Determining an individual’s employment status is not always a clear-cut exercise, as a number of factors play a part in whether somebody is a worker, employee or self-employed in the eyes of the law.
With each category of worker afforded different legal rights, incorrect categorisation can leave employers exposed to Employment Tribunal claims. Most recently, a case involving an out-of-hours GP has highlighted the risk of mistakenly treating an individual as self-employed when they are in fact a worker.
What’s in a name?
In the UK, it is becoming increasingly common for employers to hire independent contractors and freelancers in place of full-time employees. In fact, according to the TUC, as many as one in 10 working-age adults are now part of Britain’s growing “gig economy” – raising concerns over diminishing workers’ rights and making correct categorisation even more difficult.
Under UK employment law, there are three main types of employment, each with its own qualifying criteria and related legal rights and entitlements.
An employee is anyone who provides services for an organisation under an implied or written Contract of Employment, is paid a set wage or salary, and has their work controlled by the employer.
A worker is anyone who, like an employee, is contracted to provide services and agrees to undertake the work personally; however, unlike an employee, has very little obligation to receive or do work. An example would be somebody employed on a zero-hours contract, who works on an ‘as and when’ basis but is obligated to carry out the work they’ve agreed to.
Only employees are entitled to the full suite of statutory employment rights. While workers are entitled to some statutory rights – such as those in respect of national minimum wage, holiday pay and protection from discrimination – they cannot claim for unfair dismissal and are not entitled to redundancy pay.
A self-employed person is anyone who works for themselves, rather than for an employer, and invoices for their services. They are responsible for how and when they work, can work with multiple clients on different terms, and can subcontract someone else to undertake the work for them if appropriate.
Because they are their own boss, self-employed people have the least amount of employment rights (for example, they are not entitled to holiday pay or sick pay); however, they are still entitled to certain legal protections, including health and safety protection, protection against discrimination, and protection against mistreatment for whistleblowing.
Community Based Care Health Ltd v Narayan
In this case, the court was tasked with determining whether Dr Narayan, who worked as an out-of-hours GP for Community Based Care Health (CBCH), was self-employed (as the company maintained) or whether the nature of the parties’ contractual relationship meant that she was in fact a worker.
Some elements of Dr Narayan’s role suggested that she was a worker, most notably the fact that she had worked regular shifts for around 12 years. She was also required to work personally for CBCH (in other words, she wasn’t permitted to send somebody else to substitute for her) due to the NHS contract for out-of-hours service providers. This states that companies must ensure that doctors providing these services are competent and properly qualified and requires them to audit the services of GPs on their books. As such, any issues raised with Dr Narayan’s performance wouldn’t be directed to her, but to the company, implying the existence of an employer-employee relationship.
However, other features of her role appeared more in line with a self-employed categorisation, including the fact that:
- The company were under no obligation to provide work to Dr Narayan, nor was she obligated to perform any;
- She did not need permission to take work elsewhere; and
- She provided her own medical equipment and indemnity insurance.
Important to this case, back in 2015, Dr Narayan set up a limited company in order to receive payments from Community Based Care Health, as well as payments for locum work she did through an agency on a self-employed basis.
When CBCH stopped offering Dr Narayan work for reasons related to advice she had given to a patient, as well as the fact that she had swapped duties without informing the company, Dr Narayan brought a number of claims before an Employment Tribunal (ET). These included a claim for unfair dismissal (where an employee believes an employer’s reason to dismiss falls outside of the five fair reasons for dismissal listed under the Employment Rights Act) and wrongful dismissal (dismissal that constitutes a contractual breach). However, because Dr Narayan wasn’t an employee, these claims were dismissed.
However, Dr Narayan also brought claims for holiday pay and sex and race discrimination, which required the judge to rule whether she was a worker or self-employed. After considering 13 factors, including those mentioned above, the judge concluded that Dr Narayan was in fact a worker and allowed the claims to proceed.
Employment Appeal Tribunal
Disputing this categorisation, CBCH appealed the ET’s decision.
It maintained that Dr Narayan couldn’t be a worker as it was the limited company that they were in a contractual relationship with, not Dr Narayan herself. As a company is not a person, they argued, theirs was not an employer-worker relationship.
Like the ET, the Employment Appeal Tribunal (EAT) disagreed with this evaluation. It held that Dr Narayan’s limited company couldn’t possibly be the contractual party as it didn’t meet CBCH’s requirements regarding the provision of qualified and approved GPs who are capable of satisfying strict qualification and performance requirements. As the judge pointed out, an inanimate corporate entity cannot fulfil this criterion as it isn’t a doctor or even human, meaning the relationship had to have existed directly between CBCH and Dr Narayan.
Still not convinced, NBCH referenced a verdict in a similar case, Suhail v Herts Urgent Care, in which a court concluded that a doctor “marketing his services to whichever provider of medical services might wish to provide him with work” was self-employed. However, the EAT explained that the key difference between these two cases was that that “Dr Suhail had marketed his services to NHS bodies while this claimant worked regular shifts for the respondent over many years”.
Director of Legal Services
Given there was no contractual relationship between the doctor and health company in this case, the outcome may seem surprising. However, it is yet another example of the Tribunal looking past whatever contractual documents exist and at the real relationship between the parties.
Given that there is no magic in the contracts in these situations, it is incumbent on employers to make sure that they consider each case on its merits in line with established case law and the relevant tests. With this in mind, it’s always wise to take advice from an Employment Law specialist before acting.
Looking to safeguard your business against claims?
At Ellis Whittam, we help businesses to proactively reduce legal risk through access to a dedicated Employment Law Adviser, who you can call upon at any time for straightforward, commercially-savvy advice. Our fixed-fee service also includes expert-created Contracts of Employment for each category of worker and is backed up by independent Legal Expenses Insurance to give you valuable peace of mind.
To talk through your needs and the support available, call 0345 226 8393.