The EAT has given judgment in an employment status claim which confirms that the ‘label’ that parties place on a working relationship is only one piece of the puzzle. Too much weight must not be given to that label if the reality of the relationship suggests something different. In Richards v Waterfield Homes and Unity Build and Repairs, the employee worked for the business as a skilled carpenter. At the time he was taken on, he was registered with the CIS as a contractor. CIS is a scheme where a sub-contractor can have 20 per cent, rather than 30 per cent, of earnings deducted and paid to HMRC in tax and NI (with a reckoning at the end of the year). The CIS scheme is an industry wide scheme where workers are treated as self-employed. All workers for the business were described as self-employed. The business switched the employee to an employment contract in 2018 after taking legal advice about ‘regularising’ contracts. The employee objected to the contract because it described him as an employee from 2018 rather than 2010 when he started working for the business..
The tribunal said that the relationship was ‘close’ to an employment one but decided the employee was self-employed because of the method of payment under the CIS scheme. The employee appealed and won. The EAT said that there were no other factors cited by the tribunal judge which pointed towards self-employment other than the payment method. The judge had focussed too much on this agreement between the parties rather than the other facts of the arrangement. Based on the facts set out by the judge, the self-employed label was manifestly wrong. He was an employee throughout the relevant period.
The claim has been sent back to the tribunal to deal with the substantive issues including holiday pay. This case is a reminder that a tribunal should look at all elements of the working relationship when making a decision on employment status. A label, even an agreed one, should not be given too much weight if all other elements of the arrangement points in another direction.
Adrian Fryer, Partner & Head of Employment
t: 0151 224 0539