LRD guides and handbook May 2017

Law at Work 2017

Chapter 2

Personal service



[ch 2: pages 38-39]

A key requirement of both “employee” and “worker” status is a legal obligation to carry out work “personally”. Someone with a genuine, unfettered legal right to provide a replacement of their choice to do their work will be self-employed, rather than a worker or employee (Redrow Homes (Yorkshire) Limited v Wright [2004] EWCA Civ 469). As long as the contractual right to send a substitute is genuine and unrestricted, it does not matter whether it is ever exercised (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 but only with the employer’s approval, this is not an unrestricted right to send a replacement and the individual can still be a “worker” (Byrne Brothers (Formwork) Ltd v Baird and others [2002] IRLR 96).


If a right of substitution is only available where someone is “unable” (as opposed to unwilling) to carry out the work, they are likely to be a “worker”. For example: 



Gymnastic instructors who worked in sports centres for the council were allowed to send a replacement provided they were 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

In Pimlico Plumbers Limited & Charlie Mullins v Smith [2017] EWCA Civ 51, a practice among operatives of swapping their jobs around internally, tolerated by the employer, was not a contractual right to send a substitute. Instead it was just a method of internal work distribution similar to shift swapping. 



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 since in reality, a refusal to sign is likely to mean no work. Fake substitution clauses have featured particularly prominently in the construction industry. Here is a good 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 (recently merged with Unite) has won many tribunal victories for members defeating sham terms such as fake substitution clauses. However, recent years have seen an explosion in 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 changed the law for workers who are taken on through employment businesses, to try to combat false self-employment that takes place through the use of intermediaries. The new rules are explained on page 47. 



People who contract to do work for an organisation via a “personal service company” cannot be a worker or employee of that organisation because they are not providing work “personally” (see page 38).