Navigating blurred lines of employment status in a post-Covid world
Dermot Casserly, employment law expert and partner at DWF’s Dublin office, outlines the challenges businesses face when engaging individuals as independent contractors, freelancers and consultants
It is common practice in some sectors, particularly IT, to engage individuals as self-employed independent contractors, but in reality, and as a matter of law, this could be regarded as an ‘employment relationship’.
Working from home led to unprecedented employee autonomy, with flexibility and trust being integral to the employment relationship. In some cases, this has blurred the traditional lines regarding employee status and has unintentionally made it more feasible for companies to engage independent contractors who provide services from their home (or abroad).
Faced with a competitive labour market, skills shortages, and high inflation, many employers are offering incentives to attract and retain quality employees. This includes a more flexible employment relationship, ultimately giving employees the best of both worlds – complete flexibility as to how, when and where they work, coupled with job security.
There is no single, clear legal definition of the terms ‘employed’ or ‘self-employed’ in Irish law. To determine a person’s status, both the written or oral contract and the factual reality behind the contract must be considered. Although the intention of the parties and any written agreement is given due consideration, on their own they don't determine the employment status. While the terms of a contract might be quite clear in stating that a person is engaged as a self-employed contractor, the courts may conclude that they are, in fact, an employee.
To help determine employment status the courts have applied long-established legal tests of personal service, control, integration into the workforce and ‘mutuality of obligation’. In recent case law, the concept of ‘mutuality of obligation’ was given particular importance.
The Revenue Commissioners also have a very practical, and recently updated, Code of Practice on the issue of employment status. Typically, a genuine independent contractor owns his/her business and is exposed to financial risk. Usually, he/she would also have control over what is done, how it is done, when and where it is done and whether they do it personally.
Employees are entitled to employment protection including the right to a written statement of employment, annual leave, and public holidays, maternity/paternity/other leave, redundancy pay, minimum pay, access to a pension scheme, and the right to claim unfair dismissal.
Some of these rights require a qualifying period of service before they are applicable eg 12 months in the case of unfair dismissal rights (subject to limited exceptions where there is no minimum service level).
Self-employed contractors on the other hand have very little legal protection and instead must rely on the agreed contractual terms. However, if an independent contractor asserts employment status, it could give rise to the company having substantial exposure under employment law and with the Revenue Commissioners.
Finally, there is also a trend whereby some companies are engaging vulnerable individuals on a self-employed basis with the intention of avoiding employment law protections and tax obligations (bogus self-employment), which needs to be closely monitored by the relevant statutory bodies.
For further information on this or any other aspects of employment law in Ireland, contact Dermot on dermot.casserly@dwf.law. For Northern Ireland and Britain, contact Rachel Richardson on Rachel.ml.richardson@dwf.law. Alternatively, visit dwfgroup.com.
In conjunction with the Dublin Chamber of Commerce, Dermot Casserly is delivering a webinar on the Tips and Traps in Relation to Employee Dismissal on Weds, June 22 from 12pm-1pm. To register, contact jenna.weir@dwf.law
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