In A Solicitor v A Construction Consultancy Business (ADJ-00046911), the Complainant brought a complaint to the...

In A Solicitor v A Construction Consultancy Business (ADJ-00046911), the Complainant brought a complaint to the Workplace Relations Commission (“the WRC”) under Section 8 of the Unfair Dismissals Act, 1977, alleging that she was an employee of the Respondent company and was unfairly dismissed. The Adjudicator, Catherine Byrne, found that the Complaint was never an  employee of the Respondent company, regardless of having been treated as an employee by the Revenue and paying taxes for 11 years.

Facts: The Complainant is a solicitor who was married to AB, a manager in the Respondent company. AB’s son, MD, is the managing director of the Respondent company. A company that was established by AB went into liquidation following the 2008 financial crash. A new business was established in 2011 which carried out similar work to the previous company, i.e. construction consultancy. The Complainant’s marriage to AB ended in 2020. The Complainant submitted to the WRC that she was an employee of the Respondent company. She provided legal advice and supported her husband in his role as a manager.

The Complainant told the WRC that she did a “huge amount” of work for the Respondent at times, dealing with legacy issues from the previous company. She said that she was engaged with the liquidators and debtors and sourcing seed capital for the new business.  She said that she was involved in “everything to do with the office.”  The Complainant described her work as “assisting my husband.”  She said that he did the pricing for contracts, and she helped him to compose emails.  When her marriage ended in March 2020, the complainant said that she asked to be paid her full salary, to which her husband replied, “we’re not together anymore.”  She said that she offered to continue to work, but her husband left their home, and she wasn’t given any work.

The Complainant cited her annual salary to be €52,000.  On the documents she submitted from Revenue for 2021 and 2022, her salary was stated to be €42,000.  When she was asked at the hearing about this discrepancy, the Complainant said that she spoke to her accountant about this and she was advised that the difference didn’t matter and that her husband “has the funds.”  She said that she was not concerned about the discrepancy because she was happily married at the time.

The Respondent put it to the Complainant that she never worked in the company’s office in Dublin. The Respondent submitted that there was no evidence that the Complainant was in an employment relationship with the Respondent.  The Respondent argued that the Complainant did no work for the Respondent since March 2020, and argued that she did no work for many years.

MD gave evidence that when the new company was set up in 2011, the Complainant gave them advice in her capacity as a solicitor.  She sourced a handbook and employee contracts.  She dealt with the office manager and gave her the contracts to issue to employees. MD said that he had no dealings with the Complainant directly or indirectly for 10 years. He said that there is no file in the office in relation to the Complainant.

AB, the Complainant’s ex-husband, gave evidence to the WRC. He said that his job is to price work all over the country.  He said that, in 2011, the Complainant sourced the contracts for the employees at the time and gave them to the office manager.  When the first company went into liquidation, AB said that the Complainant “helped me a lot”. He said she helped him because she was his wife and she gave him advice.  In relation to the Complainant’s wages, AB said that he and the complainant came up with the arrangement, as by splitting his wages into his and the complainant’s, his tax burden was reduced.

Decision: The Adjudicator referred to the definition of an “employee” as stated at s.1 of the Unfair Dismissals Act, 1977:

“…an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment…”

At the hearing, the Complainant provided a document which she claimed to be a copy of her contract of employment dated May 1st 2011.  She said that this contract was issued to her when she sourced contracts for employees at the time the business was set up in 2011. The Adjudicator expressed concerns over this document, as it was not signed by the managing director of the company, and there was no clear start date of employment provided. The document stated that the Complainant’s place of work is “various construction sites within the Republic of Ireland… or Europe.”  The Adjudicator stated that this was not consistent with the role that the Complainant claimed that she held of office manager / legal advisor, and the Complainant ought to have ensured that the contact stated that her place of work is her home. Further, the contract stated that the Complainant’s annual salary was €52,000.  The documents that she provided from the Revenue Commissioners show that, in 2021 and 2022, she is recorded as having earned €42,000. The Adjudicator said that if the complainant earned €42,000 in 2021 and 2022, it is unlikely that she earned €52,000 in 2011.  He said that it seems that the Complainant was uncertain of the amount in wages that the Respondent put through the payroll in her name, something that is not consistent with being an employee. For the reasons set out, the Adjudicator was satisfied that the document submitted by the Complainant was not a contract of employment and was satisfied that she was not issued with a contract by the Respondent.

The Adjudicator was not satisfied that the Complainant demonstrated that she was an employee of the Respondent company.  The Adjudicator referred to the fact that in her written submissions to the WRC, the Complainant presented information which was incorrect, as she was mistaken with regard to the ownership of the company, She incorrectly said that her former husband was a director, and incorrectly named two people who she said were employees. The Adjudicator concluded that apart from her marriage to AB, the Complainant was detached from the Respondent’s business.

The Complainant referred to work she did to support the previous business when it went into liquidation and the work she did to help to set up the new business in 2011.  In his evidence, AB stated that the complainant was of great assistance to him at this time, as his wife and not as an employee. The Adjudicator held that this collaboration between the Complainant and her husband was entirely normal in the context of a supportive marriage and is disingenuous to seek to re-frame this support as a contractual employment relationship.  The Adjudicator also noted that while remote working is now a common working arrangement, it would have been very unusual between 2012 to 2020, and did not accept that the Complainant worked for the Respondent from home for all this time.

Employment Status: The Adjudicator stated that where there is a question about whether an individual is an employee, most precedents, including Karshan, concern the difference between a contract of service and a contract for service; that is, the difference between an employee and a self-employed contractor.  However, this was not the issue in question in this case. In this way she distinguished this case from the five tests set out by the Supreme Court in Karshan.

The Adjudicator said that here, the Respondent did not provide work to the Complainant and she did not seek out work.  She was not involved in the business on a day-to-day basis.  She never went to the office, she did not know the names of any of the employees and, on the date of this hearing, she had not spoken to the managing director of the Company in more than ten years.  The Complainant’s evidence showed that her involvement in the business was confined to the advice she gave at the beginning, her effort to have a debt repaid on an unknown date, and her assistance to her husband with drafting emails over a period of eleven years. The Adjudicator held that this was an insufficient contribution to establish a relationship of employment or to show that the Respondent was obliged to provide her with work. In considering the fact that the Complainant received a salary into her bank account from the Respondent payroll, the Adjudicator held that it was irrelevant which bank account the Complainant’s wages were paid into, as the reality was the she was not required to do any work in return for her wages, and that she colluded with the Respondent to create a false impression with the Revenue Commissioners that she was an employee of the company.

Although the Supreme Court in Karshan had held that the mutuality of obligation test should no longer be considered when determining whether or not someone is an employee, the Adjudicator based her decision on the lack of mutuality of obligation. The Adjudicator referred to the mutuality of obligation test and referred to the fact that there was no obligation on the Complainant to carry out work for the Respondent, and no obligation on the Respondent to provide the Complainant with work. The Adjudicator held that the Complainant was not an employee of the company and therefore did not have the standing to make a claim under the Unfair Dismissal Act.

Takeaway for Employers: It must be noted that we were not at the WRC hearing of this case. However, it appears from the decision that the Adjudicator was not convinced that the Complainant was an employee of the Respondent. However, it is strange that rather than applying the five step test set down in the Supreme Court decision of Karshan (Midlands) Ltd t/a Dominos Pizza v Revenue Commissioners [2023] IESC 24, the Adjudicator distinguished this case from Karshan decision and relied on the test of mutuality of obligation. It appears from the published decision that the Complainant may not have satisfied the Karshan test to be determined to be an employee. It will be interesting to see whether or not this decision is followed or whether the Karshan tests will be relied upon when this arises again.

We have seen in recent decisions that post Karshan, it is now far easier for workers to establish a relationship of employment.

The decision herein appears out of step with the current position on employee status, and it may be that the Labour Court will provide further clarification on this topical issue.

However, it remains the case that employers should be proactive in engaging with contractors and any workers who provide personal services.

Link - https://www.workplacerelations.ie/en/cases/2024/august/adj-00046911.html

Author- Jane Holian, Anne O’Connell