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Employed or self-employed, that is the question

Employed or self-employed, that is the question

The question of employment status regularly crops up amongst the dental community. Most consider associates to be self-employed because that is the industry norm and how HMRC view associates. However, that may not always be the case.

It is a common misconception that because a contract states it is ‘self-employed’ that will be the end of the matter. However, from an Employment Tribunal perspective the question is a question of fact; not just what is set out in the documents; meaning your contract may not be worth the paper it’s written on.

Given the vast amount of employment rights that employees have, getting this wrong can be a costly mistake to make.  

In addition to ensuring you get it right from the outset, in a modern society people want more flexibility in how they work; as a result hygienists, technicians and therapist are seeking self-employed opportunities. Being able to offer such roles could make you more appealing as an employer, helping you attract and retain the best possible talent for your business.

In this blog we take a look at the legal test of employment status for the purpose of an Employment Tribunal, the common pitfalls and how to avoid them.

The question of employment status is a minefield.  It is therefore not surprising that this issue regularly pops up before Employment Tribunals. There is no hard and fast rule that can be used as the issue is always case sensitive. Judges have tried to give guidance and here we set out the points you should ask when considering the position within your practice. 

It should be noted that the test for employment status for the purposes of employment rights is different to the test that HMRC use. In addition, HMRC allow some professions, such a dentistry, to utilise self-employment status, even if the Tribunals may not agree with this. This article only deals with the question of employment status for the purposes of employment rights.

Types of Employment Status

There are three types of employment status:

1.      Employee:

2.      Worker;

3.      Self-employed.

Employees have the best employment protection, workers have some protection, and those who are self-employed have very little protection. However, those who are self-employed have much more freedom as to how and when they work, compared with employees. As such there are pros and cons with each category, and which is right for you will depend on individual/business circumstances.

You can find out what rights workers and employees have here.

Identifying Status

When looking at whether the individual is an employee, Tribunals will ask:

  1. Must the person personally provide the service or can they send a substitute?
  2. Is the company obliged to provide work and is the person obliged to accept it?
  3. How much control does the company have over the individual?
  4. Who has the risk in relation to the business?
  5. Who provides and maintains the tools?
  6. What degree of management does the individual have in the business?
  7. Does the individual profit from performance?
  8. How is the individual paid?
  9. Does the individual receive holiday and sick pay?

This is not an exhaustive list and the Tribunal does not approach it as a tick box exercise. They consider all the facts and then determine the point. This is why following the industry norm may not always be the best approach, especially with the introduction of corporates and chains.

For worker status there are just three questions:

  1. Must the person personally provide the service or can they send a substitute?
  2. Is the company obliged to provide work and is the person obliged to accept it?
  3. Was the status of the "employer" under the contract that of a customer? 

There is no definition of a self-employed person. They are simply anyone who doesn’t fit into either of the above two categories.

In Issue 12 of JFH Law's Dental Bulletin we highlighted the case of the Hospital Medical Group Limited v Westwood [2012] EWCA Civ 1005 in which the Court of Appeal held that a GP working as a self-employed independent contractor for a private clinic was a worker, even though they had two other positions elsewhere. In our opinion, this case has a lot of similarities to dentists and highlights the dangers of getting it wrong.

Avoiding the Pitfalls

First and foremost make sure the contract reflects the true position of the relationship between the practice and the individual. If you try to avoid the question and/or use pro-forma contracts, the Tribunal will see through this and will scrutinise the matter in detail, potentially leaving you with a hefty legal bill and a payment of compensation to make. Many pro-forma associate contracts try to deal with all eventualities and refer to both NHs and private work. Remember one size does not fit all.

And vice versa; if you have spent money on a contract to reflect a self-employment relationship, make sure what is said in the contract is actually being carried out. If your contract states the individual can send a substitute then you must allow this. Whether this right should be unfettered is likely to depend on how the clause is worded. Given your duties as a dental practice, you will need some assurances as to who the substitute is. If you can avoid a clause that allows you to vet any locums but states a minimum standard of substitute this will give you less control and will make the contract less likely to be deemed an employment one.

As a dental practice you will no doubt have a number of policies and procedures in place for running your business. Make sure you distinguish the ones that apply to employees (mostly likely all of them) and the ones that apply to those who are workers or self-employed. This may mean having a separate set of documents for those who are self-employed in certain areas, such as conduct or performance. However, overall the cost of amending policies compared to the cost of litigation will be worth it.  

If you want advice on the status of anyone in your workforce or need assistance with re-drafting contracts or documents, please contact Laura Pearce on 0207 388 1658 or email her at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Image by Caitlin Childs under CC licence.

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