Whistle while you 'worker'

Not infrequently, I find myself pointing out to employers the risk of using self-employed consultants.  You may call someone self-employed and they may agree to it, until you have a falling out.  At that stage, they start to scream they’re an employee and have been unfairly dismissed.

What more frequently passes ‘under the wire’, is the question of whether such people qualify as workers.  A worker is not an employee, but they do have rights.  These include the right to holiday pay and not to have unlawful deductions from wages.  A worker is anyone who works under a contract to perform work personally for another person, where that other party is not their customer or client.  The question of whether a person is a client or a customer, thus removing an individual’s worker status, can sometimes be difficult to determine.

In the case of Hospital Medical Group Ltd v Westwood the Court of Appeal provided timely guidance.

Mr Westwood was a senior partner in a GP’s surgery.  He provided hair restoration surgery to HMG Ltd.  Mr Westwood had no obligation to carry out work and HMG Ltd were not obliged to provide it.  So he couldn’t be classed as an employee. 

Mr Westwood ran his own surgery and undertook work for another clinic advising on trans-gender issues.  He was paid a percentage of the fee received from the patient by HMG and, for all purposes, was treated as a self-employed independent contractor.

HMG Ltd brought the arrangement abruptly to an end.  An unhappy Mr Westwood went to the Employment Tribunal who held he was a worker.  They upheld his claim to holiday pay and unlawful deduction from wages.  That is to say, the payments he hadn’t received from the company.

Matters went as far as the Court of Appeal. They agreed Mr Westwood ran his own business.  But they said he had three distinct businesses, one of which was the hair restoration service he provided to HMG Ltd.  The court had to decide whether HMG qualified as a customer or client, with the result that Mr Westwood would not be a worker.

They applied the “Integration Test”; To what degree were the services of Mr Westwood integrated in the business of HMG?  The court decided the company was not just another purchaser of Mr Westwood’s medical skills.  He had contracted specifically and exclusively with it to carry out the relevant services and had done so separately from his surgery and other work.  Mr Westwood was an integral part of HMG Ltd’s operations, even though he was in business on his own account.  By example, he was referred to as one of the company’s surgeons in their marketing material.

This is a point many businesses, who wish to appear bigger than they are, should heed.  If you represent to the outside world that someone is part of your business, then you may find the courts agreeing with you.  The end result being your self-employed contractor acquires  rights you hadn’t planned to provide.

The Court of Appeal rejected HMG Ltd’s claims that a party must be a customer or client if it contracts with an individual who is in business on their own account.  Such an interpretation would exclude all people in business on their own account from being workers.  If this had been Parliament’s intention, then the legislation would have said so.

There is a common misconception that if an individual has their own business, they cannot be an employee.  Some people also take the view that if a person has more than one job, they cannot be an employee.  If this latter were the case, then no part-time employee would ever have employment law rights.

The important lesson to learn is not what other business interests a contractor may have, but what the nature of their business relationship is with you.

Whatever you say in writing, the courts are well aware there is a world of difference between the written word and what happens in practice.  Life rarely does ‘what it says on the tin’.