This WRC Decision Should Raise Concerns For Companies Engaging Contractors

The Complainant in Lauren McBride v. FSR Atlantic Ltd t/a ADHD Now (ADJ-00049238) alleged several…

The Complainant in Lauren McBride v. FSR Atlantic Ltd t/a ADHD Now (ADJ-00049238) alleged several breaches to her statutory employment rights, while the Respondent always maintained that she was employed as an independent contractor. This case highlights the broad definition of an employee in certain legislation and raises concern in relation to how the control element of the 5-step test from the Supreme Court decision in Karshan, is interpreted.

Facts:

The Complainant was interviewed online by Mr M of the Respondent, for the position of an Assistant Psychologist in or around September 2023. While initially she believed that she was being hired as an employee, following review of the contract it was then the Complainant’s understanding that she was a self-employed contractor, not an employee and it was agreed that she would charge €30 an hour. The Complainant acknowledged that the Contract she signed was titled Contract for Services with the Respondent and she understood that she was responsible for her own invoicing and tax.

The Complainant stated that Mr M confirmed she would get 7 hours per day/ 35 hours per week, and to change her availability from 9-4 to 4-9. However, she was never given any such hours. Mr M then agreed to engage the Complainant for 2 hours per day, which also did not materialise. For the period 8 October 2023 to 3 November 2023 the Complainant was only offered 8 hours work, which consisted of 30-minute sessions and 15-minute for administration per session, which was pro-rated to a reduced rate of €22.50 per hour. The Complaint also stated that she was owed €120 for 4 hours training, for which she was never paid but invoiced. The Complainant submitted that she was also owed the shortfall of €7.50 for the hours she worked and furthermore, that she should have been paid 25% of the hours where no work was provided, yet she was available.

The Complainant confirmed that she could refuse hours and that Mr M had confirmed to her that she could work anywhere else, but only after she had queried her lack of hours. She used her own laptop and headphones and worked from home. She never received any handbook or polices and understood that she would not receive any holidays or public holidays. Despite this, the Complainant argued during the hearing that she was in fact an employee.

Mr Gavin stated in his evidence on behalf of the Respondents that the Complainant was not an employee and furnished the hearing with the Contract for Service signed by both parties. Mr Gavin drew attention to two clauses, Clause 9 titled No Employment, which stated that nothing in this Agreement shall render or be deemed to render the Complainant an employee or agent of the Respondent. Furthermore Clause 5 which stated that the Complainant was rendering services for which the Complainant was required to invoice. Mr Gavin also stated that he had understood that the Complainant could diagnose patients, however she was not qualified and could only screen patients hence the 30-minute sessions. Mr Gavin further stated that all persons engaged by the Respondent were engaged under a Contract for Services and none of the psychologists worked exclusively for the Respondent.

Decision:

• Complaints under Payment of Wages Act 1991 (“the 1991 Act!)

The Adjudicator, Brid Deering, referred to the definition of a “contract of employment” under this Act in Section 1(1) which as including any contract whereby an individual agrees with another person to do or perform personally any work or service for a third person whose status by virtue of the contract is not that of a client or customer of any profession or business undertaking carried on by the individual. Further, the person liable to pay the wages of the individual in respect of the work or service is regarded for the purposes of the 1991 Act to be the employer.

Due to the broad definition in the 1991 Act, the Adjudicator found that the Complainant did work under a contract of employment under this Act.

The Adjudicator held that as the Complainant did not work one hour but worked 45 minutes, that pay for an additional 15 minutes was not properly payable and therefore no deduction occurred in relation to this. However, the Adjudicator did find that the failure to pay the Complainant for the four hours training and awarded €120.

• Complaints under the Terms of Employment (Information) Act 1994 (“the 1994 Act”)

The Adjudicator again found that the definition of a contract of employment under this Act was sufficiently broad to include the Complainant. The Adjudicator was satisfied that that the Complainant was engaged under a contract where she agreed with the Respondent to personally execute work or services for the Respondent.

However, the Adjudicator did not find in favour of the Complainants complaints under this Act. The Adjudicator found that the Complaant had not completed 6 months before lodging the complainant that the Respondent had not provided her with a reasoned reply to her request for employment with more predictable and secure working conditions within one month of her request. She found that the Complainant could not succeed in her complaint that she did not receive notice of a change to her terms of employment regarding her hours, when the Complainant was never given this statement to begin with, regardless of the fact that the Respondent was required to be provided with this detail, the Adjudicator held that it cannot be said that the Respondent failed to notify the Complainant of changes to a statement that was not given to the Complainant in the first place.

• Complaints under Organisation of Working Time Act 1997 (“the 1997 Act”)

Unlike the Payment of Wages Act and the Terms of Employment (Information) Act, the 1997 Act does not have a definition of a contract of employment other than a contract of service or be engaged by an agency within the meaning of Employment Agency Act 1971 (of which the Respondent was not). Therefore, it fell to the Adjudicator, Brid Deering, to determine whether the Complainant was engaged under a ‘contract of service’ as opposed to a ‘contract for service’, which was the type of contract signed in this instance.

The Adjudicator referred to the extensive case law in the area and noting the Labour Court decision in Associated Newspapers Ireland Limited t/a DMG Media Ireland v. Joseph Dunne UDD2260 which statedthat the determination of an individual’s employment status and whether they have standing to pursue claims under the employment legislation is a mixed question of fact and law.

A leading authority on the issues of employment status also noted by the Adjudicator is Henry Denny & Sons v. The Minister of social Welfare IESC 9 [1998] xxxxxwhich provided a ‘mixed test’ to determine employment status; the level of integration of the party into the business; the degree of control exercised and whether the party could be said to be in business of their own account.

The recent Supreme Court decision and judgment of Murray J in Revenue Commissioner v. Karshan (Midlands) Ltd t/a Domino’s Pizza [2023] IESC 24, though relating to tax, was referred to by the Adjudicator. Noting the conclusions of Murray J that every case turns on particular facts and that it is necessary to assess all relevant features of the relationship, identifying those features which are consistent and not consistent with the employment contract and “determining based upon the sum of those parts the correct characterisation”

Murray J concluded (while still recognising the ‘reliable structure’ provided by the cases applied in the Denny judgement) that the question as to whether a contract is one of service (employee) or for service (contractor) may be resolved by reference to the following five questions;

1. 1. “Does the contract involve the exchange of wage or other remuneration for work?
   2. If so, is the agreement one pursuant to which the worker is agreeing to  provide their own services, and not those of a third party, to the employer?
   3. If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?
   4. If these three requirements are met the decision maker must then determine whether the terms of the contract between employer and worker interpreted in the light of the admissible factual matrix and having regard to the working arrangements between the parties as disclosed by the evidence, are consistent with a contract of employment, or with some other form of contract having regard, in particular, to whether the arrangements point to the putative employee working for themselves or for the putative employer.
   5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.”

The Adjudicator was satisfied that the parties entered into a binding contractual agreement involving the exchange of remuneration for work. She was also satisfied that the Respondent exercised sufficient control over the Complainant to the extent that the agreement was one that is capable of being a contract of service. Namely, the Respondent;

• • directed how, when and what assessments were to be done;
  • determined how long the assessments were to last;
  • provided specific training to the Complainant for the use of the Respondent’s assessment tools;
  • directed the Complainant to spend 15 minutes on administrative work and 30 minutes on the assessment;
  • pro-rated the agreed hourly rate to reflect 45 minutes assessments, despite the Complainant invoicing for an hour at €30;
  • decided no payment would be received for the invoiced training hours; and
  • promised a certain number of weekly hours.

The Adjudicator also referred to the fact that the Complainant was contractually required to maintain a minimum of 10 hours availability on the platform, which was more indicative of an employer – employee relationship.

“While the Complainant used her own laptop and was free to work from a location of her choice (as there was no Respondent premises), I am satisfied in the round, for all the reasons above, the Respondent exercised a significant degree of control in relation to the place, time, and way the work was to be performed, and in relation to what the Complainant was to be paid for”

Noting the Judgment of Murray J in Karshan case, the Adjudicator stated that “control is a mandatory element of the contract of employment, it does not just extend to operational direction but also economic risk and the position of the worker in the business of the employer”. The Adjudicator was satisfied, that the Complainant:

• • was not in business of her own account;
  • had no opportunity to vary the level of profit derived from the work she performed;
  • had no capacity to profit in any material way from her own skill;
  • the assessment work she performed was integral to the work of the Respondent and not an accessory to it; and
  • despite the freedom to work for others and the discretion to make herself unavailable for work, she did not risk her own capital, and her opportunity to generate or maximise profit did not in any way depend on the way she managed her work.

The Adjudicator concluded that having considered the entire factual matrix between the parties, most of the evidence pointed towards the Complainant being engaged under a contract of service and therefore, engaged under a contract of employment for the purposes of the 1997 Act. The Adjudicator then considered the individual complaints made by the Complainant under the 1997 Act.

The Complainant had submitted that she was entitled for 25% of the time that she was required to be available for work that did not then arise (zero hours). The Adjudicator finding in her favour awarded €435.60 in compensation after making the calculations referred to in Section 18(4) of the 1997 Act.

Takeaway for Employers: Employers engaging workers on an independent contractor basis should be aware that the workers may still come within the definition of the Payment of Wages Act or the Terms of Employment Act if they are providing personal service. Also, employers should review the existing working arrangements with any contractors in light of the 5 questions in Karshan decision to determine whether they are indeed independent contractors or employees. The above case illustrates the broad interpretation of control in relation to a worker and would make it difficult for an Company to make any determinations in relation to how a contractor relationship is to work, without running the risk of the worker being deemed to be an employee.

Links – https://workplacerelations.ie/en/cases/2024/april/adj-00049238.html

Authors – Ethna Dillon and Anne O’Connell