Case law update: Employment status

Establishing employment status is vital when assessing what statutory rights and obligations may apply when someone is engaged to carry out work for another. We consider the impact of Lee Richards v 1) Waterfield Homes Ltd 2) Unity Build and Repairs Ltd.

Issue

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor’s tax and National Insurance, whilst the use of the scheme is accepted as being inconsistent with being an employee. In the case of Lee Richards v 1) Waterfield Homes Ltd 2) Unity Build and Repairs Ltd the issue was how this might be impacted by other factors in a work relationship that indicated otherwise. 

Facts

Mr Richards, described as a multi-trade carpenter, was registered as a CIS contractor. He had begun working for Mr Conyers, the owner of the respondent companies, in 2010. He was part of a diverse workforce of tradesmen, none of whom were employees. However, Mr Richards did have normal working hours, Monday to Friday and did not work for anyone else. In 2018 Mr Conyers gave the workforce employment contracts following advice that the ‘employment relationships’ should be regularised. Mr Richards objected because his contract stated he was an employee only from November 2018.

Decision

An Employment Tribunal in assessing the employment status of Mr Richards held that it was implicit in the use of the CIS scheme to pay the individual that he had self-employed status. However, the Employment Appeal Tribunal held that use of the CIS scheme was only one of the factors that had to be considered as part of the multi-factorial test. Looking at the findings relating to his work as a whole, the only proper conclusion from facts was that Mr Richards was an employee despite him being paid under the CIS.

Key points

Establishing employment status is vital when assessing what statutory rights and obligations may apply when someone is engaged to carry out work for another. The courts and tribunals have applied a multi-factorial test that takes into account personal service, mutuality of obligation, control, and other factors to identify whether the individual will fall into the category of employee, worker or self-employed. Whilst the CIS is based on self-employment, it will not be sufficient to prevent someone having employee status where there are other factors supporting such a conclusion.