The key test in establishing whether an individual providing their services is a worker with certain minimum statutory entitlements, such as the right to receive paid holidays and a minimum wage, is a contractual requirement for the individual to provide their services on a personal basis, rather than having the right to provide a substitute worker in their place to carry out the work under the contract.

Caselaw has established when a right of substitution, as opposed to a requirement for personal performance, indicates self-employment, rather than worker or employee status. 

This caselaw can be summarised as follows:

  • The right to provide a substitute to carry out the work only when the contractor is unable to carry out the work themselves will, subject to any exceptional facts, indicate a requirement for personal performance and suggests worker or employee status.
  • A right to substitute only with the consent of another person who has an absolute unqualified discretion to withhold consent to accept a substitute for the work, will indicate that the individual is required to personally perform the contract and is either a worker or employee.
  • On the other hand, a right of substitution limited only by the need to show that the substitute is as qualified as the contractor to do the work will, subject to any exceptional facts, indicate that personal performance is not required and point to that individual being self-employed.

The key to establishing that the individual is an employee, rather than self-employed and conducting a business on their own account, is the presence of a mutuality of obligation between the parties and control by the employer in how that work is carried out. 

In a recent case, the Claimant was contracted to provide care for the client’s uncle (described by him as “an irascible old man”) as a live-in carer working on a full-time, 6 day per week, 12 hour a day basis, living and sleeping at the uncle’s house for this purpose.  The client had found the Claimant carer via an agency. The client (nephew) paid the Claimant for the care and housekeeping services she provided to his uncle.  The Claimant took one day off per week and very occasionally took additional leave.  The nephew paid to the agency a monthly retainer to obtain cover from an alternative carer to be supplied by them when the Claimant was away on leave or on her day off.  The Claimant agreed with the client that whenever she was unable to provide her normal duties she should contact the agency to source an alternative carer to cover her time off. 

The Claimant had worked for the client for three years providing her services on this basis. She had been paid gross, being responsible for the payment of tax and national insurance herself. Following the end of the arrangement she brought a number of claims. One of the questions for the Employment Appeal Tribunal (EAT) was whether they agreed with the Employment Tribunal’s findings that the Claimant was an employee, rather than self-employed in order for those claims to proceed, by applying the tests set out above for establishing employment status.

Right of Substitution

The EAT did not regard the Claimant’s action in approaching the agency for a replacement carer to cover her days off, as her providing a substitute for herself. She was merely acting pursuant to the arrangement between the nephew and the agency, whereby the agency agreed to provide their client with a substitute carer when required. 

Other than when she was taking leave, no substitute was ever sought. This was in accordance with the requirement by the nephew that the initial engagement be a commitment by the Claimant for six months. The Tribunal found that the length of commitment evidenced a requirement for personal performance. 

Mutuality of obligation

Although there were no written terms with the client (the nephew), the EAT found that the client’s expectations in how the Claimant should discharge of her duties as carer and housekeeper for his uncle was set at the start of the engagement. She reported to the nephew either face to face on his visits to the house or by telephone. Mutuality of obligation and control by the employer was evident on the facts.

Nothing in the circumstances of this case indicated the Claimant was conducting a business on her own account, although she received payment for her services without deduction of tax or national insurance and she was expected to account to HMRC for both herself.

In theory, the Claimant would be able to choose which of the 12 hours daily she would dedicate to providing care. However, in reality, there was not absolute freedom as it would depend upon the care that needed to be provided on a daily basis. Her evidence that she took two hours’ rest break in the afternoon was based on a finding that this was due to the fact that the service user was otherwise occupied and didn’t require her care, as he watched television at those times. The EAT found that the fact that such an employee is trusted to manage his or her workload and hours of work does not make him any the less an employee.

For these reasons, the EAT agreed with the Employment Tribunal’s findings that the Claimant was an employee and that her contract was with the service user’s nephew who employed her. 

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