LRD guides and handbook May 2015

Law at Work 2015

Chapter 2

Personal service

[ch 2: pages 33-35]

Another key requirement of both “employee” and “worker” status is the presence of a legal obligation to carry out the work personally. Someone who is genuinely free to provide a replacement to do their work will be self-employed rather than a worker or employee. As long as the contractual right to send a substitute is genuine and unrestricted, it does not matter whether it is actually used (Autoclenz v Belcher [2011] ICR 1157).

In Real Time Civil Engineering Ltd v Callaghan [2006] All ER (D) 222, the EAT held that a lorry driver was not an employee because he had signed a contract 18 months previously that said he could send in a substitute, even though he had never tried to do this.

If the contract allows for a substitute to be arranged but only with the employer’s approval, this is not an unrestricted right to send a replacement, and in these circumstances the individual can still be a “worker” (Byrne Brothers (Formwork) Ltd v Baird and others [2002] IRLR 96). For example:

Gymnastic instructors who worked in sports centres for the council were allowed to send a replacement chosen from a register of coaches maintained by the council when they were unable to take a class. They owed an obligation to perform the work personally and were workers, said the EAT.

MacFarlane v Glasgow City Council [2001] IRLR 7

www.bailii.org/uk/cases/UKEAT/2000/1277_99_1705.html

A plumbing operative had no contractual right to send a substitute but his employer tolerated a practice among operatives of swapping their jobs around internally. This was just a method of work distribution similar to shift swapping, said the EAT. It did not mean that the plumbers were not under an obligation to provide work personally. They were workers.

(1) Pimlico Plumbers Limited and (2) Charlie Mullins v Smith [2014] UKEAT/0495/12/DM.

www.bailii.org/uk/cases/UKEAT/2014/0495_12_2111.html

Some employers try to avoid employment rights by inserting fake “substitution” clauses into the contract to make it look as if someone has the right to send a substitute to do their job. Often, workers do not read contract documents before signing, realising that a refusal to sign would mean no work. Fake substitution clauses have featured particularly prominently in the construction industry. Here is a recent example:

Construction group Mears needed a specialist scaffolder on a project, so the sub-contractor, Boss Projects, recruited Mr. Bragg. Bragg was carefully selected for the job because of his specialist skill and experience. In a letter to the tribunal, Mears confirmed that Bragg would never have been permitted to send someone else to the site to do his job. Even so, the signed contract terms asserted that he was a self-employed worker with the right to send a substitute. The EAT upheld a ruling by the employment tribunal that even though the written contract terms made it look as if Bragg was self-employed, he was a worker entitled to holiday pay. The EAT said the “substitution” clause did not reflect the true contractual relationship between the parties.

Boss Projects v Bragg [2013] UKEAT/0330/13/SM

www.bailii.org/uk/cases/UKEAT/2013/0330_13_0611.html

Construction workers’ union UCATT has won many tribunal victories for members defeating sham terms such as fake substitution clauses. However, recent years have seen an explosion of new, more sophisticated ways of structuring the employment relationship to avoid liabilities, including the use of payroll companies, umbrella companies, employment businesses, agencies and personal service companies. UCATT estimates that more than half of all construction workers are falsely self-employed.

In April 2014, HMRC attempted to clamp down on false self-employment by changing the rules that apply when individuals are taken on through employment businesses and agencies and falsely designated as “self-employed”. However, these new rules have themselves had unintended consequences, as explained on page 38.