Employers urged to properly consider employment status

A recent decision from the Employment Appeal Tribunal (EAT) has clarified the circumstances in which an individual is prevented from pursuing a claim for unfair dismissal due to misrepresentation of their employment status.

The individual in this case was recruited by a firm of solicitors and at his own request was engaged as a “self-employed locum solicitor”, being paid without deduction of tax or national insurance and submitting self-assessment forms to HMRC.  Following the termination of this arrangement, the solicitor brought a claim for unfair dismissal.

At a pre-hearing review to determine the issue of employment status, an Employment Judge ruled that the claimant was in fact an employee.  However, the judge decided that the employment contract was illegal in its performance.  She found that the claimant had wished to be engaged on a self-employed basis because it was more beneficial to him financially and that the nature of the relationship was deliberately miscategorised at his instigation.  For public policy reasons, this meant that he should not be allowed to pursue his claim for unfair dismissal.

The EAT has since upheld the claimant’s appeal. It concluded that the Employment Judge had not properly considered the extent of the claimant’s misrepresentation. It is not sufficient that the individual was simply aware of the financial benefits of having self-employed status for tax purposes. 

Rather, it has to be shown that the individual claimed self-employed status knowing that it was unsustainable to do so.  The judge had not addressed the key question of whether the claimant knew that it was unsustainable to claim self-employed status.  The EAT remitted the case to a new tribunal to consider the extent of the claimant’s knowledge.

Lorna Townsend, a principal at Steeles Law, commented: “It is understandably difficult for employers to accept that someone who is engaged on a self-employed basis can subsequently take advantage of the statutory protection available to employees.  However, this case illustrates the importance of giving proper consideration to employment status at the outset of the working relationship. 

"The EAT noted that the judge’s concerns were ‘proper and legitimate concerns’ and in circumstances where it is clear that an individual has deliberately misrepresented their employment status, they will be unable to pursue a claim for unfair dismissal.”