Harry Taylor of Helix Law clarifies the differences and legal implications between being classed as self-employed (SE) or a worker when taking on subcontracts with a bigger firm
Trade businesses frequently use subcontractors to help meet the demand of their workload. Often there is no difficulty in establishing that subcontractors are self-employed and are therefore afforded no employment related rights against the contracting business. So if the relationship between the business and the subcontractor renders the latter a ‘worker’, then there are additional obligations that the business should be aware of.
Uncertainty may arise when a company requires its operatives to carry out their work in a particular way, regardless of whether self-employed, a worker or otherwise. An important criterion is whether the operative has the unfettered right to provide a substitute to carry out their work. If the operative is allowed to substitute, but this ability has been limited by the employing company, then it is likely that the operative is a ‘worker’. For example, the employer may only allow for operatives to transfer work to fellow operatives.
Additionally, It is not uncommon for tradesmen to contract with subcontractors verbally, without any written terms. It is also not uncommon for operatives to be assigned to work without express mention of any terms. Even in these circumstances, there may still be a contract by which the operative may be considered a ‘worker’ and not a self-employed subcontractor.
The court will take a holistic approach to the circumstances surrounding the relationship between the business and the operative. One potential aspect to look at is the extent to which the operative has been integrated into the business.
An example of when operatives were classed as workers
A recent case saw that the business advertised their operatives as being part of their brand so that consumers could associate the service offered with their company. The operatives were required to drive company branded vehicles and wear uniforms. However, their contract made clear that they were not employees, agents or partners of the company.
Although the operatives were required to provide their own insurance and tools, the court found that they were ‘workers’. The operative in question fell within this category and was entitled to protection against unlawful discrimination and, amongst other things, they were entitled to the minimum level of holiday pay.
The relationship between the business and its operative does not solely depend on the terms of the contract. The court will look at the surrounding circumstances to assess the reality of the engagement. A self-employed contractor, having an unfettered entitlement to provide a substitute, should be seen to be an independent operative. While company logos on vehicles and uniforms promote the business, the court could see this as limiting the independent nature of the contract and could potentially render the operative as a ‘worker’. Likewise, the absence of the operative’s services could be another indicator of worker status.
Trade businesses should not only check the terms of their contracts with subcontractors but carefully assess the surrounding circumstances of their use of sub-contractors. If their independence is fettered in any way, it may be that the subcontractor is entitled to the rights of ‘worker’. Workers are entitled to protection from unlawful discrimination, including the failure to make reasonable adjustments.
Harry Taylor was a J B Montagu Scholar at Middle Temple. He was called to the Bar as a non-practicing barrister in 2014. Before joining Helix Law Harry gained commercial experience at a Tax advisory firm. He is currently studying for a Masters degree in Employment Law.
Disclaimer: This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law and Meet 19 are not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.