Reality check – employee or self-employed?

Reality check – employee or self-employed?

In the recent case of Richards v. Waterfield Homes and Unity Build and Repairs, the Employment Appeal Tribunal (EAT) decided that a claimant, despite being paid through a scheme only available for self-employed contractors, was an employee. The EAT noted that all other factors in the relationship were more akin to employment. The issue of employee/worker status has been a frequently litigated issue in recent years following the landmark case of Uber BV v. Aslam where it was held that Uber drivers had worker status and so were entitled to holiday and sick pay. The Richards case serves as an important reminder that the court will not rely on just one factor, such as the parties’ stated intention. Instead, the entire facts of the relationship must be assessed.

The facts

The Claimant (C) was a skilled carpenter and had been engaged by the Respondent (R) from October 2010. He was paid via HMRC’s Construction Industry Scheme (CIS) which was established specifically for the self-employed, and is therefore not applicable to employees. However, C worked normal working hours, from Monday to Friday, and worked solely for R. In November 2018, following advice, R reviewed its arrangements and C was issued with an employment contract. The contract envisaged that C’s employment started from November 2018. C objected and asserted that his start date as an employee was in fact October 2010.

Employment Tribunal decision

The Employment Tribunal (ET) decided that C was only an employee from 2018 based on the fact that the CIS Scheme is a well-recognised scheme, open only to those who are self-employed. Despite finding that C and R’s relationship was “close to an employment one”, the ET distinguished this case from previous precedents as they believed the true intention of the parties was that C was self-employed up until 2018. The ET held that the arrangement started in 2010 was not a sham; indeed, C had insisted upon working through the CIS Scheme. The ET held that this was therefore the decisive factor.

Employment Appeal Tribunal decision

On appeal by C, the EAT reversed this decision and held that the ET had been wrong in putting so much weight on one factor – C’s use of the CIS Scheme. The working relationship between C and R had numerous indicators of employment status and only one, the CIS scheme, in favour of self-employment. The relationship had to be looked at as a whole and there was only one reasonable conclusion, which was C should have been considered an employee since 2010.

Comments

The decision may come as no surprise to many. However, it serves as an important reminder that the question of employment status must be determined by assessing all aspects of the relationship. It is well settled within case law that the label the parties put on the relationship will not be determinative of what that relationship actually is. It is usually prudent for businesses to regularly review their various contracts with workers/contractors to ensure the label correctly reflects the reality.