Employment status case will ‘open the floodgates’ warns Welsh HR Specialist, The HR Dept

Caryl Thomas of The HR Dept Cardiff, Newport and Monmouth, discusses her concerns over a current employment status case

A recent employment tribunal case over false self-employment could open the floodgates to a deluge of claims for notice, holiday and redundancy pay, across multiple industry sectors.

That’s the view of The HR Dept, experts in human resources for small and medium-sized businesses (SMEs) in the UK and Ireland.

Earlier this week, a 26-year-old self-employed hairdresser in Lancashire, Meghan Gorman, won a tribunal case in which the judge rule she deserved the rights of an employee, despite being officially self-employed.

Ms Gorman’s lawyers successfully argued that the amount of control her employer – a Terence Paul salon in the centre of Manchester – had over her working practices meant she was, effectively, an employee.

She has now won the right to claim for six years of backdated holiday pay, notice and redundancy pay after losing her job when the salon closed in 2019.

“The flood gates will now open,” said Caryl Thomas, director at The HR Dept in Cardiff, Newport and Monmouth. Across the UK and Ireland, the company provides outsourced HR advice and practical to support to more than 6,500 SMEs through a network of 65 licensees.

“It has become standard practice for many salon owners to use self-employed in this way and the implications of this case are likely to be huge and costly for many business owners in this sector.

“But it’s not the only sector affected. Many self-employed sports coaches, tutors, golf pros, physios, dental hygienists, designers, architects – the list goes on – are often engaged on a self-employed basis for their personal skill and wouldn’t have a right to substitute.

“Part of the problem is that smaller businesses are often encouraged to use such ‘false self-employment’ arrangements by professional advisors, bank managers and accountants who usually lack the ability to offer qualified HR or employment law advice.

“One of the problems is owing to the complexity and different rules relating to tax law and employment law about employment status. In tax law, it is binary – somebody is either ‘employed’ or ‘self-employed’ – whilst in employment law, there is an additional category of ‘worker’ status.

“This is not the same as an employee. Many sole trader self-employed individuals, if put to a test about their true status, would likely be a worker if not an employee.

“That is not to say that all self-employed are not truly self-employed people running their own business, but for many the practices are a sham.”

Caryl Thomas explained that employers should look at three main tests to see whether their staff are truly self-employed:

  • there should be no ‘mutuality of obligation’ – as in an ongoing expectation that work is offered or has to be undertaken;
  • the staff member should not be working under the control of the employer – being self-employed is running your own business and providing a service;
  • they should have an unfettered right to send a substitute, with no right of refusal by the employer as a self-employed person is providing a business service, not a personal one.

Thomas emphasised repeated calls from The HR Dept for the Government to abolish worker status and also reduce the burden on a self-employed person of providing a substitute, especially where they are actually being engaged for their personal skill.

She said the wider issue of employment status will be put further in the spotlight with the Uber appeal case being heard remotely in the Supreme Court this week. The private transport firm will claim drivers who had previously been found to be ‘workers’ are actually self-employed on the terms they have been engaged on.

“If Uber loses, the company will have no further recourse and then the flood gates for worker status claims will well and truly open – especially with so much uncertainty in the economy and with no costs associated with bringing a claim at employment tribunal.

“The Government urgently needs to carry out the commitment it made in its Good Work Plan, to review and align employment status rules for tax and employment.  We need a common, simple platform, so that all business owners and personnel understand employment status. For those medium and large businesses, who will also have IR35 changes to contend with from April 2021, the need for employment status to be reviewed makes is even more imperative.”

For more information about The HR Dept Cardiff, Newport and Monmouth, visit: https://www.hrdept.co.uk/cardiff-newport-monmouth/