Yet another recent case has evidenced the important distinction between employee and a self-employed person and how ultimately the courts will always look at the actual relationship between the parties and look behind the contract, showing how the contract must reflect the reality of the working relationship. Whilst this principle is nothing new it reiterates the legal position which so many companies still appear to be unaware of when entering into these self-employed style relationships.
In a recent case, Ms Meghan Gorman disputed her employment status. Despite having signed a “self-employed contract” it was found that the salon had sufficient control over her working practices and her hours to mean that she was effectively an employee.
Terence Paul, her ‘employer’ claimed that the company’s “self-employed” hairdressers, like Ms Gorman, had control over the hours and days that they worked, their starting and finishing times, treatments they could give and their holidays.
Ms Gorman alleged that she had to work for the hours set by Mr Paul salon, working from 9am-6pm from Monday to Saturday, and that the company took 67% of her takings. Ms Gorman had no control over pricing or offering discounts to, in fact, they changed hers as they were found to be Mr Paul’s clients, she had to use the company’s products and conform to Mr Paul’s standard of dress.
The legal test
When assessing employment status there are various tests to consider, one of the key factors looks at the amount of control over the individual also whether they have to work the hours they are given. More often than not, where there are a significant control and an obligation to work set hours, the individual is likely to be a worker or employee rather than self-employed, even where there is an express agreement in place to the contrary.
TIP – companies should always ensure their agreements reflect the reality of their working relationship with every individual.
Why does this matter?
Employees and workers have more rights than the self-employed. Having been deemed an employee means that Ms Gorman can now continue her other claims, for failure to pay holiday pay, unfair dismissal and sex discrimination, against her employer in the Employment Tribunal.
Here at Thrive, we were pleased with this ruling, in no small part because Ms Chelsea Brooke-Ward, the barrister which we frequently instruct on our matters and who has been kindly volunteering to help us on our free advice line – email@example.com – was the barrister representing Ms Gorman. We approached Ms Brooke Ward for her comment, and she said:
“The case has been described as a landmark, and although I agree it is a landmark judgment, but not because of the law which has been applied. The judge interpreted the law as it has been for many years, since the days of the renowned judgment of Autoclenz v Belcher in 2011, which set precedent that Tribunals can, and should, scrutinise alleged self-employed contracts for sham clauses which don’t reflect reality.
The Judge in Ms Gorman’s case did just that and found that what was written in the contract was not how the relationship was in reality. In fact, Ms Gorman had almost no freedom over her alleged self-employed status when one looked at the facts of this particular case.
Ms Gorman’s case is significant, not least because it is evidence that the courts will disapply any written agreement that is not consistent with the way the relationship is conducted, but also the message it sends to industries such as the beauty industry, which is largely dominated by females. Whilst each case will be fact-specific the reality is a lot of industries operate in similar ways, and it’s what happens in practice that matters not what is written on paper.
The judgment has the potential to affect thousands of purported self-employed people (and for that matter the businesses who employ them) who will need to re-evaluate their respective situations, and that follows we could see more litigation as a result.
Despite the extensive employment law and precedent, we have in the UK, there are still many industries taking advantage of individuals by attempting to bind them to sham contracts for a number of reasons: one being to avoid paying tax and NI. Yet the companies seek to control those individuals in all almost all areas of their work, which can only be described as having their cake and eating it which is not in line with our employment legislation.
Hopefully, this judgment will see more individuals successfully questioning their working relationships.”
The matter is also a landmark case for beauty industry workers, a female-dominated industry, which often work in “self-employed” arrangements. We have written a recent blog, on how women have fallen through the cracks of support during this coronavirus crisis.
At Thrive we had a similar case last year presenting an employer, where the tribunal found she had no rights and was self-employed. In this matter, there was an absence of any contract, but they looked very closely at the relationship. This is very common at the moment and something business should be thinking to conduct an audit on the contractual status of all those who work of them to avoid claims of this nature, which can be costly and damaging on reputation.
If you have any issues around your employment status or the status of your employees, please get in touch and we’d be happy to help just email firstname.lastname@example.org
Written by the Thrive Tribe