News Items – at 27th February 2007

Employment Status of Couriers

EAT considers the approach to be taken in deciding whether someone is a ‘worker’

The London Employment Appeal Tribunal (EAT), in a decision given on 21 February 2007 in the case Mrs. P. James v Redcats (Brands) Ltd, has given further guidance on the approach tribunals might adopt when considering whether someone is a worker, and also on the significance of mutuality of obligation in this context.

Mrs. James worked as a courier for Redcats, delivering parcels to private addresses using her own vehicle.  She claimed that she was a “worker” as defined in the National Minimum Wage Act 1998 and was therefore entitled to the national minimum wage.  In the company’s view, she worked for them under a "self-employed courier agreement".  It was common ground that Mrs. James was not an employee.  The employment tribunal that heard her initial claim agreed with Redcats.  Mrs. James appealed that decision to the EAT.

Individuals who meet the definition of “worker” are entitled to be paid the national minimum wage.  They are also entitled to rights under the Working Time Regulations 1998 and certain rights under the Employment Rights Act 1996, where the same definition of “worker” is used.  For an individual to be a “worker”,

1. there must be a contract to perform work or services,
2. there must be an obligation to perform that work personally, and
3. the individual will not be a worker if the provision of services is performed in the course of running a profession or business undertaking and the other party is a client or customer.

The employment tribunal decided that Mrs. James was working under a contract to perform services.  However, in the tribunal’s view, Mrs. James was conducting a business and Redcats was a customer of that business.  On that basis, she was not a “worker”.

The EAT considered in depth the issue of how to tell if an individual is carrying on a business undertaking – the key issue in the appeal.  Although a decision will in all cases involve careful analysis of all the elements of the relationship, the EAT suggested that the “dominant purpose” test may help tribunals decide whether or not an individual is running a business undertaking.  This test is a means of focussing on the immediate purpose of the contract by considering the relationship between the second and third elements of the “worker” definition above.  The courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not.  If it is, then the contract lies in the employment field; if it is not, for example because the dominant feature of the contract is a particular outcome or objective and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field.

Applying these principles to the facts of the case, the EAT decided that the employment tribunal was correct in deciding that Mrs. James was self-employed but the decision that she was running her own business did not follow from that decision.  The case was therefore referred to a fresh tribunal for that matter to be decided.

The EAT also discussed at length a matter that was considered important by the employment tribunal in deciding whether or not Mrs. James was in business but which the EAT felt was only of minor significance in the case – the issue of “mutuality of obligation”.  This principle recognises that, for a contract to exist, there must be mutual obligations on the parties to the contract.  In the context of employment, those obligations are a duty on the employer to offer or provide work and the duty of the worker to accept and perform the work.

The issue of whether there is mutuality of obligation commonly arises where a person is employed intermittently by an employer and the question arises whether there is a contractual relationship in the period when the worker is not actually working.  For example, many casual or seasonal workers, such as waiters or fruit pickers or casual building labourers, will periodically work for the same employer but often neither party has any obligations to the other in the gaps or intervals between engagements.  To quote the EAT:

“There is no reason in logic or justice why the lack of worker status in the gaps should have any bearing on the status when working.  There may be no overarching or umbrella contract, and therefore no employment status in the gaps, but that does not preclude such a status during the period of work.  If casual and seasonal workers were to be denied worker status when actually working because of their lack of any such status when not working, that would remove the protection of minimum wage and other basic protections from the groups of workers most in need of it.”

Accordingly, overturning views put forward in earlier EAT decisions, this EAT took the view that:

“the fact that there is a lack of any mutual obligations when no work is being performed is of little, if any, significance when determining the status of the individual when work is performed.  At most it is merely one of the characteristics of the relationship which may be taken into account when considering the contract in context.  It does not preclude a finding that the individual was a worker, or indeed an employee, when actually at work.”

Further information:
Mrs. P. James v Redcats (Brands) Ltd  http://www.bailii.org/uk/cases/UKEAT/2007/0475_06_2102.html

Van Fuel Benefit Charge

Correction to expenses and benefits booklet 480 

HMRC has identified and corrected an error in paragraph 13.7 of booklet 480 (2007).  The introduction of the £500 charge where fuel is provided for a van for which there is a van benefit charge is introduced from the 2007/08 tax year, not the 2008/09 tax year.

The corrected booklet is available to download and will also be provided on the Budget version of the Employer CD-ROM.

Further information:
Error in booklet 480 (2007)  http://www.hmrc.gov.uk/guidance/2007/480.pdf

Employer CD-ROM

Installation on Microsoft Vista

As the Microsoft Vista operating system was launched after the 2007 Employer CD-ROM was finalised, the disc will not auto-start.  Instructions on how to start the installation manually is available on HMRC’s website, at the link below.

Further information:
Installing the CD-ROM on Microsoft Vista  http://www.hmrc.gov.uk/employers/cdrom/install-vista.htm

Payroll deadlines during the next month

March 5 – This is the final day of tax month 11.  Tax and NICs etc. for payments made in the tax month to March 5 are due for payment to the Accounts Office by March 19, or by March 22 if paid electronically.

March 19 – For employers required to pay tax and NICs etc to the Accounts Office monthly, this is the deadline for payment to be received by the Accounts Office, unless made electronically.

Payroll FAQ's

Tax, NICs and Statutory Payments Rates

What are the tax, NICs and statutory payments rates and thresholds for 2007/08?

Income tax rates and thresholds
The thresholds shown for 2007/08 are unconfirmed estimates, based on the rate of inflation at September 2006 (3.625%).  The 2007/08 thresholds are likely to apply from the first payday on or after 18 May 2007.

Income tax allowances (applicable from 6 April 2007)

*The tax relief on the married couple’s allowances is restricted to 10%.  The married couple’s allowance also applies to couples in civil partnerships from December 2005.

NICs thresholds (applicable from 6 April 2007)

* Values defined in statute.  All other values are calculated according to statutory rules.

NICs contracting-out rebates (applicable from 6 April 2007)

NICs rates (applicable from 6 April 2007

*Shaded boxes indicate the bands of contracted-out earnings

Statutory Sick Pay (applicable from 6 April 2007)

Statutory Maternity, Paternity and Adoption Pay

*33 weeks where expected week of childbirth starts on or after 1 April 2007
**39 weeks where expected date of placement falls on or after 1 April 2007

Statutory Redundancy Pay

BAILIWICK OF JERSEY

Redundancy and Business Transfers Laws

Employment Forum recommends new employee rights and protection

The Employment Forum is recommending further changes to the Island’s employment legislation following public consultation.  The Forum presented the Social Security Minister, Senator Paul Routier, with its recommendations to introduce legislation that will:

• give employees the right to receive a compensatory payment from their employer in the event of being made redundant, and
• protect employees’ terms and conditions of employment when they are transferred to a new employer in a business takeover or sale.

The full recommendation includes further details, including the criteria by which employees would qualify for the new rights, the consultation requirements and obligations of employers in redundancy and business transfer situations, and the awards that would be made to employees where an employer has not met the requirements of the recommended legislation.

The Employment Forum is an independent consultative body which makes recommendations to the Social Security Minister, based on views received during consultation with the public. Consultation on these two issues closed in August last year and the Forum has since considered the very detailed responses that were received. In all, 24 responses were received from a wide range of individuals and organisations.

The issues of redundancy and business transfers are the first two issues to be considered by the Forum in the further development of Jersey’s employment legislation programme. A two phased approach was approved by the States in 2000. Consultations planned to be undertaken by the Forum over the next two years will seek views on maternity, equal opportunities, flexible working and family friendly policies.

Further information:
Forum recommends new Redundancy and Business Transfers Laws
http://www.gov.je/SocialSecurity/NewsReleases/Forum+recommends
+new+Redundancy+and+Business+Transfers+Laws.htm

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