In the recent case of Community Based Care Health Ltd v Narayan, the Employment Appeal Tribunal found that an out-of-hours GP who was providing her services via her personal services company was nevertheless a worker.
Community Based Care Health Ltd (“CBCH”) provides out-of-hours GP services under an agreement with the NHS. The NHS contract required CBCH to ensure that doctors providing the services were competent and qualified.
The Claimant in this case, Dr Narayan, worked for CBCH as a duty doctor working regular shifts on a 12 week rota, generally at one establishment. She was not obliged to accept work and CBCH was not obliged to provide any. She took holidays when she pleased. She had her own indemnity insurance, carried out other work as a locum, used her own equipment and had to log in to book her shifts months in advance. However, she was required to perform her work personally and could not send a substitute of her choice.
Dr Narayan commenced working for CBCH in 2005. In 2015, she set up a personal service company (“PSC”) to obtain tax advantages. She gave the bank details of her PSC to CBCH, but did not otherwise tell them about it.
In 2016, CBCH ceased to offer her work. She brought a claim in the Tribunal for, amongst other things, unpaid holiday pay. CBCH argued that she was self-employed and so could not bring a claim for unpaid holiday pay.
Looking at the whole picture of the relationship, the Tribunal found that Dr Narayan was a worker of CBCH and therefore could bring a claim for unpaid holiday.
CBCH appealed, partly on the basis that Dr Narayan could not be a worker, as her PSC became the relevant contracting party in 2015 and that CBCH unknowingly came a client of her PSC from that date. The Employment Appeal Tribunal (EAT) rejected the appeal. On this particular point, the EAT held that as this had not been clearly argued in the Tribunal, so could not be raised as a new point on appeal. The EAT said that “a party seeking to deny a contact with a person by asserting that the contract was with another, should do so plainly”. Notwithstanding this, the EAT said there was no merit in CBCH’s argument. This was because CBCH was required to ensure that the out-of-hours GPs met the NHS’s strict performance and qualification requirements. The PSC could not meet these requirements as it was not a human. Also, CBCH could not approve the PSC without knowing of its existence.
It is a generally accepted principle that individuals who have a PSC and contract to provide their services to a third party via that PSC are not employees or workers of the third party, although of course they may be office holders or employees of the PSC itself.
Although the claimant in this case did have a PSC which was receiving the money for her services, this was an unusual situation as CBCH had no knowledge of the PSC. This was not a clear tripartite relationship with the PSC as a clear intermediary. The finding of worker status is explicable on this basis. The suggestion that the PSC could not be the relevant contracting party because a corporate entity could not meet qualification and performance requirements is, however, more difficult to understand. Many individuals who are required to have certain qualifications to work provide their services via a PSC without difficulty. It is the individual who needs to be qualified, not the PSC.
There was a case last year (Sprint Electric Ltd v Buyer’s Dream & Another) where the High Court held that an individual was an employee rather than an independent contractor, despite the fact that the individual provided services to the company via a PSC. None of the parties had questioned the description of their relationship as that of contractor and client. Nevertheless, the High Court considered it necessary, as a matter of policy, to look beyond the description of the relationship that the parties had chosen to adopt. The decision reached by the High Court in this case was surprising as it indicated that the use of a PSC is vulnerable to challenge for the purposes of employment status, even in circumstances where neither of the parties involved wish to contest the arrangement.
These two cases together don’t indicate that the general principle is being significantly eroded. They do, however, show that it is not impossible for an individual to be an employee or worker of the company, when providing work via a PSC.
It will be interesting to see if the advent of the new IR35 rules for private companies (currently due to come into effect in April 2020) will lead to an increase in litigation from those who are deemed to be employees for tax purposes, but have no employment rights.