Case Studies » Social Insurance » Insurability of Employment - from 2015 Annual Report (ref: 2015/26)
Background: The issue arose when solicitors acting for individual sought a formal decision as to his employment status. The matter was referred for investigation and Social Welfare Inspectors interviewed the parties and arranged for completion of the Form INS1 questionnaires on insurability of employment or self-employment. The Inspectors also clarified the question as one which referred to the working relationship between the worker and the company. The Deciding Officer in the Department’s Scope Section noted that the individual concerned worked as a facilities manager, maintaining and looking after residential property. He had been employed in a similar capacity with the same company previously and PRSI at Class A had been paid up to the date that he was let go. Subsequently, the company retained him under new terms and conditions. They paid him €300 for 2 days work and classified him as a contractor liable for his own tax and social insurance. He was required to submit an invoice for payment. The Inspector reported that while the new conditions differed considerably from the previous employment, the worker had accepted them. According to the company, he was not subject to control or direction and it was considered that he could not be dismissed. The Deciding Officer considered that he did not stand to gain or lose financially from the performance of his duties, did not carry public liability insurance and worked on the company premises. The Deciding Officer held that the worker was employed by the company and insurable under the Social Welfare Acts at PRSI Class A, provided that earnings were at least €38.00 per week. Where earnings were below this threshold, PRSI Class J was to apply.
The company made an appeal against that decision, and submitted that the individual concerned was made aware of his status and the employment relationship from the outset and had agreed the cost for the provision of his services; he had full control over what work was done, how it was done and when it was done; he was entitled to sub-contract the work, and he was free to provide his services to other businesses.
Oral hearing: Two representatives of the appellant company attended. The worker and the Deciding Officer attended at the request of the Appeals Officer. The Deciding Officer outlined his decision and the grounds on which he had relied. After some discussion, it was agreed that the question at issue was the status of the individual’s working relationship with the company from a date in 2009, and whether he worked under a contract of service or a contract for services.
For the appellant company, it was stated that there was no dispute with the worker but that it was considered that his status changed completely in 2009 after he had been made redundant by another company. It was stated that, at that time, the new working arrangements and the terms on offer had been discussed. It was claimed that the company was not in a position to hire a staff member but had sought to retain the work on a contract basis.
In response the worker insisted that he had submitted a P45 to the company’s office. He denied that he was told that he was being retained on a self-employed basis but recalled that he had been left without any payment for about 5 weeks. He asserted that he had protested the new terms at the time but got nowhere and in the uncertain economic climate, he went along with the conditions that were being imposed on him. He continued working but his hours and days were gradually cut down, eventually to just 2 days a week from a date in 2011. He said that he had refused to sign a contract offered to him in 2009. He confirmed that he had always worked as an employee and had had no history of self-employment. He outlined the work he had undertaken, involving maintenance such as cleaning and painting as well as dealing with more serious issues such as flooding.
For the appellant company, it was not denied that the company had received the worker’s P45. It was stated that the company had only tried to provide for him after he was made redundant. It was remarked that the individual concerned was a good worker and that the company had been keen to retain him. The company’s position was that the worker had accepted his altered status and had not complained. The company did not become aware of the issue until the Department began its investigation.
The worker disputed this. He insisted that he had never accepted the conditions which he believed had been imposed upon him. He listed the local Citizens Information Centre, the Department’s local office, local radio and, ultimately Scope Section as avenues he had pursued. He stated that he had told the Revenue Commissioners of his situation and that he was not paying tax as he had refused to register as self-employed. He added that he had set aside funds should he find himself having a tax liability.
The company acknowledged that the worker had protested his self-employed status but maintained that the company had done the best that could be done for him after his redundancy by seeking to create a position for him. With regard to payments, it was accepted that the worker had been paid on a monthly basis and that there had been times when payments were delayed due to cash flow problems within the company. It was agreed that the worker had been offered the prospect of finding a position in the company as an employee.
The position in relation to holidays was discussed, as was the question regarding hours worked. The company held that the worker decided what hours he worked and how and when he did the work. The company accepted that if he provided contractors to cover when he was on holiday, those contractors billed the company and not him. The company quoted case law and the tests applied in the case of Ready Mix Concrete(SE) Ltd v Minister of Pensions and National Insurance  2 QB 497 and the changed status that applied to the lorry drivers in that case. It was accepted that, in this case, the worker supplied labour only, did not provide any equipment, did not hold public liability insurance and worked on the company premises.
Consideration: The Appeals Officer noted that the question at issue was whether the worker was employed under a contract of service or under a contract for services while working for the appellant company. He considered that the contract between the parties identified the irreducible mutuality of obligation requirement as endorsed by the High Court in the Minister for Agriculture and Food -v- John Barry and Ors, where Edwards J held that:
The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer. If such mutuality is not present, then either there is no contract at all or whatever contract there is must be a contract for services or something else, but not a contract of service. It was characterised in Nethermere (St Neots) Ltd v Gardiner,  ICR 612 as the “one sine qua non which can firmly be identified as an essential of the existence of a contract of service”. Moreover, in Carmichael v. National Power PLC,  ICR, 1226 at 1230 it was referred to as “that irreducible minimum of mutual obligation necessary to create a contract of service.” Accordingly the mutuality of obligation test provides an important filter. Where one party to a work relationship contends that that relationship amounts to a contract of service, it is appropriate that the court or tribunal seized of that issue should in the first instance examine the relationship in question to determine if mutuality of obligation is a feature of it. If there is no mutuality of obligation it is not necessary to go further. Whatever the relationship is, it cannot amount to a contract of service. However, if mutuality of obligation is found to exist the mere fact of its existence is not, of itself, determinative of the nature of the relationship and it is necessary to examine the relationship further.
The Appeals Officer made reference to the Government appointed expert group, the ‘Employment Status Group’ which had been established to outline clear criteria for determining whether a person was an employee or self-employed. It endorsed the test applied in Henry Denny & Sons (Ireland) Limited trading as Kerry Foods and The Minister for Social Welfare  1 IR 36. Having regard to the criteria outlined, the Appeals Officer summarised the relevant considerations as follows:
- The worker supplies labour only on the company premises.
- The worker receives a fixed rate of payment related to the number of days worked.
- The worker does not sub-contract the work. However, when cover had been required, that cover was paid by the company and not by the [named] person.
- The worker is not exposed to financial risk in the entrepreneurial sense and stands to lose his job only. He is not exposed to wider losses. He has not invested in the company and does not assume any responsibility for the management of that business.
- There is exclusivity in the relationship between the worker and the company. The worker has no history of self-employment and does not carry public liability insurance.
- The worker never accepted his changed status and has protested his status over the years and even sought to bring the matter to a head by withholding tax.
- The worker works on the company premises and is subject to control and direction. One can assume that the worker is also liable to dismissal.
- While the worker has not enjoyed annual leave arrangements or sick pay, he would in the first instance have to establish employee status and this is what he is seeking to do.
Following close examination of the evidence, the Appeals Officer concluded that there were more elements of employee status than contractor status and he determined that the worker has been employed by the company under a contract of service and therefore insurable at PRSI Class A for any week that he earns €38.00 or more. This decision was effective from the relevant date in 2009.
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