FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 15(1), PROTECTION OF EMPLOYEES (FIXED-TERM WORK) ACT, 2003 PARTIES : BORD GAIS EIREANN (REPRESENTED BY TOM MALLON B.L. INSTRUCTED BY ARTHUR COX SOLICITORS) - AND - S�AN MCGINLEY REPRESENTED BYSERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Doherty Worker Member: Mr O'Neill |
1. Appealing against Rights Commissioner's Decision R-049332-Ft-07/Jt
BACKGROUND:
2. An appeal was submitted to the Labour Court in accordance with Section 15(1) of the
Protection of Employees (Fixed-Term Work) Act, 2003. A Labour Court hearing took place on 11th December, 2008. The following is the Court's Determination:
DETERMINATION:
The case before the Court concerns an appeal against a Rights Commissioner’s decision, which found that the Complainant did not qualify as an employee under section 2 of the Protection of Employees (Fixed-Term Work) Act, 2003 (the Act).
Bord Gais Eireann (the Respondent) contended as a preliminary issue that Mr Sean McGinley (the Complainant) was not employed under a contract of service but was instead an independent contractor retained under a contract for services and, therefore, had no entitlement under the Act.
- Section 2 of the Act defines an "employee"
- “means a person of any age, who has entered into or works under (or, where the employment ceased, entered into or worked under) a contract of employment and references, in relation to an employer, to an employee shall be construed as references to an employee, employed by that employer; and for the purposes of this Act, a person holding office under, or in the service of, the State (including a Civil servant within the meaning of the Civil Service Regulation Act, 1956) shall be deemed to be an employee employed by the State or Government, as the case may be, and an officer or servant of a local authority, or of a harbour authority, the Eastern Regional Health Authority or the South-Western Health Board, a health board or vocational education committee shall be deemed to be an employee employed by the authority, health board or vocational education committee, as the case may be;”
(locus standi) to maintain the proceedings. The Rights Commissioner held with the Respondent on this point and found that he lacked the jurisdiction to investigate the complaint. The Rights Commissioner did not make any decisions on the substance of the Complainant’s case.
The Preliminary Issue
The issue to be considered by the Court in this case is whether the Complainant was engaged on a contract of employment. If, as contended by the Respondent, he was engaged as a contractor on contracts for service, he lacks the necessary legal standing to pursue a claim under the Act.
Background
The Complainant, Mr. S�an McGinley, had been employed by the Respondent from 1973 when he commenced as an apprentice fitter, until 1989 when he left of his own accord. Shortly afterwards he went into business as an approved natural gas appliance dealer and installer.
For approximately ten years he worked for another company. In February 2001, he agreed to become a service engineer working under a period contract with Bord Gáis �ireann Appliance Servicing Department, based in Cork.
In or about June 2001, the Respondent’s Energy supply division made a decision to set up a natural appliance servicing organisation. On 13th June 2001 at a time when the Respondent was setting up its National Customer Service the Respondent and Gascall agreed a contract for service, whereby the Complainant (on behalf of Gascall) became a service agent providing field management services to the Respondent, along with a panel of qualified contract service contractors. Gascall was a registered business name of S.M.G. Gas Services Limited. The Complainant was a shareholder and director of S.M.G. Gas Services Limited.
The Respondent engaged S.M.G. Gas Services Limited on a series of contracts for services from June 2001 to December 2006.
Summary of the Complainant’s Case
The Union on behalf of the Complainant argued that the true nature of his relationship with the Respondent was one of an employee/employer relationship. He argued that there was no such entity as “Gascall Limited”. He stated that he signed a contract to become a service agent in 2001 to carry out work in customer’s homes along with 24 other service engineers and from then on he was contracted on a yearly basis to work as part of the management team mainly dealing with Quality of Service, Training and Customer Complaints.
The Union submitted that the use of contracts with Gascall disguised the real nature of his employment relationship to the advantage of the Respondent and to his personal disadvantage. It asserted that he wasde factoan employee, he was totally integrated into the operation of the company and was indistinguishable from other employees, he was provided with company documentation and represented himself both internally and externally as an employee of the company. It asserted that he was interchangeable with a named comparator and that he operated under the total control of the company with regard to hours of work, the timing of his holidays and management of the section for which he worked.
It claimed that when he considered leaving the company in 2004 management encouraged him to stay and advised him that his situation would be regularised into full employee status at the earliest possible time.
In support of the Complainant’s position, the Union cited a number of cases,viz, Diageo Global Supply v Mary Rooney PTD04, Roach v Kelly [1969] IR 100, Motorola Limited v Davidson and Others [2000] ILRM.The Union submitted that based on the findings of these cases the Complainant’s contract was oneofserviceand notforservice. The Union submitted that the Complainant was employed under a contract of service and this could be verified when the tests cited in the above cases were examined namely: -
- -the degree to which the employer had control over the Complainant’s
work;
-the method of remunerating him for work the Complainant he personally
and exclusively carried out;
-the level at which the Complainant was integrated into the running
and management of the company, and
-the conditions of the Complainant’s contract.
Summary of the Respondent’s Case
Mr. Mallon B.L., Counsel for the Respondent maintained that the Complainant was not at any material time an employee of the company as he provided a service under a contract for service made between Bord Gáis and Gascall, a registered business name owned by SMS Gas Services Limited, a company of which the Complainant was a shareholder and director. SMS Gas Services Limited t/a Gascall were contracted on a series of contracts between 2001 and 2006 to provide field management services when the Respondent was setting up its National Customer Service.
At all material times Gascall was registered for VAT and invoices were submitted to the Respondent in respect of services provided by it for the period from 11th June 2001 up to and including 24th November 2006.
In support of the Respondent’s position, Mr. Mallon cited a number of cases,viz, Henry Denny & Sons Ireland Limited - v - Minister for Social Welfare[1998]1 IR 34. He held that the question of whether or not work performed by a limited company creates an employer/employee relationship was particularly considered by the Supreme Court inCastleisland Breeding Society Limited - v- Minister for Social and Family Affairs[2004] 4 IR 150.
Mr. Mallon submitted that there was no legal relationship created between the Respondent and the Complainant personally, any obligations were between the Respondent and Gascall. Therefore, he submitted that in the absence of any contractual nexus directly between the Complainant and the Respondent the Labour Court has no jurisdiction.
Findings of the Court
Legal complexity surrounds the area of the distinction between a contract of service and a contract for service.
A series of tests have evolved at common law to assist in this identification process. It is accepted that the distinction is a fine one and may be difficult to apply in borderline cases.
Traditionally, the existence of a contract of employment was dependent in part on the amount of control exercised by the employer, but the Court accepts that this test is not an absolute one.
The fundamental test for determining the question of whether the contract is oneof serviceorfor servicewas set down in the English decision ofMarket Investigations v Minister of Social Security [1969] 2 Q.B 173. Here it was held that the Court should consider if the person was performing the service as a person in business on his own account. If the answer to that question is yes, than the contract is one for service. If the answer is no then the contract is one of service.
That approach was adopted in this jurisdiction by the Supreme Court inHenry Denny & Sons v Minister for Social Welfare [1998] IR 34. Here Keane J (as he then was) quoted with approval the following passage from the judgment of Cook J inMarket Investigations:
- “The observations of Lord Wright, of Denning L. J and of the judges of the Supreme Court suggest that the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account '. If the answer to that question is 'yes', then the contract is a contract for services. If the answer is 'no', then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task."
- It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.
- A “Contract for Services” was formally agreed between the parties on 13th June 2001; although not identical to the 2001 contracts, similar contracts were issued on 5th March 2002, 19th September 2002, 3rd July 2003, 8th June 2004, and 1st July 2005.
- On 19th September 2006, following the expiry of the previous contract, a further contract for service to include the period up to 31st December 2006 was offered to
- Gascall, however, that contract was not executed by Gascall.
- The 2001 contract stated it was between “Bord Gáis �ireann (hereinafter called the Company) and Gascall (hereinafter called the Consultant)”and was signed by the Complainant on behalf of the “Gascall”. The contract stated as follows: -
- “The Company hereby engages theConsultant and the Consultant accepts such engagement to provide to the Company such services as the Company may call for during the tenure of the Agreement. The services shall involve assisting and advising the Company, in its Appliance Service projects.”(1)
- The contract stated that the Consultant shall furnish a V.A.T. invoice and the Company shall pay a daily fee twenty days after approval of the invoice and the amount of the fee shall be calculated by reference to the time spent by him in providing services to the Company. It stated that all expenses incurred in providing the services shall be paid in full other than where the Company specifically requested him to travel outside the base location, which may be subject to change from time to time. The Consultant was held responsible for all statutory contributions/liabilities; to provide and maintain all necessary equipment and to provide all necessary insurance.
- The contract provided that the Company could withhold payment in the event that the services were unsatisfactory.
- Payment for annual leave or other employment type benefits was not provided for.
(1) Included in the 5th March 2002 contract and in subsequent contracts the words “Service Supplier” is used instead of the word “Consultant”. The Complainant signed these contracts on behalf of the Service Supplier.
The Court notes the following: -
Payment for work done was considerably higher than the total payroll costs for Service Engineers employed by the Respondent. The latter were paid a salary of approximately €65,000 whereas his fee amounted to approximately €132,000 per annum. Increases in the fee were agreed between the parties in line with the consumer prices index on an annual basis.
The Complainant was registered for V.A.T. and offset V.A.T. payments from the monies he returned to the Revenue Commissioners, e.g. van and all travel expenses incurred. He supplied Tax Clearance Certificates to the Respondent each year.
The Respondent supplied the Complainant with a laptop, mobile phone and phone, and the main work equipment necessary for the job.
His time off for holidays was scheduled by the Respondent and a replacement was rostered to carryout his work. He provided his services personally and exclusively for the Respondent and reported to the Respondent’s field office on a daily basis. From January 2006 the Respondent created his invoices and sent them to him for information purposes.
The Complainant was provided with a business card identifying him as Technical Manager Appliance Services. He was required to attend business meetings scheduled for staff, included on the departmental mailing lists. He was rostered for duty and emergency cover, was interchangeable with staff and was scheduled for training in the same manner as other members of staff.
InHenry DennyKeane J held that “The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive”.It is clear from the foregoing that the Respondent exercised a great deal of control over the Complainant in terms of the allocation of his hours of work and jobs to be performed. It is equally clear that he was to a large extent integrated into the Respondent’s business and workforce. These factors are undoubtedly relevant in attempting to determine his status as an employee or as an independent contractor. However, there are other aspects of the relationship which are equally significant in so determining.
The Court fully accepts from the evidence submitted that the Complainant represented himself as S.M.G. Gas Services Limited t/a Gascall and is satisfied that at the signing of each of the contracts for service, the intent of the parties was for the supply of services from an independent contractor to the Respondent as distinct from an employer/employee relationship. The contracts are explicit in that regard and the Court notes that the Complainant was one of twenty-five such persons on similar contracts. Neither did he at any time, up to the period when it became clear that the contract was not going to be renewed did he seek to invoke employment rights.
The Court understands that due to the nature of the service supplied it was imperative that the Respondent engaged the services of those who were fully qualified in the provision of that service and in that regard must be distinguished from a situation where a person in business of their own account may delegate work to someone else.While the Court has formed the view that the Complainant was to a large extent integrated into the day-to-day business operation of the Respondent, his terms and conditions compared to full time employees were significantly different.
The Complainant was paid on foot of an invoice without deduction of PAYE or PRSI. There are certain similarities with theDennycase in that in that case the demonstrators were paid a fee in respect of each demonstration provided. Each demonstrator submitted an invoice and payment was made each fortnight without deduction of tax or PRSI. In that particular instance they were nonetheless held to be employees.
However, in this case the Court considers it significant that the fees paid to the Complainant were higher than the total payroll costs of similar employees and when comparison is made with the basic salary of a Service Engineer, the fees paid to the Complainant were substantially higher.
The Court is of the view also that it is inconsistent with the status of an employee to submit V.A.T. returns to the Revenue Commissioners; to be required to submit Tax Clearance Certificates and to offset traveling expenses from tax returns. The Court notes that the reasons submitted for the change to the invoicing system in January 2006 whereby invoices were generated internally with the agreement of the Complainant, was purely for administrative purposes and the new system was speedier and more efficient.
Furthermore, the Court notes that at some point the Complainant decided of his own volition to discontinue liability insurance sometime in 2004/2005, despite his contractual obligation to do so and despite the provision for such in the overall fee, thereby enhancing the level of profit he made.
The extent to which work performed by a limited company creates an employer/employee relationship was particularly considered by the Supreme Court inCastleisland Cattle Breeding Society Limited - v- Minister for Social and Family Affairs[2004] 4 IR 150.
The Court finds that the determining factors to decide whether the Complainant was employed under a contract of service or a contract for services are more closely aligned with those by Geoghegan J in theCastleislandcase where, in the core of his decision, he stated as follows: -
- “The principles applied by Keane J[in theDennycase]ought to have been applied by the appeals officer in this case and, in my view, if they had been there would have been a different result.
For reasons which I will explain, I have come to the conclusion upon carefully reading the full report of the appeals officer of the proceedings before her in Tralee and without having to pay any regard to points made in correspondence subsequently by the appellant that the case for Mr Walsh being an independent contractor was so overwhelming that it was not open to the appeals officer to arrive at the decision which she made, even assuming her report accurately reflects what exactly was said at the hearing.
I arrive at this view on the facts as a whole but in this connection I regard two factors as being fundamental. First of all, Mr Walsh, as did the other men at the time, knew well the reason why their contracts of service were terminated and that the redundancy arrangements were entered into entirely in the context of what was happening in the way of new arrangements involving contracts between the appellant and independent contractors.
The change of contractual arrangements had obvious consequences. The most important of these were that the inseminators, including Mr Walsh, became self- employed for tax purposes. Mr Walsh made returns on that basis and claimed tax allowances under the self-assessment system.
Even more importantly the inseminators under the new contractual arrangements had to carry out their own insurance. It is true that apparently in one instance a loss, which would otherwise have been covered by insurance, was met by the appellant and the appeals officer seems to have attached some importance to this. Apparently, this was done merely because the particular inseminator did not have proper insurance cover and this does not seem to have been contested. It would not be justified, in my view, to attach any significance whatsoever to that incident. In the other hand, the fact that the men had to carry out their own insurance was of huge importance in considering the nature of the contract. Another consequence was that Mr Walsh lost his pension entitlements. It seems quite clear that these inseminators fully understood the position in 1990 and in no sense did they enter into a bogus contract, whether as a consequence of exploitation or otherwise. The appellant made no secret of its reasons for changing its method of procuring the artificial insemination services. As far as the appellant was concerned, it was with a view to cutting losses in the appellant. There is nothing unlawful or necessarily ineffective about a company deciding to engage people on an independent contractor basis rather than on a “Servant” basis but, as this court has pointed out in Henry Denny & Sons (Ireland) Ltd – v- Minister for Social Welfare [1988] 1 I.R. 34 and other cases, in determining whether the new contract is one of service or for services the decider must look at how the contract is worked out in practice as mere wording cannot determine its nature. Nevertheless the wording of a written contract still remains of great importance. It can, however, emerge in evidence that in practice the working arrangements between the parties are consistent only with a different kind of contract or at least are inconsistent with the expressed categorisation of the contract. In this case, apart from matters of minor detail, the written contract seems to have been the contract that was actually worked. Furthermore, in the case of Mr Walsh it was worked by him between the 1st March, 1990 and the 8th September, 1999, without any claim being made by him and he was subject to the Social Welfare Acts and was under a contract of service.”
In determining the nature of the contract under which the Complainant works in this particular case, the Court concludes that while certain elements of Complainant’s employment situation are consistent with an employer/employee relationship, overall the working practices in reality are consistent with the contracts of service entered into between the parties.
Therefore taking all of these factors into account, the Court finds that the Complainant was engaged as an independent contractor supplying services to the Respondent through his trading company “Gascall” and consequently was not an employee who worked under a contract of employment”.
Determination
The Court determines that the Complainant is not an “ employee” as defined under section 2 of the Protection of Employees (Fixed-Term Work) Act, 2003 (the Act) and therefore cannot avail of the protection of the Act.
The decision of the Rights Commissioner is upheld. Therefore, the Complainant’s appeal is dismissed.
The Court so determines.
Signed on behalf of the Labour Court
Caroline Jenkinson
19th January 2009______________________
AHDeputy Chairman
NOTE
Enquiries concerning this Determination should be addressed to Andrew Heavey, Court Secretary.