The WRC recently delivered decisions on a number of employment law claims brought by the Complainant in a case entitled PR Company v Hotel Resort (ADJ-00046181, ADJ-00047024, ADJ-00045524, ADJ-00047375). The decisions are noteworthy as the WRC found the individual to be an employee (and not an independent contractor) for the purpose of various employment law statutes notwithstanding that she was paid through a company.
Facts:
On various dates in 2023 the Complainant lodged claims against the Respondent under a number of different employment law statutes. The Complainant described herself as the PR and Digital Marketing Manager for the Respondent. She submitted that while she performed some duties as an independent contractor, following a successful application for a work permit, she became an employee of the Respondent.
The Respondent submitted the Complainant was never their employee and that all work she completed on their behalf was as an independent contractor. The Respondent submitted that the duties she carried out were completed by a limited company of which the Complainant was the sole director. It was submitted the Complainant retained complete autonomy over the strategies and operations of her company. The Respondent submitted that they imposed no restrictions as to when or how the Complainant completed work assigned to her company nor was she assigned any company laptop, phone or other assets to complete her work. As part of their defence, the Respondent referred to documentation where the Complainant allegedly referred to herself as a “contractor”. They also argued she was in a position to substitute others to complete work for her so long as the work was completed by her limited company. The Respondent referenced an invoice that named a different individual within the Complainant’s company.
There were some very unusual facts in this case, including the Complainant being under the investigation of the Gardai at the time of the WRC hearing and a significant dispute around the level of knowledge/involvement by the Respondent in respect of the Complainant’s application for the abovementioned employment permit.
It was not in dispute that for a period of time from March 2023, the Complainant provided services to the Respondent as an independent contractor and that such services were provided by a third party company of which the Complainant was the sole shareholder and director. However, the position of the Complainant was that this arrangement was to come to an end with the commencement of her employment visa/permit in August 2022. The Respondent on the other hand argued that the Complainant remained an independent contractor at all times and, notwithstanding the terms of the Complainant’s visa/permit, she did not take up direct employment with them at any point during their engagement.
Decision:
In determining whether the Complainant was an employee or independent contractor, the Adjudicator applied the five question framework set out by the Supreme Court in the case of Revenue Commissioners v Karshan [2023] IESC 24.Those questions are as follows:
- Does the contract involve the exchange of wage or other remuneration for work?
- 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?
- 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?
- 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.
- 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.
In analysing these questions, the Adjudicator considered the extent of the Respondent’s knowledge and involvement with the Complainant’s employment permit application process. While the board of the Respondent denied any knowledge of same, the Complainant opened various communications from the then General Manager advising her to make the permit application and acknowledging the application while it was in progress. There also appears to have been some level of acknowledgement on the part of the Respondent that the former General Manger did assist the Complainant with the permit application.
The Adjudicator concluded that while the Respondent had noted that the Complainant signed the permit application on the part of the former general manager, and apparently drafted an accompanying contract of employment of her own volition, it was apparent that the senior management of the Respondent was aware, at all times, that the Complainant intended to make such an application in the anticipation of the commencement of direct employment with their organisation.
The Adjudicator went on to comment that it is apparent it waas a condition precedent of the permit application that the applicant must have secured an offer of employment prior to the award of the permit and that while the Respondent had raised many deeply concerning points in respect to the manner by which the Complainant applied for the permit, the fact remained that the Respondent was aware she was making the application and should have been aware that such application would by operation of statute serve to create an employment relationship between the parties.
The Adjudicator went on to state that if the Respondent intended for the Complainant to remain as an independent contractor, then they had a duty to make this extremely clear to her, particularly when her ongoing residence in the state was dependent on her ongoing employment with the Respondent.
As mentioned above, there were a number of very unusual issues that arose in this case. Another such point was the fact that the Complainant opened correspondence from the Respondent in which the Respondent apparently sought to ostensibly terminate its agreement with the Complainant and then later stated that should the Complainant return various passwords and digital marketing assets, the Respondent would come to an arrangement regarding the Complainant’s ongoing visa and continued residence. On this point, the Adjudicator commented that it was “utterly inappropriate” for the Complainant’s visa status and ongoing residence to be used as a form of bargaining chip and that the foregoing further illustrates the Respondent were well aware of the Complainant’s status and were prepared to rely on same, and the consequent contract of employment implied by same, when the result was to their benefit.
The Adjudicator commented that in considering the various points that arose in this case, it was apparent that the facts represented an extremely unusual set of circumstances and even having considered voluminous submissions from both parties etc. it remained difficult to classify the relationship between the parties with any degree of certainty.
Nonetheless, the Adjudicator determined that applying the Karshan principles it could be seen that in respect of question 1, the contract between the Complainant, “or at least the corporate entity controlled by the Complainant”, and the Respondent involved the exchange of remuneration for work.
Significantly, the Adjudicator determined that “While the Respondent placed a great deal of reliance on the fact that all payments were issued through a third-party company controlled by the Complainant, such a system is commonplace in complaints of incorrectly classed self-employment and cannot, of itself, disqualify the existence of a contract of employment”.
In respect of question 2 of the Karshan framework the Adjudicator noted the Complainant’s evidence that she was under the direct control and supervision of the Respondent and that while the Respondent submitted a third party could have provided such services, there was no evidence of such services having been provided by a third party.
On the question of control, the Respondent had argued that they exerted little to no control over the Complainant in the manner in which she performed her duties and noted that she performed most of her duties on a remote basis. On this point the Adjudicator commented that while the concept of control is a crucial criterion by which an engagement might be classified as a contract of employment, in recent times an increasing number of roles are performed either fully or partially remotely and that the nature of the Complainant’s role was that such duties could be performed remotely. The Adjudicator noted the Complainant’s evidence that she performed such duties under the direct control and supervision of the incoming general manager.
In respect of questions 4 and 5 of the Karshan framework the Adjudicator noted the Respondent’s position was that the relationship was entirely inconsistent with a contract of employment and the arrangements did point to the Complainant working for herself. The Adjudicator commented that while this point was far from conclusive, the fifth question of the Karshan framework advises that any finding must be adjusted based on the existence of a particular legislative regime. The Adjudicator commented that in this regard, the relevant legislative regime provides that in sponsoring, or at least having constructive knowledge of the application for residence, the Respondent engaged in a process that would have the legal requirement of the criterion of a contract of employment and any finding in respect of question 4 of the Karshan framework must be viewed in this respect.
The Adjudicator ultimately concluded that the Complainant was engaged under a contract of employment and moved on to consider her various employment law claims against the Respondent.
Takeaway for Employers:
This case shows that in contractor arrangements even where an individual is engaged through a company, the WRC may in theory be willing to look behind that company and deem the individual worker to be an employee. It will be interesting to see whether the case is appealed.
It is important to point out that the facts of this case were very unusual, and it would remain to be seen whether the WRC would adopt a similar approach in another case.
The case is timely in circumstances where the Government has recently published an updated Code of Practice on Determining Employment Status. It is noteworthy in the context of this case, that the code includes a whole section on the use of intermediary arrangements in lieu of a direct engagement between a worker and an end user and sets out how Revenue and the Department of Social Protection are likely to approach such arrangements. See our article summarising the provisions of the Code available at this link.
Links:
https://www.workplacerelations.ie/en/cases/2024/november/adj-00046181.html
https://www.workplacerelations.ie/en/cases/2024/november/adj-00047024.html
https://www.workplacerelations.ie/en/cases/2024/november/adj-00045524.html
https://www.workplacerelations.ie/en/cases/2024/november/adj-00047375.html
Author – Laura Killelea