Although tribunals can consider the intention of the parties when determining a worker’s employment status, the EAT has emphasised in Richards v Waterfield Homes Ltd and anor that it is not the only factor to take into account. As the tribunal had considered it to the exclusion of other factors relevant to employment status, the EAT substituted its view that Mr Richards was an employee as opposed to a self-employed worker.
Basic facts
Mr Richards, a multi-trade carpenter, began working for one of the companies owned by Mr Conyers in October 2010. At the time he was hired, he was a registered CIS contractor, which meant that 20 per cent of his gross earnings were deducted by his employer and paid to HMRC in respect of income tax and National Insurance.
In February 2014, Mr Richards wrote to Mr Conyers asking for an increase in his hourly rate to enable him to take annual leave or alternatively a period of paid annual leave, as he had not had any since starting work for him in 2010. He did not receive a reply to this letter.
In November 2018, Mr Conyers moved Mr Richards onto an employment contract for a seemingly different company but, in reality, it was the same one owned by Mr Conyers. Mr Richards objected to the contract because it stated that he was only an employee since November 2018. He asserted instead that he had been an employee from the day he started in October 2010.
He went off sick shortly afterwards and remained off until his resignation. Having brought a claim to the tribunal, a preliminary hearing was held to determine his employment status.
Tribunal decision
Given that Mr Richards worked normal working hours, Monday to Friday, and worked solely for Mr Conyers, the tribunal acknowledged that the relationship was “close to an employment one”.
The tribunal found, however, that the legal basis on which Mr Richards had been engaged was through the CIS scheme as a self-employed contractor. It considered that this was a genuine arrangement, unlike other cases which were a sham. It also found that Mr Richards had sufficient bargaining power and had agreed to be engaged through the scheme. Consequently, the tribunal found that the intention of the parties had been that he should be self-employed.
Mr Richards appealed.
EAT decision
Upholding the appeal, the EAT found that the description of the relationship between the parties as self-employed was manifestly “false” when considered over a sustained period. Taking into account the fact that Mr Conyers decided unilaterally to make Mr Richards an employee following a “regularisation” in 2018, the tribunal should have taken into account the other factors that pointed towards a contract of employment.
As such, the tribunal judge had been wrong to focus solely on the intention of the parties and that, because they had agreed Mr Richards should be employed through the CIS Scheme as a self-employed contractor, it determined his employment status. Looking at the findings as a whole and in order to be consistent with the case law, the EAT held that the only proper conclusion open to the tribunal was that Mr Richards was an employee throughout the period from 2010 to 2018.
This was not a finely balanced case in which the description of the relationship by the parties could be regarded as a tipping point. The EAT, therefore, substituted its finding that Mr Richards was an employee throughout the time in question.
It remitted the case to the tribunal for a remedy hearing on that basis.
Comment
This judgment makes clear that the label that the parties put on the employment relationship will not on its own be conclusive as to someone’s employment status. It is notable that in this case, unlike most other employment status cases, factors such as a right of substitution and mutual of obligation were not an issue.