Ruling provides further guidance on worker status vs employment status

Employers should take note of a recent Employment Appeal Tribunal decision which gives clearer guidance on the assessment of worker status vs employment status.

In the case  Ter-Berg v Malde and another, the Employment  Appeal  Tribunal overturned a previous tribunal decision which considered the legal test for both worker and employment status to be interchangeable.

The case involved a dentist who after selling his dental practice then agreed to provide dental services at the same location. In the agreement it was stated that this didn’t create an employment relationship, and it also included a substitution clause which allowed the dentist to arrange for a locum to cover any long periods of absence.

The dentist later brought a claim at the Employment  Tribunal and in it he claimed he was an employee or a worker.  At a preliminary hearing the Employment  Tribunal decided he was not an employee which wasn’t challenged by the claimant. In a separate ruling to decide worker status, the Employment  Tribunal also ruled against the claimant saying a finding or worker status would be inconsistent with its earlier ruling on employment status.  This will now be heard again by a new Employment  Tribunal after the Employment  Appeal  Tribunal’s guidance.

In overturning the Employment  Tribunal’s decision, the Employment  Appeal  Tribunal decided:

•   The claimant didn’t meet the requirement of personal service due to the substitution clause in the agreement. It said that where a substitution clause is limited ie when a person is ill, it does not negate the requirement for personal service.

•   In the decision on employee status, the Employment  Tribunal wrongly assumed the claimant was not an employee and therefore not a worker.  The Employment Appeal  Tribunal clarified the test for worker status has a lower threshold and should have an independent assessment rather than carrying over conclusions of the employment status test.

•   Finally, the Employment  Tribunal had placed undue weight on the parties’ original intention that the claimant be self-employed. Whilst the intentions of both parties can be relevant in assessing employment status, they are not conclusive in determining whether an individual is a worker. In this case, the claimant met the legal definition of a worker.

When considering this ruling employers should remember that tribunals look at the reality of a working relationship as opposed to contractual labels and a substitution clause does not automatically trump worker status, especially if it is conditional or limited.  There may be situations where an individual is not an employee, but they may qualify as a worker.  A business should not assume a self-employed designation is sufficient to exclude statutory protections. Employers should therefore ensure their contractual arrangements accurately reflect the true nature of the relationship and if substitution rights, control mechanisms and the level of integration into the business are consistent with the intended status. If there is any doubt or to review your contracts, please get in touch with our team to discuss.