The use of a fully compliant umbrella company would have headed off what unions are celebrating as the first successful bogus self-employment appeal involving a payroll firm.
In fact, the case of pipefitter Russ Blakely would never have got to tribunal had the umbrella he used not engaged him on a self-employed basis — as it did, says freelance body the FCSA.
It means that his now successful appeal that he was a worker, contrary to what an initial tribunal in Reading decided, seems to have largely hinged on the actions of payroll firm Heritage Solutions City Ltd.
In 2016, Heritage was approached by Blakely thanks to a referral text message he got from his recruiter about his new work with Broadmoor Hospital, which began in January (and unbeknown to him at the time, would end in May).
‘Contract for services’
Then in March, Heritage asked Blakely to sign a “contract for services” – synonymous with self employment, with the effect that he would not be entitled to ‘employee-style’ rights.
So rather than the 84 statutory rights and benefits of employment than bonafide, compliant umbrellas are legally required to provide, he was ‘denied them,’ complained Unite.
According to the union, which took on Blakley’s case, the contract also moved to authorise deductions for Employer’s Class 1 National Insurance, and included a “menacing” indemnity clause.
The clause in the Heritage-provided contract was aimed at stopping him from pursuing any legal claims, and gagged him from raising complaints with HM Revenue & Customs, alleges Unite.
‘Failed to understand’
Blakely was apparently informed that if he did not sign the agreement his pay would be stopped but he refused, only to be told that his services were no longer needed after he took a holiday.
“Blakely was owed £1453.50 in unpaid holiday pay, as well as the management fee and employer NICs deductions,” says Unite assistant general secretary Howard Beckett.
“[His] case was initially heard at the Reading employment tribunal which dismissed the claim believing he was not a worker having failed to properly understand the evidence provided. [Then we] lodged an appeal”.
According to the appeal judgement in his favour, Blakely was a ‘worker’ but of whose it remains to be seen — he may be a worker of his recruiter On Site Recruitment Ltd, or his ‘umbrella’ Heritage.
Blakely’s case has now been returned to the employment tribunal for it to decide (both parties could be deemed his employer), and for it to set his compensation, which is expected to be around £2,500.
“This is a ground-breaking victory…in the fight against bogus self-employment,” Beckett claimed. “The fact the EAT held that a worker could be jointly employed by two organisations is a game-changer”.
He vowed that Unite would ensure that the EAT’s findings are “fully utilised” to ensure that other workers are not denied employment rights or “exploited” by “parasitical” payroll companies.
‘Sick and tired’
Julia Kermode, chief executive of the Freelancer and Contractor Services Association responded: “We are sick and tired of our sector always being tarnished with the same brush due to actions of non-compliant firms that do not provide professional employment services.
“For that reason we would welcome potential regulation of the umbrella sector if it is sufficiently broad to ensure a minimum standard and does actually rid the sector of cowboys. There are many good compliant umbrella companies out there that provide a valuable service.”
Kermode points out the original case refers to ‘unlawful’ wage deductions for Employers’ NI but, often she said, this is down to “miscommunication where the worker has erroneously been told that they will be paid the assignment rate, which is different to their pay rate