The case of a limited company contractor who has been able to successfully assert that he was an employee of his client has recently been raising eyebrows across the industry.
In Asltrom v Tilson, Mr Tilson, who operated through his own limited company which was acting as a subcontractor, whose principal was being supplied to the client through an agency, successfully showed that he was an employee of the client and thus succeeded in his claim for unfair dismissal.
Although the contractual documentation appeared to suggest that the relationship was one of an independent contractor, this documentation was regarded as “bogus” by the court. On examining what was actually happening on a day to day basis, the Court found that the evidence supporting the case that Mr Tilson was an employee of the client was compelling. Such factors included that Mr Tilson was able to hire, discipline and dismiss the client’s permanent employees, which is more indicative of a person actually employed by the client than an independent contractor.
The case again emphasises that the actual working practices of an engagement are just as, if not more important in certain circumstances than the contractual documentation in place. It is vitally important therefore that contractual arrangements in place are drafted in such a way to minimise the risk of being held as a sham and to effectively deal with this area of liability.
Quite what view HMRC will now take of Mr Tilson’s tax status remains to be seen.
This is another example as to why agencies should ensure that contractual arrangements with both client and candidates whether operating via limited companies or on a PAYE basis are commercially robust yet also reflect the reality of the workers arrangements.
Lawspeed can advise on all aspects of employment status, including advice to contractors on their IR35 status. For more information contact Lawspeed on 01273 236 236