Considering Employment Status

Judges gavel and legal books

by Barry Walsh, Partner and Head of the Employment Team at Fieldfisher.

Employers can sometimes have employment status issues.

By this we mean that individuals purportedly engaged or portrayed as “independent contractors” are not always what they seem or what the organisation intended them to be. Irish law applies a substance over form test and will look to the reality of relationships to determine whether employment status exists.

This matters because individuals wrongly characterised as independent contractors but who are in reality employees in the eyes of the law, have employment-related rights which may include unfair dismissals and other rights such as working time and annual leave entitlements. Separately, taxation issues might also apply.

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The facts of this Workplace Relations Commission (WRC) case ADJ-00033537 are a good illustration.

Facts

Here, the Complainant had previously commenced employment as a full time driver with the Respondent organisation in 2017.

In January 2019, the organisation restructured the business and the individual was made redundant. However, the individual then commenced providing services to the organisation as an independent contractor, on a five days a week basis.

WRC decision

In this case, the WRC Adjudicator had to consider whether the individual was an “employee” under the meaning of the Unfair Dismissals Act, 1977 for the relevant time period to which his claim related i.e whether he was allowed to bring the WRC claim in the first place.

Although the precise details of the Complainant’s claim are not outlined in the decision, he was alleging that he was constructively dismissed by the Respondent. On the other hand, the Respondent claimed that the Complainant’s claim was misrepresented and furthermore, that “work continued to be available for the Complainant – it was he who chose not to do the available work”.

In determining the case, the WRC referred to the useful Code of Practice prepared by the Revenue Commissioners (see below). While not a legal precedent in the traditional sense, it is a very useful practical tool for employers. As well as consideration of the Code, various legal tests are often applied by Irish courts including the WRC and Labour Court. In essence the aim is to determine whether the individual is truly in business in their own right or whether they are more likely an employee.

Ultimately, the Adjudicator in this case held that the individual drove his own truck, was not paid a wage or salary and submitted invoices for his services.

The Adjudicator found that the individual was not employed as an employee and therefore, the WRC held it had no jurisdiction to hear the claim.

Another similar finding – Labour Court case

In another recent Labour Court decision (UDD2260), the Complainant, a photographer, claimed that he was employed by the Respondent as an employee and therefore was entitled to bring a claim under the Unfair Dismissals Act. This was rebutted by the Respondent. The Labour Court, on appeal, held that the WRC decision correctly found that the photographer was not an employee.

The Labour Court found that the photographer was engaged by the Respondent as a self-employed individual from 2003 and the start of 2010. It was also held that later the Complainant’s provided his services through Joseph Dunne Photography Ltd (a company formed by the Complainant) by way of a commercial arrangement.

Interestingly, it was noted by the Court that at no point did the Complainant challenge the arrangements between him and he Respondent which were in place.

Again, the Court found that it did not have jurisdiction to consider his claim under the Act.

Conclusion

These WRC decisions are useful to employers as they confirm that employees under a contract of services and independent contractors working under a contract for services will be treated very differently under employment legislation.

However, it is important to note that some cases reach a different conclusion, depending on the merits of the case. A recent WRC case ADJ-00033791 is an example in which it was found that an individual engaged as an independent contractor was really an employee working under a contract of services. In that decision the WRC considered the “mutuality of obligations” test amongst other considerations.

As such, employers need to make sure that they correctly legally characterise workers. Employers are urged to seek legal advice if there are any ambiguities in that respect or, at a minimum be guided as appropriate by the Revenue’s Code of Practice on Determining Employment Status (click here to read the Code).

About the author
Barry Walsh is Partner and Head of the Employment Team at Fieldfisher. Barry advises a wide range of Irish and multinational corporate, public and institutional clients on all aspects of Irish employment law from recruitment to retirement including contentious, advisory and transactional work. Barry is experienced in acting for clients with respect to contractual and termination issues with senior executives. In addition to advising on employment law, he has also advises on industrial relations issues arising from mergers and acquisitions, outsourcing and redundancy situations. He has significant litigation experience and has directly represented clients before the European Court of Justice, the Irish civil courts and all specialist Irish employment tribunals.