legal updates
Monday, 15 Nov 2010
When is a worker not a worker?
The question of employment status has been blurred in recent years by the evolution of the status of the "worker", a creature created by statute. A worker is defined under section 230(3) of ERA 1996 as an individual who has entered into or works under (or, where the employment has ceased, worked under):
- A contract of employment; or
- Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
The Employment Appeal Tribunal (EAT) has given further guidance on how to draw the line between workers, who are protected by working time and minimum wage legislation, and the "genuinely self employed", who are not. In the case of Yorkshire Window Company Ltd v Parkes [2010] UKEAT/0484/09 the EAT held that a double-glazing salesman was a worker, even though, as one of 12 salesman earning commission from referrals, he signed a contract which described him as a “self-employed salesman” and made it look (at least at first sight) as if he was in business on his own account.
The EAT reviewed the authorities on the statutory definition of "worker" for the purposes of the Working Time Regulations and it drew the following principles:
- The question whether or not a contract provides for the performance of personal services is essentially a matter of construction.
- The court is concerned with construing the contract, rather than with general policy considerations.
- The fact that the individual chooses personally to supply the services is irrelevant; the issue is whether he is contractually obliged to do so.
- The right or obligation to employ a substitute will not necessarily mean that there is no obligation on the part of the "contractor" to perform personal services unless that right to employ a substitute is unfettered.
- In cases where the "contractor" has accepted an obligation to perform specified services, but is unable as opposed to unwilling to do so, and where he himself does not bear the costs of employing a substitute, a limited or occasional power of delegation may not be inconsistent with a contract to provide personal services.
- A worker holds an intermediate position between an employee and someone who carries on his own business undertaking.
The EAT set great store on the fact that while it was theoretically possible for the salesman to undertake some totally different work from that in the double glazing industry, it did not mean that he was in business of his own account. The EAT also recognised that the contract contained the specific undertaking that the salesman would not work for any other company providing similar goods or services as the company, not only for the duration of the contract but also for the period of three calendar months after its termination. The reality of the matter was the salesman was required to confine himself to providing services to the company and that he did so.
On the facts, the tribunal concluded that the salesman was obliged to carry out the work personally, was not pursuing a business and was therefore a worker for the purposes of his claim for holiday pay.
Parkes was followed by the EAT in Community Dental Centres Ltd v Sultan-Darmon UKEAT/0532/09 who confirmed that an unfettered right for an individual to appoint a substitute for any reason without sanction will be fatal to a claim that they are a worker.
If you would like more information or advice on this issue, please contact Donna Reynolds in our employment team.