A new judgment from the Employment Appeal Tribunal (EAT) has underlined the urgent need for the Government to provide a reliable tool to help employers and engagers determine the correct employment status for their staff and contractors.
Currently, there is a three-category system for employment legal status. Individuals are either employed, self-employed, or have ‘worker’ legal status. These different statuses determine whether employment legal rights like sick leave, paid annual leave, protection from discrimination, and national minimum wage will apply.
Meanwhile, there is a two-category system for employment tax purposes where individuals are either employed earners or non-employed earners. These determine the tax and national insurance contributions to be paid.
The Government has announced a wish to harmonise employment legal status and employment tax status but has not clarified how it intends to do this. It has also promised new tools to help employers reach status determinations. This is becoming even more pressing in advance of major employment law regulation changes and new rules on off-payroll working both of which are due in April 2020.
At present, HMRC provides an (albeit imperfect) tool to help determine employment tax status, but there is no such equivalent to help determine employment status.
Employers are therefore obliged to understand the case law and the tribunals have the difficult job of being required to reach a status determination by painting the picture forming the elements of the working relationship.
This latest case concerned a not-for-profit provider of out of hours GP services sector. It argued at the Employment Tribunal that one of its contracted GPs was self-employed and neither an employee nor a worker and was consequently not entitled to holiday pay. However, the Judge ruled that the claimant was a ‘worker’ under the Employment Rights Act 1996, having reviewed at least 13 factors to make the initial working status determination.
This was appealed on the basis that there had been an error of law by the Tribunal. The appeal Judge upheld the lower tribunal ruling and found that the GP who was working regular shifts for the not-for-profit company on a 12-week rota was a worker and not self-employed. Since she was not required to accept work nor was the not-for-profit company required to provide her with any work, she did not reach the higher rights status of an employee.
This decision was despite a very similar prior EAT medical sector case where on its facts that arrangement was determined as self-employment.
Commenting on the case, Carolyn Brown, employment legal partner and head of client legal services at RSM said: “Rather surprisingly, the Judge was not asked to determine the nature and extent of the parties’ contractual relationship. In particular, he was not asked to decide whether this was a case where contractual obligations existed between the out of hours GP and her not-for-profit engager between her shifts or if they only existed during a shift. The Judge decided that there was mutuality of obligation. That constituent would have been key if the worker status were derived only from the overarching nature of the relationship including the parties’ obligations in between working shifts.
“This case serves as a further reminder of the challenges of establishing self-employment in long term integrated working relationships. Descriptions in the contract which fit self-employment status such as ‘service level agreements’ and ‘clients’, whilst not determinative, will support a determination of self-employment.
“This also underlines how challenging each working status determination is and how each determination has to be evaluated on its own facts.
“We eagerly await the Government’s promised status determination tool which is expected prior to the introduction of major employment law and tax changes due in April 2020. We hope this will provide much-needed clarity for engaging organisations trying to make working status determinations.”