FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 S2(1), INDUSTRIAL RELATIONS (AMENDMENT) ACT, 2001, AS AMENDED BY THE INDUSTRIAL RELATIONS(MISCELLANEOUS PROVISIONS) ACT, 2004 PARTIES : BORD GAIS EIREANN (REPRESENTED MR TOM MALLON B.L., INSTRUCTED BY ARTHUR COX SOLICITORS) - AND - TECHNICAL, ENGINEERING AND ELECTRICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Doherty Worker Member: Mr Nash |
1. Referral from the Labour Relations Commission under the Industrial Relations (Amendment) Act, 2001, as amended by the Industrial Relations (Miscellaneous Provisions) Act, 2004.
BACKGROUND:
2. The dispute was referred to the Labour Court on the 19th August, 2009, in accordance with Section 2(1) Industrial Relations (Amendment) Act 2001, as amended by the Industrial Relations (Miscellaneous Provisions) Act, 2004.
A Labour Court hearing was held on the 18th January, 2010.
RECOMMENDATION:
This case was referred to the Court pursuant to Section 2 of the Industrial Relations (Amendment) Act 2001, as amended (the Act). TEEU referred a claim on behalf of Gas Service Engineers in individual contracts with Bord Gáis �ireann for application to them of benefits conferred by the Employee Share Option Plan (ESOP) for its members.
The claim stated as follows:
- “The Workers here concerned are Employees of BGE and are therefore entitled to share in the benefits of the Employee Share Ownership Plan (ESOP).”
The Employer raised a preliminary objection to the jurisdiction of the Court on grounds that as the persons represented by TEEU are not “Workers” for the purposes of the Act, therefore there is no “trade dispute” within the meaning of Section 2(1) of the Act.
However, following the submissions from both parties and having reviewed the legislation along with the relevant case law, the Respondent accepted that the Claimants were workers as that term is defined in Section 23 of the Industrial Relations Act 1990 and that a trade dispute within the meaning of Section 2(1) of the Industrial Relations (Amendment) Act 2001 existed between the parties.
Consequently the only preliminary issue for the Court to decide is whether the Claimants work for the Respondent under a contract of service or a contract for services. In other words are they Employees of the Respondent or are they self-employed contractors who do work for the Respondent.
If the Court finds that they worked under a contract of service, then an issue would arise as to whether they were entitled to share in the ESOP scheme. Both parties accepted that if the Court found that the Claimants worked under a contract for services then they would not be entitled to share in the scheme. Of equal importance to the Claimants, as it emerged during the course of the hearing, was that the Respondent had decided to outsource all work carried out by the Claimants to a third party. If the Court found that the Claimants worked under a contract of service they would be entitled to rely on the provisions of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 in any negotiations with the third party. On the other hand if the Court found that they worked under a contract for services they would not be entitled to rely on the Regulations.
The Respondent produced transcripts of the proceedings and both sides made lengthy submissions and cited a number of authorities in support of these submissions. The transcripts submission and authorities have been considered at length by the Court and have been of great assistance in helping it to make its recommendation.
As there were some 47 Claimants, discussion arose as to the number of Witnesses it would be necessary to call. Both parties were referred to the Supreme Court Decision of Geoghegan J inRyanair v The Labour Court and others[2007] 18 ELR 57 wherein he held that it was not necessary to produce all of the Claimants, but held that credible and cogent evidence (if required) be given by the Claimants as to the status of their complaint. In the instant case both sides put forward the names of Witnesses who were prepared to testify, and each side nominated a number of Witnesses sufficient to assist the Court in its deliberations of the dispute.
The Union’s Case
The Practical Situation
The Union classified the Claimants into three categories:
(i)Sole traders with a contract,
(ii)Limited Company with a contract,
(iii)Sole trader without a contract.
Mr. Eamon Devoy TEEU during the course of the hearings withdrew those claims on behalf of his members who operated as Limited Companies. He submitted that the remainder of the Claimants are employees of BGE and worked under contracts of service. As authority for this submission he relied on the Decisions inHenry Denny & Sons Ireland Limited - v - Minister for Social Welfare[1998] 1 IR 34,Minister for Agriculture & Food - v - Barry & Ors [2008] IEHC 216, Electricity Supply Board - v –Minister for Social, Community and Family Affairs & Ors [2006] IEHC 59 and Autoclenz Limited – v – Belcher and others [2010] IRLR 70.
He also furnished the Court with a copy of the “Code of Practice for Determining Employment or Self-employment Status of Individuals” (the Code)as used by the Revenue Commissioners and the Department of Social and Family Affairs when seeking to determine whether an individual was self-employed or worked as an Employee. He submitted that under the criteria set out in this Code, there was no doubt but that the Claimants were Employees and therefore worked under a contract of service.
Mr. Devoy argued that the Service Engineers are restricted in the work they undertake and may only undertake work for BGE. He maintained that failure to comply with these regulations might lead to their dismissal.
Mr. Devoy stated that 24 of the Claimants had been issued with written contracts of employment for a fixed duration i.e. from 11th June 2001 to 10th June 2003. He said that these contracts had never been renewed but that the Claimants had continued to work for the Employer and consequently were now working on contracts of indefinite duration. The remaining Claimants had never been provided with contracts and accordingly were on contracts of indefinite duration.
“Code of Practice for Determining Employment or Self-employment Status of Individuals”
Mr. Devoy referred to the Code which as part of its guidelines examines the job as a whole, including working conditions. It also sets out as a criterion the reality of the relationship. He submitted that the overiding consideration or test will always be whether the person performing the work does so “as a person in business on their own account.” Is the person performing the task a free agent with an economic independence of the person engaging the service. He submitted that the Code states that this economic test is paramount.
Mr. Devoy submitted that the Claimant Service Engineers fulfil the criteria for employees as set out in the Code. They are under the control of BGE management in all respects, they are provided with a number of jobs to do each day - from 8.00am to 6.00pm Monday to Friday, they work every fourth Saturday and they are on standby two weekends each month. They receive a fixed rate for each call. They do not work overtime.
The Claimants supply labour only to BGE, they cannot subcontract the work, they do not supply materials for the job other than the small tools of the trade. They do not have the authority to purchase spare parts or goods. They are required to give one week’s notice if they require time off. They are not exposed to personal financial risk in carrying out the work, they do not assume any responsibility for investment or management in the business, do not provide equipment or machinery necessary for the job, they cannot cost or agree the price for a job. They can have no effect on their level of profit, as they are required to work on the specific jobs allocated to them on a daily basis by BGE.
Mr. Devoy submitted that while the Service Engineers provide their own transport this is not unusual for Service Engineers. It held that the fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed. A person who is a self-employed contractor in one job is not necessarily self-employed in the next job. It is also possible to be employed and self-employed at the same time in different jobs.
BGE supply the Service Engineers with a computer, printer, and fax machine for use at their home. It supplies a BGE uniform, ID card, and all BGE marketing activities. BGE supplies stocks of spare parts. Service Engineers are not allowed to leave their mobile number with BGE customer and not allowed to market their own activities with BGE customers. For all these reasons Mr. Devoy, in a very able submission, argued that the Claimants must be classified as Employees. The Court will deal with the legal submissions on behalf of the Claimants later in this Recommendation.
The Company’s Case
Mr. Tom Mallon B.L. on behalf of the Company submitted that all of the applicants represented by the Union in this matter work either directly or through limited companies as service providers. They provide the service of appliance service and maintenance to BGE as self-employed persons or employed by their individual companies and not as Employees.
Service Engineers are required to personally carry out the work allocated, as the work is highly complex technical work with very significant health and safety implications. BGE must be able to guarantee the safety of the service provided and be able to vouch for the identity of the Service Engineer carrying out the work. Service Engineers are required by the Energy (Miscellaneous Provisions) Act, 2006 to be qualified to Gas Installer Domestic level or it’s equivalent. BGE cannot permit the Service Engineer to substitute another worker in his place due to RGII regulatory requirements; public liability insurance requirements, and customer care and quality assurance standards.
Service Engineers are required to have the following documents before they will be engaged by BGE:
•Membership of the Registered Gas Installers of Ireland (RGII).
•Tax Clearance Certificate
•VAT Registration Number
•Insurance Cover
They also require the following:
•A Motor Vehicle
•A Tool Kit
•Broadband Connection
•Mobile Phone
Service Engineers have the choice to:
•Make themselves unavailable for BGE services on a particular day or week or month
•Make themselves available for additional BGE services by working Saturdays, Public holidays, and other unsocial days
•Decide the type of appliance maintenance work they wish to do e.g. some decide not to carry out work on specific appliances (back boilers etc.)
They have the freedom to refuse to undertake BGE work on any day or number of days they choose. Many of the Service Engineers devote only part of their time to servicing work offered by BGE and make themselves or are unavailable to perform BGE work for significantly longer periods than would be permitted to if they were employees of BGE.
Mr. Mallon stated that the Service Engineers are not restricted to taking work solely for BGE. Many of the Service Engineers provide services to customers independently of the services they provide for the BGE. Many provide gas appliance installation services; gas cooker maintenance services; industrial boiler maintenance services; none of these services are provided by the Respondent. All of the Service Engineers are members of the RGII and their contact details are contained on the RGII website. When a customer seeks to engage a registered gas installer, the RGII and the Commission for Energy Regulation will refer the service user to the website.
Mr. Mallon stated that the Service Engineers carry considerable risk in respect of both defective workmanship and public liability. They can regulate and influence their earnings by improving the speed and efficiency in which they provide their services, both to BGE customers and their own private customers. They have the ability to supplement their earnings by selling BGE boiler insurance contracts.
They have the potential to make a significant personal effect on their level of profit in circumstances where they are paid a fixed amount per job and the speed and efficiency with which they perform the job will directly impact on their profit levels. While they are free to undertake non-BGE work, such work must not compete with BGE work in the service of boilers and fires. There is no limitation on other work e.g. plumbing work, installing or servicing gas cookers, servicing industrial gas boilers etc.
Service Engineers are required to provide BGE’s customers with a 60 day warranty on all servicing work carried out on behalf of BGE. If a problem exists within that timeframe on foot of poor quality service, the Service Engineer is required to rectify the problem at his own cost. On examination if the problem is not related to the warranty then he is entitled to charge a second call out charge. If he is uncontactable or refuses to carry out this work then he will be charged for a replacement.
They are required to provide their own vehicles and equipment and to meet the costs of same. BGE supplies the Service Engineers with limited office equipment (computer, printer and fax machine) to enable them to have jobs allocated to them and to have invoices generated efficiently and in a manner compatible with BGE systems.
The Service Engineers use spare parts provided by BGE for their own non-BGE services. The Company orders spare parts in bulk and allocates them to the Service Engineers as “van stock”, it is possible for the Service Engineer to use these for non BGE work, however, he must make good any shortages with BGE.
They can recover VAT on their respective businesses - something which no Employee can do.
Service Engineers are managed by an Employee of BGE, the Technical Manager (Field Operations Manager).
They are not obliged to furnish BGE with medical certificates if they are unavailable for work due to illness.
Mr. Mallon accepted that there might be a limited number of matters, which might be indicators of an Employer/Employee relationship. He submitted as examples the following:
•the requirement to carry BGE identity cards and to wear BGE branded clothing, however this requirement is imposed for security purposes as the Service Engineer needs to gain access to BGE customer premises, usually domestic houses.
•the requirement to comply with BGE customer standards, however this is imposed for safety and quality reasons.
•the requirement to undergo training, this is also imposed for safety and quality reasons.
•the requirement to receive instructions from BGE staff as to what work is to be performed.
However, he maintained that the contracts between the parties are strongly supportive of the facts that these persons are engaged as self-employed contractors and not as Employees.
The Evidence
The Court heard oral evidence from three Claimants, and from three Company representatives – Project Manager, Field Operations Servicing Manager and the Acting Head of Human Resources.
The evidence received by the Court can be summarised as follows: -
Evidence on behalf of the Union
- Mr. Brian Daly:
Sinkton Limited provides a tax clearance certificate to BGE and it provides the liability insurance. Sinkton Limited is registered for VAT and makes VAT returns to the Revenue Commissioners. In making its returns, the witness said that Sinkton Limited recovers VAT on expenses incurred e.g. diesel for his van, mobile phone, broadband, tools and equipment etc. The business made a loss in 2009.
The Witness said that he was an employee of Sinkton Limited and worked for BGE. He said that BGE prohibits him from servicing boilers and fires. Other than that prohibition his company is free to carry out other plumbing services.
The Witness stated that he had not at any time questioned his status as a self-employed person with the Revenue Commissioners; he had never sought to be classified as an Employee for PAYE/PRSI purposes.
Under cross-examination the Witness accepted that he was self-employed and was not an Employee of BGE.
Mr. Devoy subsequently withdrew claims relating to 8 Claimants, all classified as “Limited Companies”. The remaining 39 Claimants, classified as “Sole Trader” with a contract or “Sole Trader” without a contract continued to pursue their claim.
- James Tuite:
For BGE the witness said that he services and maintains gas appliances, predominantly gas boilers and fires, however he does not undertake work on a particular type of back boiler. He said he is available to work for BGE from Monday to Friday, from 8.00am to 6.00pm and one Saturday per month. He said that he does not cost or agree prices for jobs; he is paid a fixed rate for the number of jobs he undertakes.
The Witness explained that he is required to wear a BGE T-shirt, BGE jumper and carry BGE identity card – all supplied by BGE. BGE supply him with all the spare parts he needs for the job. He said that he does not provide any business premises or machinery, the computer equipment he receives from BGE is held in his house. He told the Court that the prices of each job he undertakes for BGE customers are fixed by BGE and he cannot derive any further profitable work as a result of visiting a BGE customer. He said that he is never called upon to work overtime, although there are out of hours and standby arrangements, which can be availed of.
The Witness explained that when he commenced in 2001 he was required as part of the contract to be responsible for his own tax, VAT and third party insurance cover. He said that since 2001 he has been paying tax as a self-employed person. He told the Court that he derived income from work other than BGE work, as he carried out some private service work for friends, neighbours and relatives.
In making his returns, the Witness said that he recovers VAT on expenses incurred e.g. diesel for his van, mobile phone, broadband, tools and equipment etc. The business made a loss in 2009.
The Witness stated that he had not at any time questioned his status as a self-employed person with the Revenue Commissioners; he had never sought to be classified as an employee for PAYE/PRSI purposes.
The Witness told the Court that he was unavailable for work with BGE on 57 days in 2009 and 58 days in 2008, (only 5 of which were recorded as illness). However, the Witness said that the majority were illness related as he suffers from a heart condition and has a bad back. He has never had to provide a medical certificate.
The Witness gave details of a certificate he sought in May 2004 from the Company relating to his relationship with BGE. In response the Company’s Appliance Servicing Manager wrote the following statement:
- “The above service agent is currently contracted to carry out appliance servicing and maintenance work on behalf of Bord Gáis. The individual is not employed by Bord Gáis and is paid fixed rates for completed work only on a job-by-job basis. There is therefore no payment made to an individual for holidays, sick leave or any other time off required. The Appliance Servicing Contract issued since July 2001 is for a fixed period and is reviewed/renewed on a bi-annual basis. If there is any queries regarding the above please contact me at (number given).”
The Witness told the Court that he could do work for non BGE customers if he planned it in advance, however, as his day was normally planned out with jobs allocated by BGE, he did very little other work. He said that he was prohibited by BGE from eliciting any other work from BGE customers once he was on a BGE allocated job. He told the Court that on occasions he could be asked to carry out extra jobs than those allocated. He said that if he could not carry out that work for whatever reason, that there would be no repercussions from BGE. Occasionally during the summer time, he may not be allocated work on a daily basis; it all depends on the customer requirements. And occasionally due to the work demands he may work out of hours for which a higher fixed rate applies for the job i.e. outside of Monday to Friday 8.00am to 6.00pm and one in four Saturdays.
The Witness told the Court that he might on occasions have to “pay” another Service Engineer to carry out warranty work on his behalf if he was unavailable. He explained that as they have a “Buddy” system in place for this purpose, no actual payment changes hands.
- John Beakey:
In 2004 he applied for a contract with BGE and worked as a sole trader providing services to BGE and also to third parties. He continues to trade under the business name “John Beakey Gas Services” and has absorbed the BGE work into the business. He explained to the Court that over the years he had set up a number of limited companies, which were, each dissolved, except one that he set up July 2009 which has yet to commence trading – it is called “Ideal Gas Service Limited”.
He said that when he applied for a contract with BGE in 2005 as a sole trader, at the interview he was assured that there would be a consistent level of work through winter and summer and that was appealing to him. BGE was a big customer for his business, BGE were not only providing him with a regular supply of work but it meant that he did not have to advertise etc. He was assured that with BGE, as their major customer there would be no bad debts.
He received a letter from BGE dated 8th April 2004:
- Dear John
Ref: Interview For Bord Gáis Appliance Servicing Work
I am delighted to advise you that following a successful interview we are happy to offer you a contract to carry out appliance servicing related work on behalf of Bord Gáis.
Prior to issue of our contract you need to provide us with the following:
II.Details of your landline telephone number.
III.Proof of qualifications G13 or equivalent.
IV.Completed application to a member of the Authorised Installer Panel & Appliance Service Panel
V.Safety Statement of Service Agent
VI.Evidence to BGE’s satisfaction that required insurances are/will be in place.
- Prior to appliance servicing work being allocated to you, you will be required to attend a training course which will cover a number of items such as Bord Gáis Appliance Servicing processes and procedures, customer care and quality service, business management and access to Bord Gáis computer system.
It is envisaged that this training will take place from week commencing 17th May. In the meantime, if you require clarification on any area please do not hesitate to contact ….
The Witness told the Court that a condition of taking part in the process of servicing for BGE was that he had to undertake the responsibility for his own tax. He said that all invoices from work done for both BGE and non-BGE customers are submitted together with his tax and VAT returns. He said that BGE work accounts for approximately 90% of his business and non-BGE for the remaining 10%. In making his tax and VAT returns, his accountant claims on the tyres and the maintenance of his van and he recovers VAT on expenses incurred e.g. diesel for his van, mobile phone, broadband, tools and equipment etc.The business made a profit in 2009 and previous years. There was one year, when he had a Revenue audit, that he made a loss.
The Witness stated that he had not at any time questioned his status as a self-employed person with the Revenue Commissioners; he had never sought to be classified as an employee for PAYE/PRSI purposes.
The Witness told the Court that he is committed to work with BGE from 8.00am to 6.00pm Monday to Friday, one in every four Saturdays and to provide cover over the Christmas period. Currently, he could be allocated anything from 5 to 9 jobs per day, with an average of 6 jobs per day. BGE notify him the day before of the number and details of jobs to be completed the following day. He said that he would rarely if ever work overtime.
The Witness said that BGE allocated work to him to work on gas appliances, however for a period of 18 weeks in 2005 when he suffered from back difficulties, he did not work on back boilers at that time.
He told the Court that he was prohibited by BGE from eliciting any other work from BGE customers once he was on a BGE allocated job.
He explained that once he is allocated a job by the Company’s Planning Department, he undertakes the work, fills in his job card, (which is also an invoice), fills in details of his arrival and finish time, any additional time spent, he must give details of spare parts used. The customer then signs the card. The Service Engineer submits it to BGE, the customer is accordingly billed and the Service Engineer is paid a fixed rate for the job.
He told the Court that he has spare parts in his van at all times, which includes BGE stock and his own. If it is necessary he will supply his own stock to a BGE customer and then telephone the BGE van stock line and have the part replenished. He said that he cannot profit for spare parts used in BGE work however, he can from spare parts from his own stock, which he uses during non-BGE work. He said that he has no business premises other than his home. BGE provide him with a computer, printer and he provides his own tools.
Mr. Beakey said that he undertook training courses of his own volition to update his skill and did not seek reimbursement from BGE.
- Evidence on behalf of the Employer
Ms Joyce Coleman gave evidence. She has worked for BGE for a number of years. In 2000 she became the Project Manager of a corporate decision making process to decide whether the company should get involved in the Appliance Servicing Business or leave it with the 12 to 15 Companies (hereinafter called “the Companies”) it has been using prior to then to carry out this work. At the time the Companies supplied their own spare parts; they did the work on behalf of BGE, invoiced BGE for the total costs involved which was then recouped from the customer. The costs were agreed in advance with BGE.
The Witness told the Court that BGE decided to move away from this model, as it was unreliable; there was no customer focus. It was causing serious damage to the brand as a result of the way individual engineers were treating their customers. It was decided to change the system in order to have predefined customer care and quality standards that would be carried out in a consistent fashion. In 2001 it was decided to introduce a different model. The new model employed Service Engineers technically competent to undertake the work, BGE would have direct communication with the Engineer doing the work. Those who were taken on were told that they were to be contracted to BGE to carry out this work and they had to comply with tax clearance requirements.
She said that the contract was specific in terms of its nature. At clause 11.3 and 11.4 it states:
- “Nothing in this Contract, shall create, or be deemed to create a partnership or the relationship of employer and employed between the parties.
The Service Agent warrants and represents to BGE that he is an independent contractor and as such bears sole responsibility for the payment of tax which may be due from him in relation to any payment or arrangements made under this Contract and shall provide BGE with an up to date Tax Clearance Certificate on an annual basis for the duration of this Contract. The Service Agent shall be responsible for all income and corporation tax liabilities together with any social insurance or other similar contributions in respect of all payments made to him hereunder by BGE and the Service Agent agrees to indemnify BGE against all demands for any income tax, corporation tax, penalties and interests made against it in respect of the Service Agent’s services hereunder and against his costs of dealing with such demands.”
When asked about the number of jobs allocated to the Service Engineers the Witness said that it depended on the Service Engineer himself. While BGE would request them to take a minimum of six jobs per day, there were some who would undertake eight jobs per day – its up to the Service Engineer to tell BGE how many and they may at any time request to take less than six or none at all. She told the Court that no Service Engineer has ever been let go because of his unavailability for work; however there have been those who were let go due to safety reasons.
All the Service Engineers are technically competent to undertake the work and therefore do not require to be supervised. If the Service Engineer finishes his jobs earlier than expected he may proceed to the next job, once he has cleared it with the customer. She said that the only stipulation on the Service Engineers is that they cannot take on other revenue generating work on foot of a BGE job. They are not allowed to advertise their services as Service Engineers for work, which is in direct competition with BGE’s core products. Otherwise they are allowed to advertise plumbing services e.g. to install central heating boilers, install gas cookers etc.
She said that typically most Service Engineers would be unavailable for between 20 to 25 days per annum, which they are free to take whenever it suits them, by the giving of five days notice. The figures show that Service Engineers’ earnings for 2009 ranged from €25,000 up to €98,000 plus VAT, however the lower level figure is exceptional. In reality the variation runs from €35,000 up to the higher level and is related to at the lower level - the “stand-down” time (i.e. the Service Engineer’s availability for work) at the higher level - working extra hours and extra Saturdays.
The Witness told the Court that the contract could be terminated by either party on giving one month’s notice in writing and that it could be terminated by BGE for failure to meet performance standards or for breach of the contract.
The Witness told the Court that if the Service Engineer’s work is consistently below standard, his contract would be terminated by the giving of notice.
Paul Cleary:
Mr. Paul Cleary gave evidence. He is employed by BGE and his position in the Company is Field Operations Board Gáis Servicing. He interacts with the Claimants on a daily, weekly, monthly basis, dealing with technical matters; customer issues; spare parts and routine non-administration work. He has no role in managing or supervising their work, however there are supervisors available (“Troubleshooters”) to the Company who deal with problem related tasks where for example a Service Engineer may need technical support or advice to assist them with a problem situation.
The Witness said that he normal hours of work are from 9.00am to 5.00pm, Monday to Friday and he is on a Band 5 salary, which is a middle management salary band. He does not get paid any extra pay for working outside of his normal working hours. He is not provided with a company vehicle, when he uses his own vehicle he is paid a mileage allowance. He pays PAYE and PRSI. He stated that any work he does outside of his BGE work would not be for any financial gain other than some teaching with FÁS, which is paid through their payroll system.
The Witness said that he was involved in the interview process for the Service Engineers. He said that it was clearly stated as the interviews that the Engineers would be taken on as sole traders operating for themselves, running their own business. He said part of the Service Engineers training and induction programme was designed to ensure that this was adhered to. He said that there were 71 Service Engineers and all were taken on with the same stipulation. He said that there was no difference whether the Service Engineer operated under the corporate umbrella or as a sole trader.
Ms. Margaret Lane
Ms. Lane is employed at the Acting Head of Human Resources for BGE and she gave evidence on salary band applicable in the company. She explained that Productivity Fitters and Response Fitters, Employees of the Company, are paid on Band 9 which has a salary range from €29,153 to €44,468, all are currently on the maximum of the scale, however, they also have an opportunity to earn substantially higher amounts due to productivity payments or call out payments which can give them total earnings up to a maximum of €100,000.
The Witness said that the HR Department of BGE had no involvement in taking on the Service Engineers, the Appliance Service Department dealt with it.
The Law
A considerable amount of 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. While the cases cited to the Court have been of considerable assistance it is accepted that the distinction is a fine one and may be difficult to apply in borderline cases.
In support of his proposition that the Claimants operated under a contract of service, Mr. Devoy referred the Court to the seminal English Case ofMarket Investigations v Minister of Social Security [1969] 2 Q.B 173. In that case the Court held that the essential test was whether 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.
In that case it was held that it is a question of degree to be decided by the Court, having regard to the contract as a whole, and bearing in mind the ultimate question which must be answered, namely, whether the person is in business on his or her own account or if they are working for another.
Mr. Devoy also referred the Court to judgment of Keane J in the Supreme Court case ofHenry Denny & Sons Ireland Limited - v - Minister for Social Welfare[1998]1 IR 34, in that case the Employee worked as a Supermarket Demonstrator for Henry Denny under a yearly contract. Her contract described her as "self-employed". Henry Denny & Sons provided the equipment. If she could not do the job, only a person approved by Henry Denny & Sons could do it for her. She had to wear the uniform provided. She was paid by the day. The question before the Court was whether the Worker was in insurable employment. The Company claimed that she was in business on her own account. However, a demonstration stand and equipment provided belonged to Henry Denny & Sons and her profit did not depend on efficiency. Therefore, even though there was a statement in her contract stating, "I am not an employee of Henry Denny & Sons", the Supreme Court was of the view that the assessment of employment status could not be judged on the basis of that statement alone. Rather one must look objectively at all the terms and circumstances. InDennycase Keane J approvedMarket Investigations v Minister of Social Security [1969] 2 Q.B 173and stated:
- 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.
Mr. Devoy also referred the Court to the case ofESB V Minister for Social and Family Affairs & ors 2006 IEHC 59.
He stated that the measure of control exercised by the ESB, the application of the criteria in the enterprise test and the mutuality of the obligations identified in that case meant that conditions under which the ESB meter readers operated were almost identical to those under which the BGE service engineers operated. He stated that the ESB meter readers were found to be operating under a contract of service and the same standard should be applied to the Claimants.
Mr. Devoy also referred the Court to the English Appeal Court Decision inAutoclenz Limited – v – Belcher and others [2010] IRLR 7,a case which involved 20 Claimants who worked as Car Valeters for the Company. All had signed similar contractual documents, which contained statements to the effect that they were self-employed and they were taxed on that basis. In 2007, the Company required them to sign new contracts.Autoclenzstated that the new contracts were not intended to altered the terms and conditions under which they worked, rather the new contracts clarified certain matters, which might until then have been unclear. The new contracts stated that for the purpose of car valeting services to its client’s garages,Autoclenzwished to engage the services of Car Valeters from time to time on a sub-contract basis. It invited them to offer their services and the contract specified that they were independent contractors, they were free to engage one or more individuals to carry out the work on their behalf and they were not obliged to provide their service on any particular occasion and similarlyAutoclenzwere not obliged to engage their services on any particular occasion.
WhenAutoclenzwas selling part of it’s business the Claimants brought proceedings in the Employment Tribunal seeking a declaration that they were Workers or Employees as defined by the Employment Rights Act 1996.
The Court of Appeal in finding that the Claimants were Employees, looked not just at the contractual terms but also at the reality of the situation. Lady Justice Smith held:
- “ I am conscious that the EJ observed on more than one occasion that the Valeters knew when they were taken on that Autoclenz regarded them as self-employed contractors and had their eyes open to that situation. However, he considered, rightly in my view, that what Autoclenz wished to create was not material; what mattered was what Autoclenz did create, both by the drafting of its documents and by the requirements it imposed on the Valeters. It matters not how many times an Employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an Employee and the Employee goes along with them, the true nature of the contractual relationship is that of Employer and Employee. I can see that the argument of the Employee is rather less attractive where, for many years, he accepts that he is a self-employed contractor and benefits from the rather more favourable taxation arrangements which are available to people running their own businesses. However, it seems to me that, even where the arrangement has been allowed to continue for many years without question on either side, once the Courts were asked to determine the question of status, they must do so on the basis of the true legal position, regardless of what the parties had been content to accept over the years. In short I do not think that an Employee should be estopped from contending that he is an Employee merely because he has been content to accept self-employed status for some years.”
In his response Mr. Mallon submitted that bothAutoclenzandDennymerely set out general propositions, which must be applied to the facts of the situation as they are found in each case. While obviously this Court would be bound by the principles set out in the various authorities it is only by applying those principles to particular facts before the Court that a Decision can be reached as to whether a particular person is engaged in business on his or her own account.
Mr. Mallon submitted that when tests were applied to the Claimants involved in the instant case, based on the evidence given it is clear that they are engaged in business on their own. Mr. Daly accepted this, Mr. Beakey described a wider business than merely Bord Gáis, although Bord Gáis did account for between 80% or 90% of this business and Mr. Tuite disclosed this fact in his accounts. He contended that those Claimants who operate under a corporate umbrella are no different than those who operate as self-employed sole traders, in terms of control, entrepreneurship and risk factors and their potential for profit.
Mr. Mallon also referred the Court to the Supreme Court Decision inCastleisland Cattle Breeding Society Ltd. v. Minister for Social and Family Affairs[2004] IESC 40 (15 July 2004) and in particular to the judgment of Geoghegan J in that case in which he held:
- “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. On 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.”
Finally Mr. Mallon submitted that a fundamental principle in addressing the status of an individual is that they cannot"approbate and reprobate”i.e. it cannot be ignored what the person claims to be when it is to his advantage and yet attempts to disclaim when it may be a liability, e.g. the Claimants cannot derive a benefit from paying tax at schedule D and still claim to be an Employee at the same time.
In relation to theESBcase Mr. Mallon stated that the rationale of that case was a Superior Court’s unwillingness to overturn a finding of fact by an expert tribunal.
He stated that in any event the situation of the BGE Service Engineers could be distinguished from that of theESBmeter readers. He stated that given the complexity and inherent danger of the work, BGE was within its rights in imposing stringent controls on any substitutes to be used. He stated that BGE Service Engineer satisfied the entrepreneurial test as set out by Gilligan J in that case.
COURTS FINDINGS AND CONCLUSIONS
Arising from the submissions made, the evidence and the cases cited by the parties the Court has identified a number of criteria which should be taken into account when deciding whether a contract is one of service or one for service. Amongst these are:
1.Mutuality of Obligation
Is BGE contractually obliged to provide the Claimants with work, which they are then required to perform. This criteria was considered by the Court inWestern People Newspaper –v- a Worker EDA047in which the Court stated:
- “The first stage requires the Court to decide if the alleged Employer is contractually obliged to provide the person claiming to be an Employee with work which that person is required to perform. This mutuality of obligations has often been referred to as the irreducible minimum requirement which must be present before a contract of employment can be held to exist.”
On the other hand Mr. Mallon submitted that the Service Engineers are providing services to BGE, either as self-employed contractors or alternatively through limited companies and there is no mutuality of obligation.
The Court notes that Mr. Beakey was offered“a contract to carry out appliance servicing related work on behalf of Bord Gáis” not by the HR Department of the Company but by the Appliance Servicing Department. There is little argument that the Company is obliged to provide work to the Service Engineers. However, the Court is of the view that importance must be attached to the fact that the Service Engineers have a right not to undertake that work and it was accepted by the Witnesses in evidence that they availed of that right.
2.What was the intent of the Parties when entering into the contract.
The Company told the Court that in 2001 it decided to carry out its servicing of BGE appliances in a new way as its previous model was unreliable, had no customer focus and the Company’s brand was suffering serious damage. It said that the new model engaged Service Engineers as independent contractors technically competent to undertake the work, with terms and conditions specifically stating that there was no Employer/Employee relationship between the parties. In support of that position it required each of the Service Engineers to comply with all necessary tax and insurance requirements and to avail of independent financial and legal advice prior to signing the contract.
Eight of the Applicants were previously employed by BGE and left as part of a redundancy scheme and subsequently took up the Service Engineer work.
The Court accepted that the intent of the parties was clear at the outset. The parties formalised an arrangement as outlined in the recitals of the contract. BGE provided the Service Engineers with customers and the Service Engineers provided the work.
The Court considers it significant that none of the Service Engineers sought to challenge their status until 2008 when they sought to be classified as Employees for inclusion in the Company’s ESOP. The Court notes Lady Justice Smith’s finding inAutoclenz:
- “…I do not think that an Employee should be estopped from contending that he is an Employee merely because he has been content to accept self-employed status for some years.”
Furthermore, the Court is of the view that the terms of contract relating to its termination are not consistent with it being a contract of service.
Clause 6. 4 (c) of the contract states that the contract may be terminated if the Service Agent: -
(i)commits an act of bankruptcy
(ii)is adjudicated bankrupt or enters into liquidation, whether compulsory or voluntary, other then for purposes of an amalgamation or reconstruction;
(iii)makes an agreement with his creditors or petitions for administration order;
(iv)has a receiver or manager appointed overall or any part of his assets; or
(v)generally becomes unable to pay his debts as they fall due.
Overall, the Court is satisfied on the evidence that the parties entered into the contract of their own free will and that contract was intended to be one where BGE agreed to provided work to the Service Engineers and they in turn agreed to carry out the work for BGE as sole traders on an independent contractor basis.
3.How was the work carried out by the Claimants integrated into the overall business of BGE (The Integration Test)
It is not disputed that the service performed by the Service Engineers is an integral part of BGE; this work forms the core part of the Appliance Servicing Division of the Company.
4.What level of control did BGE have in directing the Claimants (The Control Test)
The control test is a highly relevant factor in defining a contract of service, however where Employees have a significant degree of autonomy in carrying out their work, it may have less significance.
In this case, under the auspices of the Appliance Servicing Manager the Planning Centre allocates jobs to the Claimants on a daily basis. The Claimants do not cost or agree prices for jobs. They wear clothing provided by BGE. BGE determines the location of their work. Fixed rates are set by BGE without any involvement by the Claimants or their representative. They are not allowed to leave their phone number with a customer, not allowed to distribute marketing materials while on the job. Training is provided by BGE.
The Claimants are free to manage their work in such a way that they can perform work for non-BGE customers, by working more efficiently or by being unavailable to BGE. They have the right to refuse to undertake work on certain appliances with the result that the Company have to assign such work to others. It is noteworthy that while Fitters employed by the Company have flexibility in the performance of their work which can earn them substantially more than their basic salary, they are contractually bound to carry out work allocated at increased productivity levels or work additional/unsocial hours in order to do so.The Service Engineer's agreement is to perform work for BGE and their clients from 8am and 6pm ranging from 6 and 8 calls per day. If through smart working and industrious effort this work is completed earlier than 4pm, the Engineer is free to go home or do work, that is not BGE related, on his own account. BGE Employees are not so permitted, their finishing time is end of duty or shift, neither would it be possible for an employee to take time off during the day for 2/3 hours to do work on their own account before resuming his BGE client work later in the day.
Fitters employed directly by the Company must avail of a specific number of annual leave days in slots, with seniority being a determining factor on who gets first choice. Service Engineers are not so confined.
The Court therefore is of the view that while BGE controlled some elements of the Claimants’ work, they retained a considerable amount of autonomy as to the manner in which they performed the tasks.
5.Are the Claimants in business on their own account ?
- (The Enterprise/Entrepreneurial Test)
Following the Decisions of the Supreme Court inDennythe enterprise/entrepreneurial test has evolved into a single composite test for determining if a person is engaged on a contract of service or a contract for service. This involves looking at the contract as whole and asking is the person in business on his or her own account. If the answer to that question is yes, the contract is one for service. If it is no, the contract is one of service. All of the criteria outlined above are elements to be taken into account in applying the enterprise test.
Provision of equipment or assets, responsibility for investment and management, whether he or she hires a helper and most significantly whether the profit or loss made from the venture is dependant on the efficiency with which the person performs their work are all factors to be taken into account.
Both parties devoted a considerable amount of their submissions to the criteria the Court should apply when using the enterprise test. Mr. Devoy submitted that it was clear that the Claimants are not in business on their own account. They do not risk personal financial loss through investment; they do not provide premises or supply machinery; they do not employ others to assist them in their business; they do not have the responsibility for investment or management of the business; they do not have the authority to negotiate or conclude transactions on behalf of BGE and they do not have the authority to purchase spare parts or goods pertaining to the business.
Mr. Devoy stated that the average annual income of Service Engineers is circa €74,520 (based on 6 calls per day over 46 weeks), out of which he must provide for holidays, sick pay and pension, purchase and maintenance and running costs of his van; pay tax and insurance. Whereas the average annual earnings of an equivalent BGE employee is circa €100,000. It disputed that they were free to engage in activities such as plumbing work and private gas appliance installation and servicing work, as they only engage in such work outside of core hours for friends, family and neighbours.
Finally Mr. Devoy submitted that even though the demonstrators in theDennycase were paid a fee in respect of each demonstration provided upon submission of an invoice, and payment was made each fortnight without deduction of tax or PRSI, they were nonetheless held to be Employees.
Mr. Mallon submitted that if one applies the enterprise test correctly and used the criteria set out in theCastleislandcase then the Claimants were without doubt retained on a contract for services.
He submitted that the factors identified by Geoghegan J in theCastleislandcase apply equally in the instant case. The Claimants are self-employed for tax purposes; they make returns on that basis and claim tax allowances under the self-assessment system; they carry their own insurance. The safety and other controls imposed on Service Engineers are no different to the statutory controls imposed on the Inseminators in theCastleislandcase and do not alter the nature of the contract.
Mr. Mallon also submitted that in theCastleislandcase, it was accepted that the Inseminators became self-employed for tax purposes, made returns on that basis and claimed tax allowances under the self-assessment system. In finding that they were not employees Geoghegan J also found it significant that under the new contractual arrangements they had to carry their own insurance. The Claimants are liable for their own public liability cover, indemnity insurance, etc.
Ms. Joyce told the Court that BGE no longer require proof of the insurances directly from the Service Engineers, as RGII will not register a Service Engineer unless they can prove that they have such insurances and BGE insist that all of the Claimants must be registered with RGII.
Mr. Mallon stated that the Claimants are entitled to offset the VAT element of the input into their business from the VAT that they receive. This is not a facility open to an Employee. They are paid on foot of a BGE computer generated invoice without deduction of PAYE or PRSI.
He stated that in their evidence the Claimants told the Court that to invest in the business at the outset, it would cost approximately between €25,000 - €30,000 in terms of transport, tools, stock, and setting up costs associated with a limited company or a sole trader.
The Claimants must bear the cost of expenses incurred in carrying out their work. However, they can reclaim against travel costs associated with traveling from home to their place of work, not a facility open to an Employee. Mr. Tuite and Mr. Beakey stated that they reclaim in respect of their business premises (their home) and offset their telephone bill, heating, lighting, depreciation on fixtures and fittings against their tax liabilities. In giving their evidence both said that some years they made losses and consequently did not pay any income tax, this is not an option open to an Employee. Fitters employed by the Company do not make Revenue returns, do not have the opportunity to reclaim VAT and are not subject to Revenue audits.
It was not without some hesitation, that the Court has come to the conclusion that the Claimants are employed on a contract for services for the following reasons: -
•There is nothing to suggest that the contract between the parties was concluded in the context of an Employee/Employer relationship. The intent of the parties, as outlined in the recitals of the contract clearly shows that the Claimants were to set themselves up as self-employed contractors. This view is furthermore strengthened by the Claimants’ acceptance of that for over nine years. The Court is satisfied that this is a true reflection of the reality of the situation and is not a sham. One of the Witnesses did not refute the statement made in May 2004, which stated that he was“not employed by Bord Gáis”.
•Service Engineers were integrated into the Appliance Servicing Department of the Company however, they were not entitled to terms and conditions of employment available to Employees of BGE, and they were not included in the sick pay or pension schemes.
•While the contract between the parties allows BGE to exercise a level of control in the performance of their work however, the Claimants can at any time declare themselves unavailable to work, without any repercussions. One of the Witnesses confirmed that he had been off for 57 days in the previous year and indeed 36 Service Engineers absented themselves for work to attend the Labour Court hearing. They are allowed to do the work unsupervised and were not told how to do the job.
•The Claimants used their homes as their place of business. They stored materials and equipment there and they offset some of the running costs against their businesses.
•The Claimants were not only free to engage in business with non-BGE customers at their own discretion but they had the right without repercussion to make themselves unavailable to BGE on a particular day. They had the right to decide whether or not to accept work; there was no prohibition on them engaging in other work.
•The Claimants are not paid a fixed hourly/weekly/monthly wage. They pay tax under Schedule D (as self-employed) and were responsible for their own tax. They did not pay PAYE or PRSI, but charged VAT. They made returns to the Revenue Commissioner as a self-employed person. They were liable for their own public liability cover, indemnity insurance, etc. The rates paid to the Claimants are determined by BGE, the service rate is approximately €59.00 plus VAT and the repair rate is €45.33 plus VAT. They are also entitled to a €10.00 voucher for every insurance product sold to a BGE customer.
•The Claimants make an investment of approximately between €25,000 - €30,000 to set up their business and they engage the services of an accountant for tax and VAT purposes.
•Evidence was heard that some of the Claimants made a loss in certain financial years. This would seem to indicate that they were exposed to financial risk. Also from the evidence given, the average earnings for the Claimants varied considerably, so it seems clear that by prudently managing their affairs the Claimants could maximise their profits.
•The Claimants who do not conduct their work properly face a financial risk, as they are required to return to the customer within a warranty period of 60 days and rectify the problem in their own time and at their own risk. While this is a term of their contract, it is not a risk that an Employee would be exposed to.
•While BGE imposes restrictions on the Claimants in relation to competing with BGE they are free to provide work for non-BGE customers at his own convenience.
•The Service Engineers did not receive subsistence or travel allowance.
Finally the Court takes the view that the position of the Claimants is analogous to that of the Inseminators in theCastleislandcase. Geoghegan J. found two factors as being fundamental.
The first was that the Claimants fully accepted the arrangement they entered into and entered into it freely. They made arrangements as self-employed persons for tax purposes and made returns on that basis and claimed tax allowances under the self-assessment system. The contract which they operated under was the contract they signed.
Geoghegan J held:
- “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.”
The Claimants when entering their contracts were aware that it was a contract for services and they operated it on that basis. They sought sought to be classified as Employees in order to benefit from the BGE ESOP after it was signed into being on 29th April 2008 and the issue of their employment status became of significant importance when BGE sought to diversify the Home Appliance Servicing Business Unit to a third party vendor in 2009.
In all the circumstances and applying the criteria and authorities set out above, the Court concludes that that the Claimants are retained by the Respondents on a contract for services rather than a contract of services.
The Court’s Decision
For all of the foregoing reasons the Court has come to the conclusion that the Claimants are engaged by the Respondent under a contract for service and therefore they have nolocus standito maintain the within proceedings.
Signed on behalf of the Labour Court
Caroline Jenkinson
26th March, 2010______________________
JFDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to John Foley, Court Secretary.