Unite, the UK’s largest union, has won a potentially groundbreaking legal victory at the employment appeal tribunal (EAT) in the battle against bogus self-employment and the use of payroll companies.
Unite took the case on behalf of pipefitter Russ Blakely against the employment agency On-Site Recruitment Solutions Limited and payroll company Heritage Solutions City Ltd.
The case was for the unlawful deduction of wages and employer’s national insurance contributions as well as the non-payment of holiday pay. This is the first time that an employment appeal tribunal has considered a bogus self-employment appeal involving the use of a payroll company.
Unite appealed the case to the EAT, after the Reading employment tribunal rejected the case, wrongly finding Mr Blakely was not a worker.
The EAT case was heard in early December 2017 but Unite has only recently received the appeal court’s written judgment. The fact that the decision was made at the EAT means that it is binding on all employment tribunals and must be applied in other cases.
The employment appeal tribunal found:
- The tribunal was wrong to decide that Mr Blakely was not a worker
- When determining whether there was a contract (part of the test of whether someone is a worker) the tribunal must consider the intentions of the worker and all surrounding circumstances, not just the intentions of the employer
- There was a contract between Mr Blakely and On-Site (the agency) - importantly, the use of a payroll company did not circumvent this relationship
- Mr Blakely (and therefore other agency workers being paid through payroll companies) could be a worker of the agency, the payroll company or both. The possibility of being a worker of more than one body provides the opportunity to dramatically reduce the amount of umbrella/payroll company rip offs.
Unite assistant general secretary Howard Beckett said: “This is a groundbreaking victory secured by Unite’s Strategic Case Unit in the fight against bogus self-employment in construction and other sectors.
“It blows a hole in the way that employment agencies hide behind payroll and umbrella companies and pretend that they are not responsible for the employment of the workers they recruit.
“The fact the EAT held that a worker could be jointly employed by two organisations is a game changer in the campaign against bogus self-employment.
“Unite will be ensuring that the EAT’s findings are fully utilised to ensure that other workers are not denied their basic employment rights or exploited by agencies and parasitical payroll companies.
“This decision sends out an unequivocal message to all those involved in bogusly self-employing workers, Unite and our Strategic Case Unit is on your case.
“Whilst this isn’t the type of appeal that a mistreated worker might bring on their own, employers should beware, as Unite members have the unwavering support of the country’s largest trade union.”
“Unite would like to place on record our thanks to Thompsons Solicitors and Stuart Brittenden of Old Square Chambers for the advice and representation given to our member in this matter. Thompsons stand shoulder to shoulder with the trade union movement and have once again shown themselves to be experts in their field.”
The case has now been returned to the employment tribunal, to determine who was Mr Blakely’s employer, whether it was On-Site, Heritage or both. The tribunal will also decide on Mr Blakely’s compensation, which is expected to be around £2,500.
Notes to editors:
From 19 January 2016 until 20 May 2016 Mr Blakely was employed on the NHS funded Broadmoor hospital redevelopment project in Berkshire by On-Site. Confirming he was to undertake work on the project On-Site texted Mr Blakely and informed him that he needed to contact an umbrella/payroll company, Heritage Solutions City Limited for payment.
Mr Blakely was paid weekly and was deducted a weekly fee of £18 by Heritage from his pay (described as management company margin). He was also charged the employer’s national insurance contributions, labelled on his payslip as ‘HMRC Payment NIERS’. In total he was charged £324 in management fees and £725.59 in employer NICs.
In March 2016, Heritage Solutions asked Mr Blakely to sign ‘a contract for services’ seeking to deny him the most basic worker rights, including auto-enrolment pension, holiday pay and sick pay.
The contract also attempted to authorise deductions for employer’s class 1 national insurance from Mr Blakely’ pay and included a menacing ‘indemnity’ clause aimed at stopping him from pursuing any legal claims and gagging him from raising complaints with HMRC. He was told that if he did not sign the agreement his pay would be stopped. Despite this, Mr Blakely refused to sign.
He continued to work until 20 May 2016, when he took holiday and was told that he was not needed to return. Mr Blakely was owed £1453.50 in unpaid holiday pay, as well as the management fee and employer NICs deductions.
The case was initially heard at the Reading employment tribunal which dismissed the claim believing he was not a worker having failed to properly understand the evidence provided. Unite lodged an appeal with the employment appeal tribunal on 3 March 2017 based on the tribunal wrongly applying law and reaching a perverse conclusion.
For more information please contact Unite communications officer Barckley Sumner on 020 3371 2067 or 07802 329235. Email: email@example.com
- Unite is Britain and Ireland’s largest trade union with over 1.4 million members working across all sectors of the economy. The general secretary is Len McCluskey.