Home > Articles/Publications

Self Employed? - A Key Employment Tribunal Decision

ARTICLE ORIGINALLY PUBLISHED JUNE 2010

Whilst self employment is very prevalent within the industry, there has been a spate of EmploymentTribunal cases which highlight the potential risks and dangers, if “self employed” or rent a chair arrangements are seen as a sham. Readers will be aware of the HRMC inspections but there are also “employment” issues.. The following case is a little unusual; but the implications for salons with self employed staff are clear.

The Law

The key pieces of legislation are:

Employment Rights Act 1996

Employment Act 2002

The Facts

Mrs X worked at a salon for just over a year in a self employed capacity The salon owner attended one of my seminars and became aware of the potential risks of self employment. He offered employment status to all his staff. Everyone, with the exception of Mrs X signed the Contract of Employment and became employees. Despite the salon owners best efforts Mrs X asserted she wished to be self employed and refused to sign the contract. However she also hadn’t signed her self employed agreement.

Some months later the salon owners wanted staff to arrive at work 30 minutes before the salon opening time to prepare the salon and have a daily team meeting. Mrs X was unhappy with this request. She continued to protest and grumble to her colleagues. The salon owner felt she was deliberately undermining him. He would have taken disciplinary action but she was self employed. He decided he did not want to use her services anymore.

On the basis that she was self employed the salon owner advised that he no longer needed her services. As she wasn’t an employee the disciplinary procedure wasn’t relevant.

Mrs X took her claim to Employment Tribunal claiming that she was really an employee and had been unfair dismissal.

The Tribunal decided she was an employee, she worked according to a rota, there was a specific break time, she had to be available even if she had no clients. In short her work and time was totally controlled and she wasn’t free to operate her business and work elsewhere. I know from discussing this with other salon owners that this form of “self employment” is not untypical.

The issue isn’t whether the person is called “self employed” if the reality is that the obligations on them and working practices are those of an employee. A self employed person is effectively running their own business and Mrs X wasn’t free to do this.

Having decided Mrs X was an employee the decision re unfair dismissal was a formality. There was no disciplinary hearing, no warnings. The Tribunal did not think her action would in any event have been gross misconduct.

She was awarded in the region of £5,000 for unfair dismiss and subsequent loss of earnings. The Salon owner reflected that his mistake was not to resolve the issue at the time of the original dispute and force the individual to either sign their contract to become an employee or have a self employment agreement in place which he could have legally ended.

Key Points

Self employed is perfectly legal but salons should have a written agreement – a Contract of Service with the individual. It would be typically for a fixed period eg 12 months.
Charging a rent where the person is free to choose when to work and what to charge is generally safer. The person is then free from instruction and to pursue other business interests.
In this case Mrs X did not make any claim for notice pay or unpaid holiday pay, if she had the costs could have been much greater, ie if someone persuades a Tribunal they are an employee they could make a back dated claim for annual leave of several years.
Under the 2002 Employment Act the Employment Tribunal had the authority to award another 2-4 weeks pay as Mrs X did not have a contract. However as the salon owner had made every effort to issue one this was disregarded.

Readers may wish to review their current agreements in the light of this case.

This Months Question

A therapist has returned from 2 weeks holiday with a sick note claiming she had been sick for one week whilst she was away what do I do?

Case law now exists and the employee can ask for the weeks days leave again and for you to substitute sickness. I am not sure how many staff would actually do so. If she now tells you she was sick for one week she would need to repay you one weeks holiday pay. In return she would normally get no pay for the first 3 days and then 2 days SSP.

Articles/Publications