19 Jan 2017

HMRC win driver case

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isolated wooden truckThe heat is continuing to rise for companies that engage self-employed people after a judgement was released last week by the courts confirming that the self-employed drivers engaged by RS Dhillon and GP Dhillon Partnerships should have been employees.

The business provides haulage services delivering aggregates, asphalt and tarmac and engaged drivers on a self-employed basis but HMRC successfully argued they were employees leaving a liability of over £240k. Following similar employment law cases with companies like Uber and Citysprint, it looks to be increasingly more difficult for drivers to be classified as self-employed.

The business, would enter into contracts with its clients to deliver aggregates. The contracts would allow branding of RS Dhillon’s vehicles, address vehicle maintenance and operational instructions for drivers and specify that drivers could be used that were approved by the client to carry out the services.

There were no written contracts between the business and the subcontractors and so it was left to the tribunal to determine what terms existed between the parties.

In relation to control the tribunal decided that “control is of limited assistance” in this case which is quite frankly astonishing given cases like JL Windows and Sherburn Aero Club were determined solely on control as well as control being deemed the “irreducible minimum for a contract of employment to exist” in Montgomery v Johnson Underwood. Add to this that in 2014 the government decided that control was to be the sole criterion for determining an agency workers payment status and there seems little room to argue that control is of limited assistance nowadays. An important point to take from this judgement is that the judge confirmed that in this particular case there was a higher level of control than one would usually see with a driver.

The facts around personal service are also interesting because it was accepted that the drivers could send someone in their place (an example being if they reached their maximum amount of driving hours). A subcontractor being able to send others in its place to provide the services would usually mean the individual cannot be an employee but it is important to fully consider this area before simply relying on it as a defence. In this case the client had to approve the drivers and unless this approval has boundaries the client ultimately retains an outright veto over who provides the work, add this to the fact that the judge believed substitutes would only be used to avoid breaching driving hours and personal service was ultimately required.

In relation to mutuality of obligation (the obligation to offer and accept work), the court decided that each time the individual was offered work was a distinct and separate contract but worryingly the court also said that mutuality of obligation is met very easily, presumably by the carrying out and payment of work and so very little weight is given to this area.

This case highlights some very important points for anyone using self employed individuals. The first is that accurate written contracts are very important in defending your position as they clearly set out the terms of the relationship so that the tribunal does not have to try and figure out what terms exist.

Another important lesson from this case is that you can never be certain of an outcome, whether it be a judge taking a different view or a witness providing damaging evidence, you may feel confident that subcontractors are self-employed but on the day of a hearing anything can happen and there will always be an employment status risk associated with using subcontractors.

Last of all, the business in the case had “fee protection” whereby they paid an annual fee so that if they got challenged the legal defence costs would be covered. It was quite apparent in this case however that although they had cover, they still hadn’t actually taken expert advice in the first place about employment status and as great as it is to have the legal costs covered, the business was still left with a large liability at the end of the day.