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OverviewCrunch Time for Employee Status
Employment Breakfast Briefing
Thursday 21 May 2015
mayer brown x 1
Event DetailsWelcome to the Mayer Brown Employment Breakfast Briefing, where we be looking at the tricky issue of employee status.
The session will be a practical one focused on some of the issues employers face when deciding on how best to engage their
workforce and understanding the rights and benefits of those working for them. We will also provide answers to the questions we
get asked most often in this area. We hope you will share your experiences with us during the session and, as ever, we will be
offering both legal advice and workable solutions.
What we will cover in today’s session:
• Zero hours contracts: Where does the law currently stand, and what does the future hold after the General Election?
• Different ways to structure your workforce: What arrangements do you (or would you) use, such as agency workers,
casual contractors/consultants, self-employed workers, employees, directors and partners/members.
• When does a consultant become an employee: What factors can make the difference in when the Courts will treat
someone as an employee despite being labelled as a consultant and why does it matter.
• Understanding the rights of “workers”: A brief guide to the legal rights belonging to the special “worker” category.
Programme8.45 – 9.00am Registration & Breakfast
9.00 – 10.30am Presentation
10.45am Event close
2 x Employment Break fast Briefing
Guest ListEmployment Breakfast Briefing
THURSDAY 21 MAY 2015
Name Company
Caroline Alexander Canopius Managing Agents Limited
David Baker Mayer Brown
Rosamund Browne Rockwell Collins UK Ltd
Denny Daunt QBE European Operations
Sara Day Mayer Brown
Laura Denton Royal Academy of Arts
Marie Ellis Savills
Joanne Homes Ascot Underwriting Ltd
Ena Hunter Ayaya UK
Marie Jay Countrywide plc
Katie Kirkhope Boodle Hatfield
Lesley Mackinnon Coller Capital Inc.
Helen Makin Sisley UK & Ireland
Maria Mann
Diane Morris Millennium Capital Partners LLP
Deborah Nason Coller Capital Inc.
Carol O’Brien Catlin Underwriting Agencies Ltd
Marlene Patterson Linedata Limited
Marylin Peach The Spotlight
Nicola Raj Re:Sources UK
Tristram Redfern M&G Real Estate Ltd
Sanjeev Sharma M&G Real Estate Ltd
Khosrow Varnous Countrywide plc
Jean Wells Wellswood HR Ltd
Caroline Wheeler QBE
Nicola Woods Mayer Brown
mayer brown x 3
Speakers Miriam Bruce
Senior Associate, London
T: +44 20 3130 3695
Miriam is a senior associate in the London Employment Group. She deals with a wide range of contentious and non-contentious
employment law matters and acts for clients across a variety of sectors, including insurance, financial services, retail and
manufacturing.
Her advisory experience includes advice regarding TUPE, dismissals and settlement agreements, redundancy programmes,
employee handbooks and policy reviews, disciplinary and grievance issues and drafting employment and consultancy
agreements. Miriam is also experienced in managing global employment law projects across a number of jurisdictions on issues
such as redundancy, changing terms and conditions and business transfers. She has also worked on the employment aspects of a
number of different outsourcing deals, both globally and in the UK.
Miriam’s contentious experience includes acting for employers in Employment Tribunal, Employment Appeal Tribunal and High
Court claims involving a broad range of issues, including unfair dismissal, discrimination and breach of contract.
Ann Robson
Associate, London
T: +44 20 3130 3345
Ann is a senior associate in the Employment practice of the London office. She joined Mayer Brown in September 2007, having
previously been a partner in the commercial litigation group at another London-based law firm.
Ann has wide-ranging experience on both contentious and non-contentious employment matters, to include redundancy, TUPE,
discrimination, grievance, disciplinary and other employee meetings, dismissals and settlement agreements, drafting
employment contracts for all levels of employees and contracts for other atypical workers, and advising on staff handbooks and
policy reviews. Ann also supports the employment elements of corporate work, assisting with due diligence and advising on
warranties and indemnities.
Ann is a CEDR accredited mediator.
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Crunch time for Employee Status
Employment Breakfast Briefing
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
Ann RobsonSenior Associate0203 130 [email protected]
21 May 2015Miriam BruceSenior Associate0203 130 [email protected]
Be Brave!
Today we are talking about:Today we are talking about:
• Understanding the rights of employees and workers
• When does a consultant become an employee?
• Different ways to structure the workforce: pick ‘n’ mix
– employees
– workers
– self employed contractors– self-employed contractors
– casual workers
– agency workers
– partners/LLP members
• The rise of the zero hour contract
• Particular issues with partnerships and LLPs
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What’s in a name?The employee/worker/consultation relationship
• Modern workforces tend to be made up of people with different rights – some• Modern workforces tend to be made up of people with different rights – some contractual, some statutory and often overlapping
• Majority will be employees – contractual arrangements to suit
• Flexible workforces lead to different arrangements
• Key – recognising impact of those different arrangements
EmployeeSelf-
employed consultant
Worker
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An employee is….
• Described in the Employment Rights Act 1996 as:• Described in the Employment Rights Act 1996 as:
“an individual who has entered into or works under (or worked under) acontract of employment” (S.230(1))
• A contract of employment is:
“a contract of employment or apprenticeship, whether express or implied, and ifit is express whether oral or in writing”. (S.230(2))
• An employee works under a contract of service (where someoneagrees to serve) rather than in a contract for services (wheresomeone agrees to provide certain services to another)
Employee Status
• A “worker” is someone who has entered into/works under/worked under:• A worker is someone who has entered into/works under/worked under:
– a contract of employment (so all employees); or
– any other contract whether express or implied (and if express whether oralor in writing) where the individual undertakes to personally perform work orservices for another party to the contract, where the other party is not aclient or customer of a business carried on by the individual
(S 203(3)ERA 1996)(S.203(3)ERA 1996)
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Understanding key elements of worker status (1)
Byrne Brothers (Formwork) Ltd v Baird & others [2002] EATByrne Brothers (Formwork) Ltd v Baird & others [2002] EAT IRLR96
• Applicants were self-employed contractors on a building site
• Agreements said no holiday pay, could refuse an assignment, couldemploy additional labour where necessary, and could substitutewith consent
• They claimed holiday pay under the Working Time Regulations
DECISION: Yes – they were workers
Understanding key elements of worker status (2)
Wh t did EAT l k t?• What did EAT look at?
– There was a requirement for personal service despitesubstitution clause
– Was this a business undertaking with Byrne Brothers as thecustomer?
’ l h h l i hi ?• How arm’s length was the relationship?
• Degree of control
• Mutuality of obligation (what happened in practice)
– Always fact specific
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Understanding key elements of worker status (3)
A th Cl k P h S it D Ltd [2009]Another case: Clarkson v Pensher Security Doors Ltd [2009]
• Mr Clarkson a family friend and for two years did all the electrical work for Pensher Security
– There was mutuality of obligations – Pensher provided work and Clarkson did it for two years
– He provided all his own hand tools, Pensher provided some other equipment
– General control only
• Conclusion: He was offering a service to a “business undertaking” but it was very borderline
Why does status matter? (1)
• Workers have a number of statutory rights that self-employedWorkers have a number of statutory rights that self employed contractors do not enjoy for example:
– National minimum wage/no unlawful deduction
– Protection under the Working Time Regulations:
• Paid annual leave
• Rest breaks/maximum working week
– Protection if making a “protected disclosure”
– Right to be accompanied to disciplinary/grievance meetings
– Right to pension contribution under auto-enrolment scheme
– Full discrimination protection (see employee definition under Equality Act)
– Right not to suffer a detriment for Trade Union membership
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Why does status matter? (2)
Employees enjoy greater rights:Employees enjoy greater rights:
• Employees have implied contractual rights e.g. mutual trust and confidence
• Employees have core legal protections e.g. unfair dismissal, right to receive a redundancy payment
• Only employees are covered under TUPE, although definition of “employee” under TUPE wider than ERA
• Tax treatment is different (but not conclusive!)
• Employer is vicariously liable for employees and must have public liability insurance for them, and owes them duties under health and safety legislation
“Employment” for discrimination purposes
• Definition of employment for discrimination purposes is in Section• Definition of employment for discrimination purposes is in Section 83(2) Equality Act 2010
“Those in or applying for employment under a contract of employment, a contract of apprenticeship or contract personally to
do the work”
• This is widely drawn so can include employees, workers, and some y p y , ,who are technically “self-employed”
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Using a self-employed consultant (1)
–
• Key considerations when preparing a consultancy agreement
– What do you need vs what do they want
• Ready Mix Concrete case [1968]
– A contract of service exists if 3 conditions are fulfilled
(1) personal service – “his own work and skill… for his Master”
(2) Control – “he agrees (on express or implied basis) to be subject to the Master’s Control”
Using a self-employed consultant (2)
(3) Other provisions of contract are consistent with contract of servicecontract of service
– mutuality of obligation/substitution
– pay
– tools/equipment
– balance of risk
– integration into business
– exclusivity
– nature of relationship – is it a sham? Autoclenz Ltd v Belcher & Others [2004]
– Term
• Eyes open to risk – tax indemnity/HMRC’s view?
– more general indemnity (insurance)
– using a service company (bipartite/tripartite – the differences)
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Atypical workers
• Used to supplement the workforce in a flexible ad hoc wayUsed to supplement the workforce in a flexible, ad hoc way where the need for work is not constant
• Who are they?
– Casual workers
– Agency workers
Fi d k / i k– Fixed-term workers/part-time workers
– Secondees
– Apprentices
• What is their status?
Casual workers
• Workers who supply labour in an irregular and informal way
• Usually work for one off tasks or events, on an on-call basis, under zero hours contracts
• Status during periods of work can be that of employee, worker or self employed contractor
• Status between periods of work?
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Zero hours workers
• Used where there is a genuine need tocall upon workers for ad hoc engagement,usually at short notice for short periods
• No guarantee that work is offered butwhen it is offered, there is an expectationthat the worker will accept it
Statistics from BIS Consultation on zero hours contracts, December 2013
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Zero hours contracts
C lt ti d d f f th E l t Ri ht• Consultation and proposed reform of the Employment Rights Act 1996
– Small Business, Enterprise and Employment Act 2015
– Zero Hours Workers (Exclusivity Terms) Regulations 2015
• Drafting points:
– High degree of flexibility
– Status
– Arrangements for work
– Termination
Drafting and issues with casual/zero hours workers
• Issues to be aware of when using casual workers or zero hours workers:
– Umbrella contracts
– Holiday leave and pay
– Sickness leave and pay
– Pension and other benefits
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Agency workers
• An “agency worker” is an individual who:
– Is supplied by a temporary work agency (employment business);
– To work temporarily for and under the supervision and direction of a hirer (end-user client or hirer); and
– Has a contract with the TWA which is either a contract ofHas a contract with the TWA which is either a contract of employment or any other contract to perform work and services personally
Regulation 3(1) of the Agency Workers Regulations 2010 (AWR)
Status of agency workers
G i l lf l d?• Genuinely self-employed?
• Employee of TWA or end-user client?
– James v London Borough of Greenwich [2008] EWCA Civ 35
– Autoclenz v Belcher & others [2011] UKSC 41
– Smith v Carillion (JM) Ltd [2015] EWCA Civ 209
• Ensure contracts reflect intentions of parties and contain sufficiently clear wording to limit employer-employee relationship
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Rights of agency workers
• Rights under the AWR:Rights under the AWR:
– Day 1 Rights: access to end-user client’s collective facilities/amenities and to information about job vacancies (end-user client liable)
– Week 12 Rights: same basic working and employment conditions as permanent employees of the end-user client (TWA and end-user client liable)
• Swedish derogation and impact on employment status
• Additional rights depend on employment status – worker, employee or self-employed?
Directors and employee shareholders
• Directors are office holders with statutory and common law duties to the company and its employeesDirectors are office holders with statutory and common law duties to the company and its employees
• Are directors also employees? That depends:
– What do they do over and above their statutory duty as directors?
– If working full-time – likely to be employees
• What are the key differences for a non-executive director?
– Time commitment
f l– Defining role
– Fees (tax?)
– D&O insurance
– Term
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Employee shareholders (1 September 2013 onwards) (1)
A h ?• Anyone have any?
• At least £2,000 of shares and give up certain employment rights
• Tax (income tax, national insurance contributions and CGT)
• Definition:
– Must be an employee
– Agreement to be employee shareholder
– Written statement of particulars to include details of shares and changes to rights
Employee shareholders (1 September 2013 onwards) (2)
Shares of at least £2 000 given and no consideration required (S 205A– Shares of at least £2,000 given and no consideration required (S. 205A ERA)
• Which rights are given up?
– Right to claim unfair dismissal (but not always)
– Right to statutory redundancy payment
Ri h fl ibl ki– Right to flexible working
– Right to study leave
• Note: Requirement for independent advice
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LLPs and partnerships (1)
LLP Partnerships• Limited liability – LLP debts belong to LLP not
individual members
• Separate legal entity (registered at companies house) can sue and be sued
• Accounting and filing requirements like a company; taxed as a partnership
• Members agreement is private
p• Unlimited liability – joint liability of partners for
debts
• Sue individual partners
• Specific accounting, filing and taxation requirements
• Partnership agreement is privateMembers agreement is private
• Organisational flexibility governed by LLP Agreement
• Default is LLP Act 2000
• Different types of members
Partnership agreement is private
• Organisational flexibility governed by Partnership Agreement
• Default is Partnership Act 1890 save for common law fiduciary duties
• Different types of partners
LLPs and partnerships (2)
Wh t t f t / b ?• What type of partner/member?
– Title
– How remunerated
– Capital contribution/profit share
– Involvement in management
– Taxation
• Section 4(4) LLP Act 2000 – a member of an LLP will not be regarded as an employee by the LLP unless he would have been regarded as employed by a general partnership
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LLPs and partnerships (3)
P t ti f LLP b• Protections of LLP members– Discrimination (LLP members and partners)
– Whistleblowing
– Workers rights
– Rights to be accompanied to disciplinary hearings
– Part-time working protectionPart time working protection
– Working Time Regulations
– National minimum wage and no unlawful deductions
– Pensions – auto-entrolment
– TUPE?
LLP member/Partners: Ending the relationship (1)
E l i• Expulsion
– What sort of member/partner are they?
– What does LLP/partnership agreement say? May be different provisions for expulsions with/without cause. If a partnership and no Partnership Agreement, will require unanimity
• RetirementRetirement
– Must be express right to retire
– Any discrimination issues
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LLP member/Partners: Ending the relationship (2)
N ti f b / t• Notice for member/partner
• Garden leave!
• Post-termination restrictions – how Court treats partnerships and LLPs
• Practical considerations
Any Questions?
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4 x Employment Break fast Briefing
Notes
About Mayer Brown Mayer Brown is a global legal services provider advising clients across the Americas, Asia and Europe. Our geographic strength means we can offer local market knowledge combined with global reach. We are noted for our commitment to client service and our ability to assist clients with their most complex and demanding legal and business challenges worldwide. We serve many of the world’s largest companies, including a significant proportion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world’s largest banks. We provide legal services in areas such as banking and finance; corporate and securities; litigation and dispute resolution; antitrust and competition; US Supreme Court and appellate matters; employment and benefits; environmental; financial services regulatory and enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency; and wealth management.
Please visit www.mayerbrown.com for comprehensive contact information for all Mayer Brown offices.
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© 2015 The Mayer Brown Practices. All rights reserved.
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