Due to the changing nature of the workplace and the myriad of roles and ways of working, a person's employment status is often not clear, this could mean being unaware whether an individual is an employee, a worker or is self-employed.
IR35, the growth of the "gig" economy and associated high profile cases have highlighted the complicated area of how someone in the workplace may be characterised or classed. There is no one size fits all and no set of circumstances or specific tests that confirm what someone's employment status is.
This article sets out a recent case which demonstrates how complicated this issue can be and how employment tribunals can reach perhaps peculiar decisions. It also provides some guidance on factors that point towards one form of status over another.
Case law: Rainford v Dorset Aquatics Limited
The employment appeal tribunal recently determined that a director/shareholder who received regular monthly pay (which was subject to tax and national insurance) and was integrated into the running of the business was not an employee or worker – Rainford v Dorset Aquatics Limited. The case is a timely reminder that when an individual's employment status is considered in question, the employment tribunal will look at the relationship as a whole to determine what the true status is. As seen in the high profile case of Uber BV v Aslam  (Uber B.V. ("UBV") & Ors v Aslam & Ors  EWCA Civ 2748 (19 December 2018) (bailii.org)) what is written in contract and policy would not prevail over the reality on the ground.
Employment Status and Rights
Employment law recognises three distinct ways in which individuals work:
- Self-employed independent contractors
Employees enjoy the full suite of employment rights and protections. Workers enjoy some employment rights, most notably the right to the national minimum wage, paid annual leave, protection from discrimination and rights under the working time regulations.
Self-employed independent contractors, by their very nature, do not enjoy employment rights and protections.
The above case law (and other case law) demonstrate that there is no one test that always determines an individual's status. This inevitably leads to frustrating uncertainty but it is perhaps understandable given how different jobs can be from one another.
As detailed, employment tribunal judges will take a holistic approach when determining whether an individual enjoys employment/worker status or self-employed status. That being said there are indicative tests (often referred to as the "Multiple" test) which originated from the case of Ready Mix Concrete (South East) Limited v Minister of Pensions and National Insurance .
- Personal service – does the individual have to perform the services personally? Can they send a substitute in their place? If the individual has to perform the work themselves and cannot send someone else (or the organisation can prevent or scrutinise the substitute) then it is highly likely they are not a self-employed consultant.
- Control – Is the individual under the control of the organisation? Case law tends to focus on the extent to which the individual is controlled in the manner in which they carry out their tasks during the engagement. If the individual is under the control of the organisation that tends to suggest the relationship that of an employee/worker opposed to a self-employed contractor.
- Economic reality – This focus on whether the relationship
is consistent (or not) with an employment relationship –
relevant questions/considerations can be:
- Who provides and maintains the relevant tools and equipment?
- Does the individual wear a uniform?
- Does the individual hire their own help or are they provided assistance from an employee of the organisation?
- Who bears the financial risk?
- Does the individual have management responsibilities?
- Can the individual profit from good performance and suffer financial from poor performance?
- Is the individual paid a fixed wage or salary?
- Is the individual paid when on holiday and when off sick?
The above tests do help determine an individual's employment status but as the Rainford case shows, even where an individual is paid a salary and forms part of the management structure they may not be deemed to have employment status. As such the above tests are guidance to how determinations are made.
Where organisations engage self-employed contractors caution is advised over whether they are genuinely self-employed as it may be that when the relationship is considered in its entirety that the individual may in fact have employment status.
For individuals who may be engaged as a self-employed contractor or employed (perhaps as director/shareholders) to be aware that their employment status may not be what they believe it is.
Originally published 17 Jan, 2022
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.