Court decides contractor a ‘worker’ opening up holiday pay entitlement

A contractor engaged by a regulatory body under a panel member services agreement which stated he was ‘self-employed’, in fact had worker status and was entitled to holiday pay, according to the Court of Appeal (CoA).

The services performed by the contractor concerned his attendance on a panel at hearings to consider an individual’s fitness to practise. If the contractor agreed to provide his services, he was required to stay for the entire hearing.

However, there was no requirement on the regulatory body to request the contractor’s services and no obligation on the contractor to provide them when requested. Even if the contractor agreed to perform the services, he could withdraw so long as he notified the regulatory body early enough.

The regulatory body argued the contractor could not be a worker for this very reason - there was no ‘mutuality of obligation’ between it and the contractor.

The Court of Appeal disagreed because there was no right of substitution in the services agreement and the contractor agreed to provide his services personally until the contract was terminated. It didn’t matter that the contractor could withdraw from providing his services or that the parties were not obliged to offer or accept any future work. The fact an individual is entirely free to work or not and owes no contractual obligation to the person for whom the work is performed when not working, does not mean the individual cannot be a worker as defined under UK employment law.

Following the recent decision in Smith v Pimlico Plumbers, the contractor may now be able to claim compensation for the 20 days’ paid annual leave entitlement he was prevented from taking for each year he was engaged.

Both of these cases highlight the risks organisations run when engaging contractors directly and incorrectly categorising their work status.

Organisations should regularly review their labour supply chain and ensure work status reviews are in place for both employment legal rights and tax status prior to the commencement of the engagement and regularly throughout. Some contractors may now feel emboldened by these decisions to make claims for unpaid holiday going back to the beginning of their engagement.

If you have any queries or would like further information about work status or holiday pay, please contact Charlie Barnes.