Right to substitute does not always rule out employee status

Does the right to use a substitute invariably preclude someone from having employee status? Not necessarily. 

Employment status is important because many employment rights, including rights to a redundancy payment and not to be unfairly dismissed, are available only to individuals working as employees and not the self-employed. When deciding someone’s employment status, employment tribunals look for whether there was a contract to carry out work personally. An employee is required to provide their personal service whereas the right to send a substitute, or to subcontract the work, is more consistent with those who are self-employed.

In the following case, the Employment Appeal Tribunal (EAT) had to rule whether a right to use a substitute could ever be consistent with employee status. 

Facts

The Claimant worked as a live-in carer for an elderly man, having been retained by the man’s nephew through an agency. She was paid her salary gross and she was responsible for her tax and National Insurance. Initially, she invoiced her time but the arrangement was changed to one where she was paid by standing order into her bank account. At first, the Claimant was closely supervised by the nephew but the supervision was significantly reduced when he was satisfied with the Claimant’s work.

The Claimant arranged for replacement carers through an agency to cover her holidays and other absences. It was during the Claimant’s final period of absence that a replacement agency carer raised concerns about the standard of the Claimant’s work, prompting the nephew to dismiss her.

The Claimant, believing that she had been unfairly dismissed, started employment tribunal (ET) proceedings against the nephew.

The nephew denied that the Claimant was an employee. He argued that the Claimant was self-employed, evidenced by her organising her own tax and NI. He also alleged that she had the right to substitute agency carers when she took leave, was not subject to control by him and was not entitled to be paid during absences as of right.

ET Decision

The ET concluded that the Claimant was an employee. In particular, it decided that the Claimant did not have an unfettered right to use a substitute and the agency carers were only there to cover for the Claimant’s absences.

EAT Decision

The EAT rejected the nephew’s appeal. Substitution only occurred on the Claimant’s days off, for a period of jury service, and for periods of annual leave (for which she had also been paid). The Claimant had no freedom to choose who substituted for her as this was decided by the agency. Following the Pimlico Plumbers decision, the EAT ruled that a right of substitution only when a contractor is unable to work can still be consistent with personal performance and does not preclude a finding that they are an employee.

Comment

As this ruling shows, in some cases substitution will be fatal to employment status, in others it will not. If the Claimant in this case had been able to choose her own cover to substitute for her when she was absent, the outcome may have been different. Less controversially, the EAT highlighted the fact that the Claimant arranged for payment of her own income tax and National Insurance contributions did not necessarily mean that she was self-employed. 

Chatfeild-Roberts v Phillips and Another 

Warning: this news item is not a substitute for legal advice. The information may be incorrect or out of date and does not constitute a definitive or complete statement of the law. This news item is not intended to constitute legal advice in any specific situation. Readers should obtain legal advice and not rely on the information in this article.