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Tribunal issues different decisions for different contracts in IR35 ruling

In the case of George Mantides Ltd v. HMRC [2019] TC07202, a personal services company (the Company) appealed against tax and NIC assessments under the IR35 rules. The First Tier Tribunal (FTT) determined that there were sufficient differences between two engagements for the provision of services for IR35 to apply to one engagement and not the other.

The Company was providing the services of its director, George Mantides, to two hospitals – Royal Berkshire Hospital (Royal) and Medway Maritime Hospital (Medway). At both hospitals, Mr Mantides was a locum urologist. He saw patients according to a rota, ordered and reviewed x-rays, carried out minor surgical procedures and used facilities and equipment provided by the hospitals. Mr Mantides had sufficient expertise to carry out the work with minimal direct supervision and was only required to attend one regular meeting. Both engagements were for a consecutive period of three months, although both were terminated early. There were no agreed provisions for sickness, pension, holiday pay or travel expenses – other than between sites. The Company invoiced hourly and paid for professional indemnity insurance.

In its judgment, the FTT noted the following decisive factors:

• Substitutes: The Company had a written contract with Medway detailing the right to supply a suitably qualified substitute for Mr Mantides. Medway had no right of veto over this. In contrast, there was no written contract between the Company and Royal. The “Locum Booking Confirmations” provided in relation to this engagement made no mention of substitutes.

• Notice: The contract between the Company and Medway could be terminated on one day’s notice. The FTT inferred a requirement of one week’s notice from Mr Mantides’ comments about holiday absences at Royal.

• Hours: Medway was under no obligation to provide Mr Mantides with any hours. The FTT inferred (referring to the Locum Booking Confirmation documentation) that Royal would endeavour to provide Mr Mantides with 30-40 hours of work each week.

Under IR35, it is necessary to consider the terms of a hypothetical contract between the worker and the end client. The question was whether, under each of these hypothetical contracts, Mr Mantides would be considered employed by the relevant hospital or self-employed. The court held that the hypothetical contract with Royal had the characteristics of employment, and the hypothetical contract with Medway, self-employment. Consequently, the Medway contract was not caught by IR35, but the Royal contract was. This case provides an important illustration of some of the factors which will be considered by a court or tribunal in determining the scope of IR35. In this case, it worked in Medway’s favour that there was an express contract detailing the terms of engagement more specifically than the documentation detailing the relationship between the Company and Royal.

Tribunal issues different decisions for different contracts in IR35 ruling

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Employee expectations of privacy in the workplace – employers should still proceed with caution but a recent case highlights how privacy rights could be waived.

In the case of Garamukanwa v. United Kingdom, the European Court of Human Rights (ECHR) has declared that an employee could have no expectation of privacy in relation to communications and photographs that resulted in his dismissal.

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Whistleblowing protection: when will a complaint be protected as a qualifying disclosure?

In order to be protected against detriment or dismissal under whistleblowing law, a worker must have made a “qualifying disclosure”. A qualifying disclosure is any disclosure of information which:

• is, in the reasonable belief of the worker, made in the public interest; and

• tends to show that one or more of six specified types of wrongdoing has taken place, is taking place or is likely to take place. The six specified types of wrongdoing include a “failure to comply with a legal obligation”.

As long as the worker reasonably believes that the wrongdoing has occurred it does not matter if that belief later turns out to be wrong.

In Elysium Healthcare No 2 Ltd v Ogunlami UKEAT/0116/18 the Employment Appeal Tribunal (EAT) took a look at the ingredients of this test.

Mr Ogunlami was employed by Elysium as a health care assistant, working on one of its specialist programmes for patients detained under the Mental Health Act. He brought a whistleblowing claim, arguing that he had suffered a number of detriments as a result of having made a series of complaints regarding his supervisor, Ms Miles. The complaints concerned Ms Miles’ conduct in relation to certain patients.

Mr Ogunlami was successful in his claim at first instance. Elysium appealed to the EAT, arguing that the complaints did not amount to qualifying disclosures because Mr Ogunlami had not provided sufficient evidence that his complaints tended to show a breach of a legal obligation. In addition, Elysium argued that the public interest element of the test was not satisfied.

The EAT dismissed Elysium’s appeal. In the EAT’s view, it was apparent that Mr Ogunlami’s complaint amounted to an allegation that Ms Miles was guilty of a breach of a legal obligation – notwithstanding the fact that he had not said this in express terms. It was clear on the evidence that he viewed her behaviour as more than morally wrong or contrary to guidance. He had referred to Ms Miles’ conduct as being a disciplinary matter, a breach of company policy and a safeguarding issue. Not all breaches of policy will amount to breach of an employment contract but, in the EAT’s view, typically they will do so. The evidence was therefore enough to establish a belief on the part of Mr Ogunlami that the information in his complaints tended to show a breach of a legal obligation, namely the breach of an employment contract. The EAT was also concerned to emphasise that whistleblowers should not be expected to use precise legal terminology.

Looking at the public interest element of the test, the EAT was again unpersuaded by Elysium’s arguments. It determined that the mistreatment of vulnerable members of society readily satisfied the public interest requirement.

The public interest test was introduced in order to address the perceived problem of employees bringing whistleblowing claims based on alleged breaches of their own employment terms. The precise boundaries of the public interest test continue to develop. This case is an important reminder that anything capable of amounting to a breach of an employment contract, which also has a public interest element, may still amount to a qualifying disclosure. Where there is the potential for this protection to be triggered it will be important for employers to be particularly careful about how they manage and treat employees who have blown the whistle.

Whistleblowing protection: when will a complaint be protected as a qualifying disclosure?

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“Anything is better than lies and deceit!”

We are accustomed to hearing on an almost daily basis about “fake news”. What about “fake CVs”?

If an applicant lies during the recruitment process, either expressly or by omission, on their CV, job application or in other pre-employment information you could end up recruiting an employee you ultimately do not want or who is unsuitable for the job.

How to deal with a lying applicant will depend on the stage of the recruitment process and on the extent of the deception.

Before an offer is accepted

An offer can be withdrawn at any time before acceptance. So simply withdrawing the offer will be the easiest way of dealing with a lying applicant. It will be important to keep a record showing that the offer had not been accepted and clearly setting out the reasons for withdrawing the offer. This provides good support to defend the claim if the applicant subsequently alleges, for example, a discriminatory reason for the withdrawal of the offer.

After an offer is accepted

Once an offer of employment has been accepted, and any conditions of the offer have been satisfied, a contract of employment will be formed. Thereafter, unless the contract allows for summary dismissal in the circumstances, normally contractual notice will have to be given to terminate. Failure to do so may be a breach of contract, for which the employee can sue either in an employment tribunal or in the civil courts.

Dismissal without notice may be justifiable where the dishonesty is significant enough to amount to a repudiatory breach on the part of the employee. This is often referred to as gross misconduct and gives an employer grounds to treat the conduct as a breach of trust and confidence which brings the employment relationship to an end.

Offers should be qualified to make it clear dishonesty in the application process will have significant repercussions. It should be stated that the offer may be withdrawn at any stage after acceptance, and employment, if commenced, terminated with immediate effect, if any information given during the recruitment process proves to be substantially incorrect or dishonestly provided.

Once the applicant has commenced employment

Once employment has started, the usual rules around unfair and wrongful dismissal will apply. Though the employee is unlikely to have two years’ service,  automatic unfair dismissal (e.g. for reasons connected with pregnancy or whistleblowing), which does not require a minimum period of service, may still be argued by the employee. You will also have to be mindful of any applicable notice periods.

Again, depending on the level of dishonesty, the employer may be able to dismiss with or without notice. The dismissal should normally be treated as a conduct dismissal.

Where you suspect or identify information that appears to have been provided dishonestly we recommend that you speak with the applicant or new start about this to understand if there has been an error. However, an error of this kind may also be used to support a conclusion the person is just not a good fit for the role.

“Anything is better than lies and deceit!”