The muddy waters of employment status
Identifying whether a new worker should be hired on a self employed basis or as an employed farm worker can be challenging, especially when one or other party has strong views and/or financial benefits to gain. The recent Court of Appeal case of Pimlico Plumbers Limited & Charlie Mullins v Gary Smith has shed light on this issue and provides some useful guidance.
It is understandable that agricultural workers and businesses would want to take advantage of the flexibility and tax advantages of self-employed status. In the past informal arrangements may have been the preferred approach with many employers in this sector, but with increased focus, both by the courts and HMRC on employment status, it is important that agricultural businesses engage staff under the correct contractual arrangements or face significant consequences.
In Pimlico Plumbers Limited & Charlie Mullins v Gary Smith the Court of Appeal held that a plumber employed by Pimlico Plumbers was a worker, and not a self-employed contractor as stated in his contract. This was despite the fact that his contract provided that the plumber could choose his hours of work; he was responsible for providing his own tools and equipment and he handled his own tax and insurance (factors which traditionally employers have relied on to prove self-employed status).
The Court of Appeal held that the plumber was an integral part of the company’s operations and he was subordinate to the company. Consequently, although he was not found to be an employee, he was a worker and therefore he was entitled to worker protection which includes holiday pay, national minimum wage, rest-breaks, protection from discrimination, and auto-enrolment for pension purposes. In reaching this decision a persuasive factor for the Court was that the plumber did not have an unfettered right to send a substitute to provide his services if he chose to do so.
Lessons for the agricultural sector
This case is particularly relevant to the agricultural sector where, in contrast to other professions, there may be no set hours of work, but an expectation that the individual will work very long hours, often without the usual rest breaks. In addition the individuals may be expected to provide their own tools and equipment and complete their own tax returns.
The raft of recent case law in this area confirms that the courts and tribunals will look beyond any written contractual arrangement and will evaluate the reality of the situation as a whole, in order to determine an individual’s status.
The potential liabilities do not only include potential back-pay claims from workers or employees in respect of their loss of past rights, but also claims and penalties from HMRC for taxation.
Farm businesses would be well advised to take a look at their contractual relationships with staff to ascertain whether the written agreements accurately reflect the reality of the relationship. If they do not, then changes need to be made if farm businesses are to avoid the risk of a costly investigation.