Worker wins 'groundbreaking' victory in payroll case
19 February 2018
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's press release provides the full details of this case which was for the unlawful deduction of wages and employer’s National Insurance contributions (NICs) as well as the non-payment of holiday pay. This is the first time that the EAT has considered a bogus self-employment appeal involving the use of a payroll company.
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 NICs ‘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 an ‘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.
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.
According to Unite 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
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.
Read the full press release from Unite.