We have a lot of contractors in our business and I am concerned about the risks of them being considered to be employees. How do I handle it?

Over the years, the Irish Courts and Tribunals have often deliberated over whether an individual is an independent contractor or an employee. As a result, through the vast amount of caselaw in this area, a number of tests have developed which are often relied upon to try and establish the nature of the relationship between the parties. With the dawn of the gig economy and a growing number of employees engaging in work of a more casual and less traditional nature, the issue continues to arise on a regular basis, and not only in Ireland. For example, the status of Deliveroo riders has been the subject of considerable and well publicised litigation internationally in recent times.

Back in Ireland, the recent Tax Appeals Commission determination, HotFoods v. Revenue Commissioners, provides a detailed review of the employment status of delivery drivers in Ireland. The case concerned an appeal by HotFoods, which manufacturers and delivers fast food to customers via delivery drivers, against Revenue’s contention that PAYE was due in respect of the delivery drivers as they were the employer under a contract of services. HotFoods contended that the drivers were independent contractors. Ultimately, the Tax Appeals Commission held that the drivers were considered to be employees as they were integrated into the business of the Company. The total outstanding PAYE and PRSI due to be paid to Revenue by HotFoods amounted a hefty €215,718. The Commission explored at length the question of whether the drivers’ contracts constituted contracts of service or service. Various day-to-day issues were examined such as rostering, the need to substitute another driver, the need to wear uniforms, record keeping and time keeping.

In analysing the drivers’ contracts, the Commission relied heavily on the High Court decision of Mr. Justice Edwards in Minister for Agriculture v. Barry [2011] IEHC 43 and utilised Edwards J.’s sequence of legal questioning to determine the nature of the relationship. The Commission also carried out an in-depth legal analysis of the tests of; substitution, control, integration, enterprise, business opportunity, etc. and noted that such analysis lead to the “unequivocal conclusion that the contracts are contracts of service”.

Employers should note that the fact that the drivers were so integrated into the business of the employer resulted in them being held to be employees. In relation to the integration test, the Commission held that the core aspects of the business must be examined. Given that the component of delivery was extremely important, this was a core function of the business. The Commission highlighted that it is not possible to outsource delivery as this was the very service the business was established to provide, noting the following;

It seems to me that where it can be established that a driver carries out a service which the business was established to provide, the work of the drivers is integral to the business and is not merely accessary to it. The integral nature of the work of the drivers to this business raises the implication that in ordinary course they would be employees.

The Commission was of the view that, if the delivery service was carried out by contractors who were truly independent of the company, the contractors would not be wearing HotFood’s branded clothing and would not be driving HotFood’s branded vehicles.

While such a determination is not binding on other fora such as the WRC or other Courts, it will of course be persuasive. The Commission has also been requested to state and sign a case for the opinion of the High Court. Although the decision relates to the nature of the relationship between parties for tax purposes, it provides a timely reminder of the implications of utilising independent contractors to complete work which is essential to the operations of an employer’s business.

In late 2018, Revenue released an updated guidance on the tax treatment of motorcycle and bicycle couriers, which is effective from 1 January 2019. The guide sets out that, in order to determine the status of a courier for tax purposes, it is necessary to examine each case by reference to the Code of Practice for Determining Employment or Self-Employment Status of individuals. Revenue will generally form the view that motorcycle and bicycle couriers are engaged on a contract for services. However, as the HotFoods decision demonstrates, employers need to be cognisant that such individuals may be held to be employees if they are sufficiently integrated into the business of the employer.

More recently, a UK case involving a courier classified as “self-employed” has now been referred to the Court of Justice of the EU for clarification on certain rights of a “worker” in the UK. The Watford Employment Tribunal referred the case of B v. Yodel Network Limited on the 18th September last. While the term “worker” is an intermediate category between employee and contractor and is unique to the UK, the CJEU will have to consider the following:

-          whether or not the Organisation of Working Time Directive precludes provisions of national law which require an individual to undertake, to do or perform all of the work or services required of him/her, “personally” in order to fall within the Directive;

-          whether or not the following are material to a determination of worker status for the purposes of the Directive:

• that the putative employer is not obliged to offer work to the individual claimant,
• that the individual claimant is not obliged to work exclusively for the putative employer but may concurrently perform similar services for any third party, including direct competitors of the putative employer, or;
• that the particular claimant is not in fact availed himself of the right to perform similar services for third parties, where others engaged on materially the same terms have done so.

The Court will also have to consider for the purposes of the Directive how a worker’s working time is to be calculated in circumstance where the individual claimant is not required to work fixed hours but is free to determine his own working hours within certain parameters. The decision may have far-reaching implications for those who are considered to be “self-employed” and may impact on the application of the tests outlined above.