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Independent contractors
Sometimes the issue is not whether the individual is a worker or an employee, but whether or not they are genuinely self-employed.
The definition of “worker” in section 230 of ERA 1996 makes it clear that to lose the benefit of statutory holiday pay and other important rights available to workers, a person must be genuinely self-employed, carrying out a profession or business on their own account, under a contract to provide those services to their own clients and customers. The importance of this was illustrated by a recent case, The Hospital Medical Group Limited v Westwood [2012] EWCA Civ 1005. In this case, the Court of Appeal highlighted the distinction between a genuinely self-employed person — someone who markets their services independently and at arms length to the world in general — and someone who is recruited by a business as a contractor to work as an integral part of its own operations, providing services to the customers of that business. Only the first individual will be genuinely self-employed:
A doctor ran his own business providing hair restoration services. As part of that business, he had a contract with private health company, HMG, to provide services to its patients. When the contract ended, he claimed holiday pay and unpaid wages. HMG argued that he was self-employed, but the Court of Appeal decided that even though he ran his own hair restoration business as a self-employed person, in his relationship with HMG he was a worker. HMG was not just another arms-length client or customer buying his medical skills. Instead, it specifically recruited Dr Westwood to carry out surgical procedures on its behalf and referred to him in its marketing materials as “one of our surgeons”. Dr Westwood was an integral part of HMG’s business providing those services to its customers, even though he was also in business on his own account. He was entitled to holiday pay and unpaid wages.
The Hospital Medical Group Limited v Westwood [2012] EWCA Civ 1005
A number of factors can be used to identify whether someone is genuinely self-employed. They include:
• what the paperwork says (this could be a job advertisement as well as a contract);
• whether workers provide their own equipment;
• whether they can provide a replacement to carry out the work;
• whether they have any helpers;
• whether they are taking on any financial risk;
• whether they receive sick pay or holiday pay;
• whether they are responsible for their own expenses; and
• whether they are responsible for their own tax and National Insurance.
For example:
A gym worker who asked to be self-employed and paid tax on a self-employed basis was an employee, because of the control exercised by her employer, which included setting her hours and disciplining her
London Fitness Consultancy v Hickson EAT/0160/05
Leaders of Weight Watchers meetings were employees because of the degree of control exercised by the slimming organisation over them, including a requirement to maintain a particular weight at all times.
Weight Watchers UK Limited v the Commissioners for HMRC FTC/57-69/2010