We come across the question of whether a person is deemed to be an employee or self-employed in the context of their work, most recently in the case of McCotter -v- Quinn Insurance Limited (Dublin) UD242/2011.
This question is not as straightforward as it may first appear. There's a considerable grey area when it comes to distinguishing a self-employed person from an employee. It can also be somewhat more confusing when you look at the case-law on the issue and how some cases are applied in our Tribunals.
What's the difference between a Contract 'Of' Service or Contract 'For' Service?
Firstly, it's necessary to clarify that a contract of service is that of an employer/employee relationship and a contract for service is that of an employer/sub-contractor relationship. We will now look at the Department of Social and Family Affairs, who have developed a leaflet for determining the employment status of a person based on a number of fundamental queries.
It's clear from the beginning that the job as a whole and the reality of the employment relationship must be looked at. This is important as it points to the actual job being done as being the deciding issue and not just what is on paper. This is highlighted in the case of Henry Denny & Sons Ltd. T/A Kerry Foods -v- The Minister For Social Welfare (1997) which stated that terms such as "You are deemed to be an independent contractor" and "you will be responsible for your own tax affairs" will be of minimal value in coming to a conclusion as to the status of a person. "Each case must be considered in the light of its particular facts and of the general principles which the courts have developed".
Standard questions to ask
The following list of questions will normally deduce whether or not a person is deemed to be an employee under this Code:
- Are they under the control of another person who directs as to how, when, and where the work is to be carried out?
- Do they supply labour only?
- Do they receive a fixed hourly/weekly/monthly wage?
- Are they able to subcontract out the work (is the employer/employee relationship able to be transferred on?).
- Do they supply materials for the job?
- Do they provide their own equipment (other than small tools of the trade?).
- Are they exposed to any financial risk in carrying out the work?
- Do they work a set number of hours in a given month or per week?
- Do they receive expense payments to cover travel and/or subsistence?
- Are they entitled to extra pay or time off for overtime?
Impact of a determination
The answers to most of these questions, when taken in their totality, will normally advise whether or not someone is an employee or self-employed. But, as highlighted above, the totality of the relationship is looked at. The importance of ensuring that the workers are categorised under the correct headings is vital as the consequences of a determination can have a large impact on an employer. For example, whether they are a sub-contractor or an employee will affect:
- The way tax or PRSI is paid.
- Entitlements to social welfare benefits.
- Rights under employment legislation such as Working Time responsibilities, Terms of Employment, and protection for Unfair Dismissal.
- Liability in respect of the work done.
Case law on the discussion
The presiding case-law on this matter stems from 1968 in the case of Ready Mix Concrete (South East) Ltd. -v- Minister of Pensions and National Insurance (1968) 2 QB 497 where the court determined a three limb test for a Contract of Service to be in place:
- "A worker provides his own work or skill for payment in performing some service for the employer". This element requires the person to perform the work personally, whereas the subcontractor will have the freedom to assign others to carry out the work on their behalf.
- "He agrees to be sufficiently subject to the other party's control to make that other party his employer". A sub-contractor would have a high level of control over when, where, and how the work is performed. This element is commonly referred to as the 'Control Test' and is widely used as a barometer for determining a subcontractor from an employee.
- "The other provisions of the contract are consistent with it being a contract of service."
This Ready Mix Concrete test was used in another prominent Irish case of Rooney -v- Diageo Global Supply (2004) 15 ELR 133. Here the worker argued that she was in fact an employee and the employer maintained that she was an independent contractor. The court considered all three limbs of the Ready Mix examples and determined that Ms Rooney was in fact an employee of Diageo's as she had been working exclusively for them for 11 years.
A further useful case is the commonly called "Barry" case, which is the case of The Minister for Agriculture and Food -v- Barry and Others [2008] IEHC 216 which contains a detailed analysis of the tests to be considered when deciding whether a person is working under a contract of or for service.
Having read the above the salient points to take form this are that a case will be considered on the merits as a whole and not on individual issues. Just because a person will pay their own tax or has a contract to state they are a subcontractor, does not mean this is the case. The entire relationship is examined and a decision made in light of this.
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