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Legislation update: How to determine worker status

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Legislation updateRichard White explains how to determine ‘worker’ status, under the Working Time Regulations 1998, and considers a case relating to this issue.




In a 2004 case involving Redrow Homes, the Court of Appeal decided that bricklayers engaged by Redrow were ‘workers’ for the purposes of the Working Time Regulations 1998 and therefore entitled to holiday pay.

Following this decision, Redrow revised the contracts that they entered into with bricklayers to try and avoid such a situation arising again in the future. In the recent case referred to below, the Employment Appeal Tribunal (EAT) had to decide whether or not Redrow’s redrafted terms and conditions prevented the bricklayers from being workers.

Redrow Homes (Yorkshire) Limited v (1) Buckborough (2) Sewell

Mr Buckborough and Mr Sewell worked as bricklayers for Redrow between March 2006 and January 2007. Both of them had each signed terms and conditions which provided that:

  • They were self-employed bricklayers

  • They were responsible for ensuring that there was sufficient labour to maintain the rate of work required by the company

  • The obligation to perform the work was not personal to them and their obligations may be performed by other labour.

Claim

Mr Buckborough and Mr Sewell brought claims in the employment tribunal that they were workers under the Working Time Regulations 1998 and therefore entitled to holiday pay.

Decision

The tribunal decided that Mr Buckborough and Mr Sewell were workers and therefore entitled to holiday pay. The tribunal found that the term of the contract allowing the work to be carried out by anyone was in fact a “sham” and Mr Buckborough and Mr Sewell were required to carry out the work personally.

The tribunal went on to find, in the alternative, that the obligation on Mr Buckborough and Mr Sewell to ensure that there was someone on site to lay bricks as and when required by Redrow, nonetheless amounted to “personal service” for the purpose of Regulation 2(1) of the Regulations.

“The most effective way of an employer ensuring that the contractors do not become ‘workers’ is to ensure that the right of substitution under the contract is genuine.”

Redrow appealed, but the EAT dismissed the appeal. The EAT decided that for the arrangement to be a sham it is not necessary to show that the parties intended to deceive third parties or a court of law. In other words, a sham could occur where the parties simply don’t intend the provision to constitute an effective obligation between them.

The tribunal effectively decided that Redrow and Mr Buckborough and Mr Sewell always intended that they would carry out the work personally. In this case, the tribunal had made sufficient findings of fact to the effect that the parties did not intend the substitution clause to have any effect. Redrow’s appeal therefore failed on this ground.

The EAT went on to affirm the tribunal’s alternative finding that Mr Buckborough and Mr Sewell fell within Regulation 2(1) as they were “personally obliged” to provide the service of ensuring there was labour on site to do the bricklaying. Redrow’s appeal on this ground also failed.

Comment

The EAT’s decision highlights the importance of reviewing the overall circumstances in which a contract is entered into. A tribunal is entitled to take into account the surrounding circumstances, as well as the terms of the written contract, in deciding the parties’ intentions when they entered into the contract.

It may be appropriate to explain the key issues to the contractor before entering into the contract and ensuring that those issues are recorded in correspondence to evidence the intentions of the parties at the time.

However, the most effective way of an employer ensuring that the contractors do not become ‘workers’ and are therefore entitled to holiday pay, is to ensure that the right of substitution under the contract is genuine and utilised by the contractors during the period of the contract.


Richard White is a specialist employment solicitor at Withy King.

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