Meghan Gorman from Lancashire has brought a claim against the hairdressers, Terence Paul in Manchester. She joined the salon as a trainee in 2013 and worked there for six years until the salon closed in 2019. She had a contract which stated she was a self-employed hairdresser but argued that the amount of control the salon had over her working practices effectively made her an employee. Ms Gorman claimed that the hours were set by the salon and they kept 67% of her takings.

Terence Paul argued that the self-employed hairdressers had control over their hours, the days they worked, the start and finish times, the treatments they gave and their holidays. However, at a Preliminary Hearing in Manchester, Employment Judge Batten found in favour of Ms Gorman.

What does it mean to have employee status?

For the purposes of employment law, self-employed individuals have no employment protection rights. In contrast, employees have extensive rights, including the right to not be unfairly dismissed; the right to a statutory redundancy payment; the right to a minimum notice period; the right to statutory sick pay and the right to statutory maternity, paternity, adoption and shared parental leave (and pay).

Do all workers have employment protection rights?

An individual who personally performs work under a contract (and who is not self-employed and in business on their own account) may be a ‘worker’ attracting limited employment protection rights including the right to National Minimum Wage and rights under Working Time legislation, including the right to paid holidays.  Workers do not have employed status and the associated full employment protection rights afforded to employees. 

How do employers decide who is self-employed or an employee?

When determining whether an individual is self-employed, a worker or an employee, an Employment Tribunal will look at a variety of factors beyond simply the contract, including whether the company has control over the individual, such as determining when and how the work must be done; whether the individual is integrated into the company’s organisation, possibly by using the company’s equipment, wearing a uniform or working from the company’s premises; and whether the individual must perform the work personally or may arrange for a substitute to undertake the work.

Why should employers be concerned about employee status or worker status?

There has been much litigation in recent years on the issue of the employment status of individuals performing work and what their associated rights might be.  The decision in Ms Gorman’s case is not binding on any other Employment Tribunal and each case is decided on its own particular facts.  However, the case serves as an important reminder to employers that the Employment Tribunals are stringently calling out ‘false self-employment’ across a wide range of industry sectors, affording significant numbers of workers employment protection rights.  Such rights may result in increased costs and potential liabilities including liabilities for redundancy payments, notice rights and accrued holiday pay.

Employers should carefully analyse the true status of individuals performing work for their businesses on an on-going basis and particularly prior to taking action which may result in potential liabilities, for example, dismissal.  Erroneously categorising individuals as self-employed may also result in significant costs and penalties for failure to appropriately account for income tax and national insurance contributions.

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