November’s case involving taxi firm Addison Lee is the most recent example of employers losing out in a dispute with staff over employment status. Whilst most will be aware of the three different categories of employment status: employee, worker and self-employed, it is important that employers are clear on the key indicators that determine an individual’s status.
When faced with questions regarding status, an employer’s first instinct may be to rely on existing contractual agreements. Whilst this may help in certain circumstances, they are advised to dig deeper and consider the true nature of their respective employment relationships. After all, this is what an employment tribunal (ET) will do if they are faced with a dispute over status.
Instead, to correctly determine the employment status of their staff organisations will need to carry out an appropriate employment status test. For a test to be successful it must evaluate three important factors: control, mutuality of obligation and personal service. These categories determine the employment rights individuals are entitled to, such as annual leave and statutory sick pay.
When assessing control employers will need to look at the balance of power between themselves and their staff. A high level of control is usually associated with employee or worker status. In these situations, employers will typically control the contractual terms, the time and location of work and any rules around dress codes or disciplinary procedures. Self-employed individuals, on the other hand, will have more control over matters, including their hours and days of work, and employers should bear this in mind.
Mutuality of obligation assesses whether employers are obliged to offer work and if staff are obliged to accept work that is offered to them. It is not uncommon for staff to be unable to refuse work due to fear of reprisals even where contracts state that they have the right to do so. Therefore, when evaluating mutuality of obligation, it is once again important that employers look past any contractual terms into how the relationship operates in practice.
The test for personal service employers to assess whether staff are required to carry out work themselves, or if someone else may be sent in their place. The requirement to complete the work personally is something typically associated with employees or workers, whereas self-employed individuals have the ability to send other individuals to carry out the work on their behalf. This has proven a stumbling block in many recent tribunal cases involving employers such as Addison Lee and Pimlico Plumbers who have been found to have constructed a situation of bogus-self-employment.
Ultimately, employers should keep in mind the more rules that are in place between them and their staff, the more likely they are to be classed as employees or workers rather than self-employed. It is essential that employers have a firm grasp of this as withholding employment rights, whether accidentally or otherwise, will leave them open to costly tribunal proceedings.