The Supreme Court judgment in The Revenue Commissioners v
Karshan Midlands Limited t/a Domino's Pizza was published
on Friday, 20 October 2023. It is a very welcome clarification and
reframing of this complex area of law for businesses and workers in
Ireland.
The law on the classification of workers has been in a state of
evolution and refinement over the past 25 years in Ireland and
elsewhere as new ways of working have developed and with a strong
upsurge in the number of gig economy and platform workers. It is
important that businesses have clarity on how the courts, the
Revenue Commissioners and the Department of Social Protection in
Ireland will determine the true nature of a working relationship.
The unanimous decision of the Supreme Court is a clear and helpful
guide for businesses and workers.
This is a detailed judgment which canvasses the authorities in the
UK and Ireland and recentres the applicable "tests" to
help businesses and workers pose a series of questions to establish
the more likely true character of a given working
relationship.
The key points to note in this lengthy judgment are:
- The Court has clarified the scope of the "mutuality of
obligation" test in Ireland. The Court has opted for a more
simplified approach to mutuality of obligation, pointing to earlier
authorities which confirm that the key analysis is whether there is
an obligation to work in exchange for an entitlement to pay. If the
response to this is "yes" then this makes a contract
capable of being a contract of employment, but it is not
determinative of the position. Evidencing "mutuality of
obligation" permits the working arrangement to be capable of
entering "the employment field".
- In analysing the mutuality of obligation test, the Court
decided that where a worker performs work intermittently for an
employer for pay, then it is possible for that worker to be working
under a contract of employment even where the employer has no
obligation to offer further or future work and / or where the
employee has no obligation to accept any future work.
- In other words, the mutuality of obligation requirement relates to pay for the work done now by the worker. It does not have to extend into the future beyond the current assignment that the worker is engaged on and the obligation on the "employer" is not necessarily to provide or to commit to provide future work or for the worker to reciprocate with a commitment to agree to work. This is a simplified and re-stated test to determine whether an arrangement is capable of being a contract of employment.
"The fact that there are mutual obligations merely
ensures that there is a contract, while the fact that the
obligations are of work and of payment merely ensures that the
contract is capable of being an employment contract. Thus
understood 'mutuality of obligation' can carry two meanings
and two consequences. Neither entail the necessity for an ongoing
obligation."
However, in cases where a worker contends that a contract of
employment subsists over periods both when they are
working and when they are not working, then in those
cases, the worker will have to evidence a mutuality of obligation
over the entire period of work and not just during the periods of
active work. It is important to note that this was not the
situation in the Irish Supreme Court Domino's case where the
matter in issue was simply whether during rostered hours,
the pizza delivery drivers were employees or were in fact engaged
as true independent contractors.
The Court reframed the five questions (including mutuality of
obligation) that should be posed to determine whether or not a
working arrangement constitutes a contract of employment:
- Does the contract involve the exchange of wage or other
remuneration for work? – the mutuality of obligation
analysis.
- If so, is the agreement one pursuant to which the worker is
agreeing to provide their own services, and not those of a third
party, to the employer?
- If so, does the employer exercise sufficient control over the
worker to render the agreement one that is capable of being an
employment agreement?
- If these three requirements are met the decision maker must
then determine whether the terms of the contract between employer
and worker interpreted in the light of the admissible factual
matrix and having regard to the working arrangements between the
parties as disclosed by the evidence, are consistent with a
contract of employment, or with some other form of contract having
regard, in particular, to whether the arrangements point to the
putative employee working for themselves or for the putative
employer.
- Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.
In looking at the factual matters which help identify a contract of employment vs an independent contractor agreement as set out above, the Court approved the analysis of the following factors:
- Can the worker provide a substitute – is it a true right
to sub-contract or is it a freedom to refuse to work a shift and
have the "employer" substitute the worker? If so, the
latter is more consistent with an employment relationship.
- Is individual personal service required?
- How much control is exercised over the worker? This means
looking at rostering, dress code, equipment, provision of
insurance, invoicing, direction to carry out certain tasks in a
prescribed manner – in this case the fact that the
employer:
(a) helped to prepare invoices;
(b) directed what the drivers wore; and
(c) instructed drivers on working hours and number of deliveries tended to suggested a high level of control and therefore was more consistent with an employment relationship.
- Are the workers carrying on business on their own account? In this case, the workers:
(a) did not take calls directly from customers;
(b) they did not take on any economic risk;
(c) they worked exclusively at the employer's premises;
(d) they did not scale their business to a particular market;
(e) overall their ability to maximise their own profits was very
limited and constrained by the control of on-site managers;
and
(f) they were required to wear uniforms, carry branding on their
vehicles and deliver on those pizzas as directed by manager.
In such circumstances, their economic activities were controlled and restricted by the employer such that it favoured an employment rather than independent contractor character.
The extent to which the worker is "integrated" into
the business of the employer remains an important part of the
analysis.
The tests require a balance of all factors and the fact that the
workers drove their own vehicles and carried their own insurance,
on balance, did not outweigh the existence of an employment
arrangements.
The Court emphasised the limits of application of the Domino's
decision to its particular facts. In particular, the Court noted
that it was not expressing any view on the continuity or
reckonability of any such employment service by the drivers.
This judgment is very welcome, very clear and closes for now, a
decade long analysis of this issue which has resulted in four
different forums reaching four different conclusions (or variations
on the conclusions). This is a very nuanced issue. Employers are
encouraged to consider, in particular now, whether their own
individual contracting arrangements require adjustment by reference
to the re-stated "tests" to determine the correct legal
nature of a working arrangements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
