Can a self-employed contractor be classed as a worker?

The case of Plastering Contractors Stanmore Ltd v Holden examines the question of what constitutes a ‘worker’ – and has wide-ranging legal implications for employers.

The ‘worker’ category and what it means

Employers sometimes take on self-employed contractors who do not have the same rights as employees. For example, a contractor is not entitled to a statutory period of notice, redundancy pay, or protection against being unfairly dismissed.

However, sometimes a contractor has rights as a ‘worker’, which has a broader legal definition than an ‘employee’.  A worker is someone (A) who contracts to work personally for someone else (B), where B is not a client or a customer of any business carried on by A.

Workers have legal protection against unlawful deductions from their pay and are entitled to paid leave.  They are also protected by the Working Time Regulations which means that they have a right to daily and weekly rest breaks and are subject to maximum weekly working hours if they do not choose to opt out of this provision.

Businesses that take on staff as self-employed contractors and fail to let them take paid leave could face legal action from former or current staff claiming they are entitled to paid holiday, based on their status as a ‘worker’.

Case study

A self-employed sub-contractor who had worked virtually exclusively for a business claimed he was a ‘worker’ entitled to holiday pay.

Even though the sub-contractor was not obliged to accept work from the company, which in turn was not obliged to offer him work, the Employment Tribunal decided he was a ‘worker’ based upon several different factors.  He had worked for the company for a total of 16 years, firstly as an employee and latterly as a self-employed sub-contractor.  He was regularly offered work and effectively worked in much the same way as when he had been an employee.  He wore clothing provided by the company and drove its vehicles.

The appeal procedure

The company took the case to the Employment Appeal Tribunal which considered three questions:

• Was there a contract?
• If so, did it require services to be provided personally by the sub-contractor?
• Was the company a client of the sub-contractor?

The final question involved examining the level of control the company had over the sub-contractor, whether he was integrated into the business and whether he marketed his services elsewhere.

The Appeal Tribunal ruled that the original Tribunal decision had been correct because a contract existed; the services it covered had to be provided by the sub-contractor personally; and the company was not a client of the sub-contractor.

What this means for employers

When recruiting contractors, employers are advised to consider whether individuals could be considered to be ‘workers’.  If so, employers should ensure that they comply with their legal obligations including allowing workers to take paid leave or businesses may face future claims.

If a business believes a self-employed contractor is not classified a worker, a professionally drafted contract should be drawn up, setting out the exact relationship and clearly showing that the contractor is not entitled to ‘worker’ rights.

For more information on this, or any other employment law matter, contact the Employment team on 01772 258321