Self-employed worker entitled to holiday pay

19 September 2014

The Employment Appeals Tribunal (EAT) has ruled that a self-employed subcontractor was a worker entitled to holiday pay.

Many thanks to Pinsent Masons for this report on the EAT decision in the case of Plastering Contractors Stanmore Ltd v Holden.

The EAT has upheld a decision that an employee who accepted £200 in exchange for becoming a self-employed subcontractor was a worker with the relevant entitlements under the Employment Rights Act 1996 (ERA) and Working Time Regulations 1998 (WTR).

From 7 April 1997 to 7 February 2001, Plastering Contractors Stanmore Ltd (PCS) employed Mr Holden (H) as a general labourer to provide plastering services to the construction industry. From 7 February 2001, it was agreed that in exchange for a one-off payment of £200, H would become a self-employed contractor and would be paid under the construction industry scheme, for which PCS accounted to HMRC for 20% of his gross pay.

PCS added H to its database of labour-only subcontractors and referred him to construction sites upon receiving requests for services. When on site, H was under the instruction of the site supervisor and was paid depending on the amount and nature of work he undertook. The rates of pay were set and arranged by PCS without negotiation, based on the supervisor’s record of H’s work.

Although H used his own safety boots, PCS provided other safety and high-visibility clothing and also a vehicle to transport equipment between sites. H worked almost exclusively for PCS until May 2013. At this point and without notice, H stopped working for PCS, having grown frustrated at spending most of his time at home waiting for referrals to work on available sites. H subsequently took up similar work with another company and brought a tribunal claim for unpaid holiday pay, arguing that he was a worker and that PCS has failed to account for his holiday pay after his change to the labour-only subcontractor role. PCS disputed this and argued that H was not a worker, on the basis that:

•PCS was under no obligation to provide H with work nor was he obliged to accept it (so there was no mutuality of obligation), and
•H was entitled to send a substitute (therefore the requirement for personal service was not met).

The Employment Judge ruled that H was indeed a worker for the purposes of ERA 1996 and WTR 1998; PCS had regularly offered work to H for 16 years with an expectation of him turning up for work during working hours, therefore he had been integrated into the workforce. PCS appealed.

The EAT dismissed PCS's appeal and established that the Employment Judge was correct in finding that sufficient mutuality of obligation existed throughout each assignment undertaken. The EAT also ruled that there had been no error of law by the Employment Judge on whether H had the right to send a substitute; there was no express provision about substitutes being permitted. In reality, H had not marketed his services publicly and had been recruited by a former employer to work as part of its workforce on certain sites or to transfer goods between sites; thus the EAT found that the requirements of both integration and control had also been met. The EAT has now sent this case back to a fresh tribunal to consider the issue of remedy.