ADJUDICATION OFFICER DECISION/RECOMMENDATION

 Adjudication Reference: ADJ-00003763

Complaint(s):

ActComplaint/Dispute Reference No.Date of Receipt Complaint seeking adjudication by the Workplace Relations Commission under Section 8 of the Unfair Dismissals Act, 1977 CA-00005535-001 28/06/2016 Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991 CA-00005535-002 28/06/2016 Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991 CA-00005535-003 28/06/2016  

Date of Adjudication Hearing: 04/10/2017

Workplace Relations Commission Adjudication Officer: Niamh O'Carroll Kelly

Procedure:

In accordance with Section 41(4) of the Workplace Relations Act, 2015 and following the presentation by an employee of a complaint of a contravention by an employer of an Act contained in Schedule 5 of the Workplace Relations Act of 2015 or such other act as may be referred to in the 2015 Act, made to the Director General and following a referral by the said Director General of this matter to the Adjudication services, I can confirm that I have fulfilled my obligation to make all relevant inquiries into the complaint or dispute. I have additionally and where appropriate heard the oral evidence of the parties and their witnesses and have taken account of the evidence tendered in the course of the hearing.   The Complainant herein has referred a matter for dispute resolution under Section 8 Unfair Dismissals Acts, 1977 and Section 6 Payment of Wages Act, 1991. The referral has been made within six months of the initial circumstances of the relevant contravention.

Preliminary Application.

Summary of Complainant’s Case:

The complainant is an audiologist. He is a de facto employee of the Respondent. Prior to March 2013 he did not have a contract of employment. In March,2013 he was given a consultancy agreement dated 22.03.2013. It is a retrospective agreement. There were no negotiations in relation to the that agreement. It was simply sent to him to sign and return. Again in December, 2013 he was given a similar consultancy agreement. It came with a cover note on the Respondent’s headed note paper requesting that he sign it, keep a copy for his records and when returning it, he was to send a copy of his Professional Indemnity Insurance with it. The complainant is of the view that because there was no consultation process prior to the creation of the agreement, that that renders it an employment contract and not a consultancy agreement.   The complainant argued that the agreement/contract shows an element of control the respondent had over him and his practice. Clause 1.4 of the agreement states “during the term of this agreement, the consultant shall not solicit or undertake any work on its own behalf directly or indirectly for existing or potential customers of the Company or undertake on its own behalf using the resources of the Company or which may be reasonably considered to be against the proprietary of the Company or work on its own behalf in partnership or association with another party in that capacity. The Consultant, with the prior written consent of the company, which consent may be withheld at the Company’s absolute discretion, offer similar services to third parties”. The respondent provided all the equipment for the role. Clause 4.1 “ The Company agrees that for the duration of this agreement it will from time to time and at the request of the Consultant make available to any servant or agent of the Consultant duties under this Agreement office space at its premises in Waterford which shall be equipped with suitable office furniture and a telephone line to enable it to effectively perform such duties” Subcontracting out of the service was prohibited. Clause 11.3 “Neither party shall be entitled to assign this Agreement or any part of its rights and obligations under this agreement other than with the prior written consent of the other party. The Consultant may with the prior written consent of the Company sub-contract the delivery of the services hereunder, which consent may be withheld at the sole discretion of the Company” The complainant required the permission of the respondent prior to taking annual leave or any other type of leave. The Respondent dictated all of the complainant’s term and conditions of employment, i.e place of work, start and finish times etc. In 2000 the complainant was made the Manager of the Limerick branch and later on, the Waterford branch. Respondent’s documentation refers to his as the Manager. The complainant incorporated a limited company in 2004, XX ltd. . That company invoiced the respondent monthly. The invoices contain v.a.t. The company then paid the complainant the amount invoiced together with travel and subsistence. No employer related deductions were made at source. Prior to 2004 the complainant filed returns as a self- employed person. The complainant submits that respondent had ‘control’ over his working arrangement and that mutuality of obligation existed in their relationship. The respondent agreed to provide work for the complainant in the form of clients and the complainant agreed to attend at the respondent’s premises to provide a service to those clients.  

Summary of Respondent’s Case

It is submitted that the Complainant was not an employee as defined in the legislation and the Adjudication officer does not therefore have jurisdiction to hear the case. As the Complainant was not an employee of the Respondent any claim under the Unfair Dismissal and Payment of Wages Acts must also fail. The Complainant was and remains an employee of XX LTD Limited, a company he incorporated in 2004. Prior to providing dispensing services to the Respondent and between 1999 and 2004 the Respondent understands that he was working as a sole trader. XX LTD took over the delivery of the contract dispensing services first to YY Ltd (renamed to the respondent) and then ZZ Ltd. The Respondent had the lease of a building in Waterford and operated out of there until August/September 2005 when they moved out of the building due to a problem with the lease and ceased trading out of the Waterford premises.   A separate legal entity, moved into the building under a new lease with the landlord from September 2005 to the end of July 2010. The Respondent provided ZZ ltd their database of clients attending the Waterford shop on the basis that ZZ ltd could service those clients on behalf of the Respondent and the Respondent retained full ownership of the database. ZZ Ltd ceased trading in July 2010 at the end of the lease term and the Respondent commenced trading out of that business location from August 2010 to date. During the period September 2005 to end-July 2010 the Complainant provided services to both the Respondent and WHC separately. XX LTD invoiced each legal entity separately. The Complainant issued his own invoices under XX LTD from 2004 to a point in time in 2007. After that date, the financial controller agreed to prepare the invoices in a private capacity. The reason for this was because the Complainant became verbally abusive towards him when he was not in a position to make payments without first receiving invoices in accordance with good accounting practice. It was generally accepted that the Complainant was not good at administration and it was for this reason that the financial controller took on the role, in a private capacity, of preparing the invoices for XX LTD. On a day-to-day basis, the Complainant attended and carried out assessments throughout the day. However, he came and went as he pleased and was in control of his appointments. He directed the audiological assistant what was to go into his diary and what was not.   This pattern of behaviour was accepted by the Respondent as the consultancy agreement provided for a commission structure and not a number of hours service per week. It was entirely up to the Complainant how he went about earning his commission in line with the consultancy agreement. If on any given day, there was a gap in appointments, there was no requirement for the Complainant to stay and he could leave the premises as and when he wanted. In or around 2012, after a financial audit was carried out the Respondent was advised that clarification was required in relation to the Complainant's status. The Respondent was advised that either the Complainant had to be put on the books as an employee or the Respondent needed to put in place a written consultancy agreement with XX LTD in line with best accounting practice. The Managing Director, discussed this with the Complainant and also the option of becoming an employee. In fact, the Respondent even prepared a draft contract of employment and gave it to the Complainant to consider. The Complainant refused to sign the contract of employment and made it clear that he was not interested in coming onto the Respondents payroll as an employee. At this time he informed the audiological assistant in the branch that he was taking the afternoon off to see his solicitor as he was not an employee and had no intention of becoming an employee. It took some time for the matter to be resolved as again, the Complainant is not very practical in terms of administration. On 28 February 2012 the Managing Director sent the Complainant and email subject “self-employed status”. The email stated “with this month payroll looming we need an immediate clarification of your income tax position. Unfortunately, if we do not receive this by the end of this week we will be forced by …….. to include you on the payroll and deduct income tax and prsi/USC accordingly. As per our discussion at last week's regional meeting, unless you can provide evidence that your self-employed status in relation to your position as dispenser in the Waterford branch is valid under the revenue guidelines we must treat you as an employee and deduct tax in the correct manner at source. Unfortunately, we have no choice in this matter.” The Complainant responded by email dated 28 February 2012 as follows “, I must say I am shocked and dismayed on receipt of your email. I find it totally unreasonable that after so many years been contracted to the respondent I should be told that this issue should have to be resolved this week. HR will get a letter within the next few days from my accountant in this regard.” It was following this that ultimately a Consultancy Agreement was entered into by the Complainant. However, this was not done until 2 March 2013. The Consultancy Agreements are between the Respondent and XX ltd . As can be seen, the first Agreement was for a period of two years terminating on 31 December 2013 with an option of extending for a further period to be agreed by the parties. The second Agreement was for a period up to December 2015. The Agreements provides that the consultant “shall through the Complainant, or such other servants or agents of similar ability and experience as agreed by the company in writing, provide to the company” certain consultancy services. Clause 2.1 of the agreement provides that “the company shall pay to the consultant within 30 days of receipt of a valid VAT invoice from the consultant a monthly commission of 25% of sales made by the consultant net of returns and that in excess of a threshold of €1000 per month.” Clause 2.2 of the Agreement provides in relation to a bonus that “the consultant shall also be entitled to a bonus of €4500 plus VAT per quarter if sales, net of returns and that, on average in a quarter, exceeds his agreed monthly sales KPI per month over the same quarter…” The Agreement also deals with the fact that the Respondent will not reimburse for any accommodation, travel or entertainment expenses. In addition, the Respondent agreed to make available to any servant or agent of the consultant performing duties under the agreement office space at its premises in Waterford equipped with suitable office furniture and a telephone line. The Agreement provides that the consultant will provide its own equipment as is necessary to provide the services which include computer equipment, mobile telephone and car. Because of data protection concerns, the Respondent ultimately provided a laptop to the Complainant. In relation to status and tax liabilities, the Agreement is clear that it is the intention of the parties that the consultant, its servants or agents shall not be entitled to any overtime payments, sick pay, holiday pay, pension or other benefits from the company and it was agreed that the consultant would be responsible for all income tax liabilities, prsi contributions, levies or other deductions required by law in respect of its fees or those of its servants or agents. The Agreement further confirms that the relationship is not a relationship of employment between the company and the consultant. In addition, the Complainant was obliged to maintain a policy of insurance and a copy of the policies provided by the Complainant. During the course of the Consultancy Agreement difficulties arose with the Complainant following the resignation of a clinical assistant. The clinical assistant in question expressed some grievances towards the Complainant and his management of her prior to resigning from her position. While the Respondent met with the Complainant to discuss the issues as it was the second clinical assistant who had made complaints against the Complainant, ultimately they could only sit down and discuss the matter with him as he was not subject to the disciplinary policy in place for employees. The Complainant was not paid for holidays or sick leave, he was not part of the Respondents pension scheme. He was not required to provide medical certificates for periods of absence and although asked to give details of annual leave he proposed to take, that was merely for the purpose of organising the business and having proper cover in place. On 8 December 2015 the Managing Director sent the Complainant an email asking for him to attend at head office on Tuesday, 15 December in order to discuss the end of the consultancy contract and the potential renewal of same. He received a message that the Complainant was unwell and would be unable to attend the meeting. By registered letter and email dated December 16 the Managing Director wrote to the Complainant asking to reschedule the meeting to take place as soon as possible. The letter pointed out that in accordance with clause 1.1 the Consultancy Agreement was due to terminate on December 31, 2015. The letter goes on to say that the company reserved the option to extend the agreement by a further period and that that was the purpose of the meeting. The letter also confirmed that in the absence of an agreement between both parties and until a new agreement was in place, the Complainant was not required to attend the Waterford branch from January 1, 2016.The Managing Director was anxious to normalise the matter as quickly as possible and suggested meeting on Wednesday, January 6, 2016 the first available business day after the New Year holidays. Despite a number of attempts to follow up the correspondence with phone calls to the Complainant's mobile the Complainant refused to engage. The Complainant has been paid all monies due to him on foot of invoices that he has submitted. He is not entitled to a notice period as he is not an employee. The Consultancy Agreement ended in accordance with the terms of that Agreement and the Complainant refused to engage with the Respondent in order to discuss the arrangement continuing.

Findings and conclusions.

  The courts over the years have establish a multitude of tests to be applied when assessing whether an individual has a contract for service or a contract of service. What is clear from the case law is that every case must be assessed on its individual facts. One question that the courts always turn to is whether the individual is in business on his or her own account and has an opportunity to make a profit or gain by the manner in which the work is executed. Market Investigations v Minister for Social Security   Cooke J stated: “the fundamental test to be applied is this; if the person 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 service. If the answer is ‘no’ then the contract is a contract of service. The complainant was employed by a company, XX ltd. He incorporated that company and was a director. XX ltd invoiced the respondent and collected v.a.t. arising out of the services provided by the complainant. The complainant in the consultancy agreement is described as a “ independent contractor” at paragraph (A). He was responsible his own transport and the costs of same, his mobile phone and did not receive any expenses for accommodation, travel or entertainment as per 3.1 of the agreement. The Respondent did provide a laptop because of its data protection responsibility towards its customers, together with the premises and a phone line as per 4.1 of the agreement. He received no fixed pay or benefits and was not in receipt of sick pay or payment for annual leave.   The complainant could take annual leave when he wanted to.The respondent’s requirement that he input this annual leave dates onto their system was purely for the purposes of providing cover for clients when he was not there. . He was contractually required to have his own professional indemnity insurance. It is also clear that the complainant deemed himself to be in business on his own account until his consultancy contract was not renewed. It was not renewed due to the fact that he would not engage with the respondent in relation to it.   In Autoclenz Limited v Belcher and ors   the Court focused heavily on the test to establish whether a contract of service exists set out by McKenna J in Ready Mixed Concrete (SE) Limited v Minister of Pensions and National Insurance   where he stated; “I must now consider what is meant by a contract of service. A contract of service exists if these three conditions are fulfilled. (a)       The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.(b)       He agrees, expressly or implicitly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.(c)       The other provisions of the contract are consistent with it being a contract of service”. McKenna J further states            “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 or how far he has an opportunity of profiting from sound management in the performance of his task”. The Supreme Court in Autoclenz added to those propositions the following:- i.       That there must be an irreducible minimum of obligation on each side to create a contract of serviceii.      That a genuine right of substitution will negate an obligation to perform work personally and is inconsistent with employee status; andiii.     If a contractual right, as for example the right to substitute exits, it does not matter that it is not used. The complainant provided a service to the respondent for both their financial benefits. The complainant was paid 25% commission on the sale of hearing aids in excess of €1000 per month and a further bonus if targets were reached. Whilst I find that the complainant’s performance results had a direct impact on the financial success of the respondent entity, I can only conclude that there was no ‘Master Servant’ relationship existed between them. The complainant was in control of the number of days he worked and the number of clients he saw. He was in control of the time he spent at the respondent premises. Whilst the respondent relied on the complainant’s performance in order to reap financial reward, It was also to his benefit to sell hearing aids to as many clients has he could. Furthermore, I note from the Consultancy Agreement that XX Limited had a contractual right to provide someone other than the Complainant to provide the consultancy services provided the person was of similar ability and experience. Henry Denny & Sons (Ireland) Limited v Minister for Social Welfare Keane J, at page 49, cited with the approval of Cooke J in the of Market Investigations case, ”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?…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 a 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 he has an opportunity of profiting from sound management in the performance of his task’.     Keane J also cites the Irish case of Graham v Minister for Industry and Commerce that the Supreme Court “…had also made it clear that the essential test was whether the person alleged to be a servant” was in fact working for himself or for another person. Keane J, at page 50, goes on to say: “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”.It is submitted that similarly the fact that the Complainant was under the direction of the Respondent to the extent that he attended the branch in order to carry out assessments on clients, that is not determinative of his status. The key issue is the Complainant’s ability to influence and regulate his earnings which was entirely within his own hands. The more hearing aids he sold, the more he earned.   I accept that in every commercial arrangement/ contract for services, there has to be some element of control. The respondent has to have some rules, regulations or guidelines that the contractor must adhere to. The mere present of rules regulations or guidelines, even if they do demonstrate an element of obligation and/or control, must be assessed to establish whether they are merely there to facilitate the smooth running of the commercial entity and to provide an efficient pathway to success or whether they are there to control the individual who is providing the service to such an extent that one could only conclude that a master / servant relationship exists between the parties. I find that the element of control necessary to conclude a contract of services existed is not present in this case. The complainant whilst subjected to contractual requirements was essentially his own master. He decided what days he would work, he decided what time he would arrive for work and what time he would leave. There was no obligation on him to stay on the premises if there were no client bookings. He decided when he would take annual leave. There was no requirement on him to attend at employee meetings or at the morning huddle. He was not subjected to the respondent disciplinary processes or behavioural code. It is also relevant to consider how the parties view their own relationship and how they behaved. This may extend to tax treatment. Stringfellow Restaurants v Quashie   the individual’s remuneration came from customers of the restaurant, not from the putative employer, and she was treated (by the employer and by herself) as self-employed for tax purposes. The Court of Appeal (Elias LJ) made the point that: The Employment Tribunal’s conclusion [that the Complainant there was not an employee] was strongly reinforced by the fact that the terms of the contract involved the dancer accepting that she was self -employed, and she conducted her affairs on that basis, paying her own tax. In addition, and again consistently with that classification, she did not receive sick pay or holiday pay. It is trite law that the parties cannot by agreement fix the status of their relationship: that is an objective matter to be determined by an assessment of all the relevant facts. But it is legitimate for a court to have regard to the way in which the parties have chosen to categorise the relationship, and in a case where the position is uncertain, it can be decisive, as Lord Denning recognised in Massey v Crown Life Insurance [1978] 2 All ER 576,578. To similar effect is the following observations of Lord Justice Ralph Gibson in Calder v H Kitson Vickers Ltd [1988] ICR 232, 251: “the fact that the parties honestly intend that between themselves the contract should be a contract for services and not a contract of service is not conclusive, but it is a relevant fact, and…it may afford strong evidence that that is their real relationship.”“It follows in my judgment, that the fact the parties here intended that the dancer should have self- employed status reinforces the conclusion of the employment judge in this case” The Complainant considered himself to be an independent contractor. He actually insisted on it. He made is views known to the respondent and categorically stated that he did not want to be an employee. Furthermore, he set up a company XX Limited and was an employee of that Company. He did so on the advises of an accountant, that it would be financially beneficial to do so from a tax perspective. Having carefully considered all the evidence, submission and documentation and for the reasons set out above, I find that the complainant was not an employee of the respondent and that he provided a service to the respondent under a contract for services. Accordingly, I do not have jurisdiction to hear or make a determination.      

Decision:

Section 8 of the Unfair Dismissals Acts, 1977 – 2015 requires that I make a decision in relation to the unfair dismissal claim consisting of a grant of redress in accordance with section 7 of the 1977 Act. I dismiss the complaint ADJ 3763 – CA – 00005535-001 and CA 00005535-002 and CA 00005535-003.

Dated: 11/01/2018

Workplace Relations Commission Adjudication Officer: Niamh O'Carroll Kelly