. does not share in the other person’s commercial risk;
5. has no independence as regards the determination of the time schedule, place and manner of performing the tasks assigned to him or her; and
6. for the duration of the contractual relationship, forms an integral part of the other person’s undertaking.
While no Government sponsored legislation has yet been drafted to specifically address the issue of false self-employment, the matter might be dealt with in the Government sponsored Employment (Miscellaneous Provisions) Bill 2017, which was recently passed by Dáil Éireann and will now be laid before the Seanad. The Bill, in its current form, makes it an offence to incorrectly designate an employee as self-employed. This provision, which was introduced by way of amendment, confers power on the WRC to prosecute the offence and, upon being found guilty, a person will be liable on summary conviction to a class A fine (maximum fine of €5,000) or imprisonment for a term not exceeding 12 months or both.
The Minister for Employment Affairs and Social Protection, Regina Doherty TD, has said that, while she shares the concern relating to false selfemployment, she believes that the Employment (Miscellaneous Provisions) Bill “is not an appropriate vehicle” for this offence as it “should be subject to proper and thorough scrutiny to allow the House and all stakeholders at risk of being adversely or positively impacted the opportunity to consider the full implications of what is being proposed”. She expressed her disappointment at the passing of the amendment introducing the offence and stated that she would “spend the next number of months consulting with businesses, workers and industry to provide amendments to the amendment passed”.
Given the changing nature of the employment landscape and the increased demand for more flexibility in working patterns from both businesses and individuals alike, the complex question of employment status will continue to be a growing area of focus for both the WRC and the Revenue Commissioners.
Employers must exercise caution in ensuring that the reality of the relationship is reflected in the contractual arrangements put in place. Particular care should be exercised when conducting a review of contractual relationships with independent contractors. Such relationships are subject to increased scrutiny and employers should be aware that only genuine independent contractors will be assessed as such. If employers are found to have incorrectly engaged individuals, the likelihood of serious reputational and financial consequences for the company is increasing, particularly if the offence of incorrectly designating an employee as self-employed is passed into law. Employers should commence a review of contractual relationships in place with employees and independent contractors in light of the questions below and, more generally, the Code of Practice for Determining Employment or Self-Employment as it is only a matter of time before further employment status cases come before the Irish Courts.
The following are some of the matters which should be considered by employers when conducting a review of existing or proposed contractual relationships:
1. What is the level of control and supervision exercised by the business over the individual?
2. With whom has the business contracted, an individual or a company?
3. How is the payment processed?
4. Who pays the taxes?
5. Who bears the financial risk in the arrangement?
6. Is the individual entitled to annual leave, sick leave and other types of statutory leave?
7. Is the individual required to wear a uniform or drive a company branded car?
8. Does the individual have to work set or standard hours?
9. Who has the responsibility for maintaining the tools and equipment used by the individual? Who owns them?
10. Does the company instruct the individual how to carry out his/her job?
11. Are there any penalties imposed on the individual for non-performance that is akin to a disciplinary procedure?
12. Does the individual have a right to substitute who carries out the work?
13. Is the business obliged to give work to the individual and the individual obliged to accept the work?