Employment appeal tribunal rules that CIS payments alone don’t determine employment status

A self-employed carpenter, Lee Richards, was awarded employee status by an Employment Appeal Tribunal (EAT) despite being paid as self-employed for more than eight years registered as a CIS subcontractor.

The successful appeal found that an earlier Preliminary Hearing was wrong not to award Mr Richards employee status because his working relationship had numerous indicators of employment status and only one – his tax status – in favour of self-employment.

In his judgment, Judge Martyn Barklam acknowledged that Mr Richards was a willing participant and declared himself as self-employed, but regardless of that he was an employee throughout the entire eight years he was paid as a subcontractor.

The respondent, Waterfield Homes and Unity Build and Repairs, had been following the advice of Peninsula Business Services, an HR and employment law consultancy, when they unilaterally moved Mr Richards from being self-employed to being an employee on the books. More or less as soon as Mr Richards was employed, he went off sick and began his legal case. Four years on, and the case is still not resolved: the EAT has ordered that a substantive hearing should take place to consider Mr Richard’s treatment and complaints on the grounds that he was an employee not a subcontractor.

Commenting on the case, Ian Anfield, managing director of Hudson Contract, said: “Sometimes clients think we are being overcautious when it comes to our methods and audit procedures, and all too often we hear that ‘our accountants have it covered’ which may or may not be correct on the tax front but employment is a separate area of risk.

“This judgment proves that employment status is incredibly complex and you can never be too careful in your approach. The fact that this case has rumbled on for four years says a lot about the stress and hassle these cases can cause, and being self-employed does not in itself prevent people from claiming employment rights.

“The last time we faced a challenge like this that went all the way to tribunal, our model was upheld in the landmark case of Wendy Lynch versus HelpLink where the employment tribunal found that Mrs Lynch was self-employed. This was despite her pouring £30,000 into legal fees with the law firm which had won worker status for Gary Smith vs Pimlico Plumbers. The Lynch case was reported in the Times.

“Hudson Contract is the only CIS intermediary to have its contracts and procedures scrutinised by the high court for tax treatment and also to have numerous tribunal and even EAT judgements in its name when it comes to employment rights. We are the market leader not just because of our size, but because of our track record and experience.

“Being a client of ours brings you into the fold with the combined might of 2,600 companies which allows us to invest more in compliance than anyone else. Whether you have one operative or one thousand, you get the same protection and the customer service you would expect from a market leader.”