The Protection of Employment (Measures to Counter Self-Employment) Bill
The question of whether a contract is one of service or for services will be summarised into a section in the proposed Bill, with an emphasis on the “substance rather than the form” of the arrangements under which the individual works. In other words, while the courts have always recognised that the contract itself will not be determinative of the relationship between parties, the previous common law tests relating to mutuality of obligation, control and level of enterprise or entrepreneurship will no longer be as relevant or perhaps applicable at all.
While there is a suggestion in the Bill that the question of whether a contract of employment exists will be a cause of action in itself prosecutable before the WRC (and for which there will be a possible award of up to two years’ pay), there is separate reference to courts or tribunals in other contexts being able to rely on the provisions of the Bill in determining whether a contract of employment exists. The question is whether, if the Bill is enacted, the common law tests relied upon to date will be considered redundant. This is cause for concern for business because the common law tests have developed over time and are nuanced enough to take account of the range of scenarios which can create a contract of services. The definitions proposed in the draft Bill are far more blunt and are likely to give rise to unforeseen consequences, potentially including far more independent contractors within the description of “bogus self-employed” than would previously have been the case.
The proposed new Bill states that any agreement purporting to define or govern employment status shall not be conclusive and any arrangement in relation to
· tax or social insurance contributions or
· the applicability of enactments or rules of law for the protection of employees
“shall, save to the extent that it may provide a motive for misrepresenting the nature of the agreement be disregarded”. This means that arguments that organisations would previously have relied upon, for example that the certain treatment of an individual contractor was only done to comply with the Safety Health and Welfare at Work Act 2005, may no longer be of assistance in arguing that the individual is not an employee.
There is a proposed definition of “false self-employment” in the Bill which mirrors that of the definition in the Competition (Amendment) Act referred to above. It refers to the individual being in a position of “subordination” (not defined) in relation to the other person, required to follow the person’s instructions regarding the time, place and content of his or her work, not sharing the commercial risk and having no independence as regards the determination of the time schedule, place and manner of performing the tasks assigned to him or her. It also makes reference to the person being an integral part of the undertaking. With perhaps exception to the reference to the level of integration of the individual in the organisation, the test set out in the Bill sets a very low bar for the individual to reach before they could be considered an employee of the organisation. The Bill continues to add that the fact that the individual may also be employed elsewhere will be irrelevant, as will the possibility that in respect of other work done the individual may be considered self-employed.
Employment via intermediary
One of the sections in the proposed legislation addresses employment via “intermediary” which is not defined in the Bill, but an example of “via a personal service company” is provided. This raises questions as to whether the provisions would apply to what are commonly referred to as “managed service” contracts. The draft section excludes agency arrangements but applies the provision of the Bill to “the question as to whether an individual who personally executes any work or service for a person is an employee of that person or is self-employed, the fact that the agreement under which the individual works is made between a person and a third party may, if the functions of the third person in relation to the arrangement are matters of form only and not substance.” This statement, combined with the low bar set in the test for false self-employment will risk capturing more individuals working on managed service arrangements than would previously have been the case if the legislation is enacted.
Ibec committed to eradication of bogus self-employment
For the avoidance of doubt, Ibec is equally committed to rooting out bogus self-employment. We are keenly aware of the cost to the Exchequer and the undermining of legitimate business practices and employment rights compliance that it presents. However, there are many instances of project work and outsourcing which may well constitute perfectly legitimate commercial arrangements which risk being captured by the blunt response proposed in the Labour party’s Private Members’ Bill. The current common law approach, honed over many years and difficult cases, remains the best manner of addressing the question of whether an arrangement is one of employment or not. This common law approach takes better account of the significant regulation which attaches to the employment relationship and the increasing legal responsibilities of employers. Furthermore, although dating back many years, the common law tests have stood the test of time and have shown themselves to be capable to addressing new working relationships as they emerge. The Revenue Commissioners’ Code of Practice for Determining Employment or Self-employment Status for Individuals remains a very useful and user-friendly tool to assess the true nature of a relationship.
The use of independent contractors in good faith remains one of the few flexible options open to individuals and organisations and is required for the performance of services needed for a short period of time, or on an ad hoc basis, or where an organisation lacks the relevant skills in-house. It is vital that any proposed further regulation of these arrangements maintains this flexibility.
It is important to note that draft legislation referred to above is a Private Members’ Bill and as such may not proceed to become legislation in its current form or at all. However, Ibec is mindful of the experience with the Competition (Amendment) Act 2017 and the wider support that may exist for the issues addressed in the Bill. Notwithstanding its genesis as a Private Members’ Bill, the proposed legislation has garnered considerable interest in the media and Ibec will be tracking its level of support and progress in the coming weeks.
Monday, 11 December 2017