Mr G Haggar v Salty Dog Bar & Bistro Limited

Summary – Identification of employee status 38/2012 Jersey Employment Tribunal

INTERIM HEARING 26 July 2012 Before : Chairman Mrs Nicola Santos-Costa Panel Members: Mrs Mary Curtis and Mr Patrick Kirwan Between Mr G Haggar Applicant And Salty Dog Bar & Bistro Limited Respondent For the Applicant: The Applicant represented himself For the Respondent: Mr Damon Duffy and Mrs Natalie Duffy, Directors Employment (Jersey) Law 2003 Notification of the tribunal’s decision This award,(subject to the right of appeal to the Royal Court as set out in the law) is legally binding and is the final decision of the tribunal. Each party, if applicable, is responsible for establishing their liabilities with regard to Social Security and Income Tax payments Chairman:

THE FACTS 1. Mr Haggar worked for the Respondent as a bookkeeper. The Tribunal heard that Mr Haggar worked for the Respondent for 12 hours a week, split equally over 3 days and in each session he had a separate focus of work from the banking, to invoicing, to the payroll. The Tribunal learned that Mr Haggar worked in the office alongside Mrs Duffy and by all accounts they got along very well, supporting the business in their own ways. The Tribunal was informed that Mr Haggar worked as a bookkeeper for other businesses too but he spent the biggest proportion of his time working for the Respondent.

2. The Tribunal heard evidence that the Directors of the Respondent decided to dispense with Mr Haggar’s services as a bookkeeper and to undertake his work themselves. On the 20th January 2012 they gave Mr Haggar a month’s notice, in accordance with the agreement between them. Mr Duffy gave evidence, which was not disputed, that on receiving notice Mr Haggar was nonplussed by the event saying that it was, ‘OK as I’m self-employed anyway’, which Mr Duffy said he and Mrs Duffy felt relieved about as they were apprehensive of giving notice to Mr Duffy as they knew he would feel the loss of his work at the Respondent. Evidence was heard that Mr Haggar continued to work for the Respondent throughout the period of his notice and everything seemed normal. Mr Haggar’s last day of work for the Respondent was the 24th February 2012.

3. On the 10th April 2012 Mr Haggar filed a form JET1 complaining that he had been unfairly dismissed and was due a redundancy payment. The Respondent replied that Mr Haggar was not an employee of the business but an independent contractor and thus not entitled to claim compensation for unfair dismissal or a redundancy payment. This Interim Hearing has been convened to adjudicate upon the employment status of Mr Haggar.

4. The Tribunal asked each party to set out their reasons as to why they considered Mr Haggar to be to be employed or not respectively.

5. Mrs Duffy was clear in her evidence that she always considered Mr Haggar to be a ‘freelance bookkeeper’ who was engaged by the business to undertake certain specific tasks. Mrs Duffy explained that when Mr Haggar started working for the Respondent in 2003 they paid his fees to a company owned by Mr Haggar and Mr Haggar paid his own tax and social security contributions. Mrs Duffy explained that when Mr Haggar started work for them in 2003 he worked for 8-10 hours a week under a verbal arrangement. In April 2007 Mr Haggar told Mrs Duffy that his social security contributions, as a self-employed person, were proving to be very expensive for him and he asked her if he could go onto the books of the Respondent as an employee and he would repay to the Respondent the amount of the Respondent’s employer and employee Social Security contributions and this would still be cheaper than him paying his own social security contributions as a self-employed person. The Directors of the Respondent agreed to this proposal and between 2007 and April 2010 Mr Haggar appeared as an employee in their social security returns but in fact Mr Haggar repaid to them all the monies thus expended. On the 6th April 2010 the Respondent was informed that it was going to have an inspection of its records by the Social Security Department. One of the matters that the Social Security Department warned that it

would be looking for was a contract of employment for each employee. Mrs Duffy gave evidence, which was not disputed by Mr Haggar, that she realised then that Mr Haggar appeared in the Respondent’s Social Security records as an employee but that he did not have a contract of employment. Accordingly she issued one to Mr Haggar in a standard format for the business but she said that both parties acknowledged that Mr Haggar was not an employee and this document was only for the purposes of the Social Security inspection. Mrs Duffy agreed that she had issued Mr Haggar with a contract setting out his hours in 2009 because he had asked for one but she was not able to find it in 2010 when preparing for the inspection and issued another one in the same style but she never considered that either contract made Mr Haggar an employee of the business. Mr Haggar gave evidence that he asked for a contract in 2009 because it made him feel ‘more secure’ with the Respondent and also gave him holiday pay. Mr Haggar confirmed that the 2010 contract was the same as the 2009 contract. Mr Haggar admitted to the Tribunal that he was ‘not sure’ of his employment status between the issue of the contract of employment in 2009 and the cessation of the arrangement regarding the payment of his Social Security in April 2010 (see paragraph 6 below).

6. The Tribunal heard evidence that Mr Haggar asked the Respondent for an increase in his fees in April 2010 and it was agreed by the parties that instead of paying Mr Haggar more money, Mr Haggar would stop reimbursing to the Respondent the amount of his employee’s contribution towards his Social Security. This new arrangement continued until he stopped working for the Respondent.

7. During its discussions it became clear to the Tribunal that the evidence given at the hearing by the parties concerning Mr Haggar’s income tax position – whether his earnings from the Respondent were treated by the tax authorities as the earnings of an employee or a self employed person – was unclear. Accordingly the Tribunal asked the parties to clarify the position by questions sent to them after the hearing. The Respondent informed the Tribunal that Mr Haggar was included in the Respondent’s employee ITIS returns between April 2007 and December 2010 but no deductions were made for his income tax and that he was occasionally included after that date but in error, which was subsequently rectified. Mr Haggar provided confirmation that he had obtained the permission of the Income tax Department to file his own monthly income tax schedules using software provided by the Income tax Department. The Tribunal asked Mr Haggar to confirm whether those returns showed him as an employee of the Respondent. By way of response Mr Haggar produced an ‘Income tax payment Schedule’ for the years 2005 – 2011 which described Mr Haggar’s employer in each year as the limited company which is referred to at the beginning of paragraph 5 above. Mr Haggar confirmed to the Tribunal at the hearing that he owns that company but told the Tribunal that he did not use it for his work with the Respondent. Mr Haggar confirmed that his salary was paid into his personal bank account by the Respondent as the business bank account incurred charges which he wanted to avoid.

8. The Respondent also pointed out to the Tribunal that as a self employed person, Mr Haggar was not required to seek permission for his holiday leave in advance, as the employees do. The Tribunal learned that until 3 years ago the Respondent closed its business over Christmas and New Year and Mr Haggar had always taken his holidays then. When the decision was made to open the business over this period Mr Haggar continued to take his holidays at this time even though it was very inconvenient to Mrs Duffy but she felt that she could not interfere because Mr Haggar was self employed and therefore outside her control. Mr Haggar explained that he liked to take his holiday over Christmas and New Year and he thought that this suited Mrs Duffy too and this was the reason why his holidays were not discussed.Mr Haggar added that as he sat next to Mrs Duffy it was impractical to put in a holiday request form when he could just ask her directly for the time off. Mrs Duffy responded that in fact all employees of the business request their holidays in advance from the Directors and permission is given depending on the needs of the business.

9. Mr Haggar pointed out to the Tribunal that the contract given to him by the Respondent gave him the right to paid holiday leave which would not be expected if he was an independent contractor. However on questioning by the Tribunal Mr Haggar admitted that 4 of his other jobs, where he was treated as a self-employed bookkeeper, also gave him holiday pay at a fixed rate although the Respondent was the only one which set out the holiday pay in a contract.

10. Mrs Duffy gave evidence that Mr Haggar was invited to staff parties and to staff meetings but he rarely attended them and this pointed towards the fact that he considered himself to be self-employed. Mr Haggar responded that it was up to him whether he attended staff parties as they were not compulsory and he did not attend staff meetings because they involved the restaurant staff and he worked in the office.

11. The Tribunal were shown an exchange of notes between Mrs Duffy and Mr Haggar regarding some work that Mrs Duffy had asked Mr Haggar to undertake concerning another business that they were involved in. The invoice is dated 14th October 2011. On the invoice, which is made out by the Respondent to the other business Mr Haggar had noted as follows: ‘Natalie…I am happy to do these but for the future any work that directly/indirectly benefits [the other business] then I will have to charge for only fair !!?? Thx’ Mrs Duffy gave evidence that she was ‘’puzzled’ by this comment and it is clear that she replied on the note as follows: ‘ For your information – this is no different to you creating an account for a Salty Dog customer & therefore forms part of your work for Salty Dog…is there a problem here? I do not expect [the other business] to be charged anything extra for this type of work, it is part of your responsibility to Salty Dog. OK. Thank you’ Mrs Duffy gave evidence that Mr Haggar said that this type of work, ‘was not within the boundaries of his role’ and he was uncomfortable doing the work for the other business unless he charged for it separately. Mrs Duffy stated that she believed this stance adopted by Mr Haggar over the invoices between the 2 businesses reinforced her view that he worked for himself - because an employee would have just undertaken the extra work as directed by her.

12. It was agreed that Mr Haggar did not at any time submit an invoice for the time he worked on the Respondent’s business to the Respondent in either his own name or that of the company that he owned (see paragraph 7 above) and as organised the payment of the wages for all the staff he paid his fees directly into his own bank account for the hours that he had worked. It was acknowledged by the parties that Mrs Duffy did not check the payroll or authorise the payments. Evidence was also heard that Mr Haggar generated the Respondent’s wage slips and that Mr Haggar had issued himself with a pay slip regularly throughout his employment. Evidence was also heard that Mr Haggar was included in the staff annual bonus scheme which was calculated by Mrs Duffy alone. Mr Haggar submitted that this payment was extremely unusual if he was not considered to be an employee by the Respondent.

13. It was clear from the evidence that Mrs Duffy relied upon Mr Haggar’s work and expertise in the business’ administration and trusted him enough to give him a set of keys to the restaurant and the office including the keys to the safe. The Tribunal was informed that Mr Haggar set his own hours of work and Mrs Duffy had no objections to this arrangement. Mr Haggar submitted that although he set his hours of work, they were so regular that if he had wanted to change them he would not have done so without Mrs Duffy’s permission. Evidence was heard that Mr Haggar did his work using the Respondent’s computer and programmes, but Mr Haggar said that this was not an unusual arrangement and he always used the computers of the persons that he worked for when he performed his bookkeeping service and it was not possible for him to perform his work from his home.

14. On questioning from the Tribunal Mr Haggar admitted that he did not receive sick pay from the Respondent if he was unwell and did not have to put in a sick note. Mr Haggar also gave evidence that he set his rate of pay but in a fairly casual way in that he would mention a pay rise to the Respondent and Mrs Duffy would then set a new rate of pay which he would then agree to. It was acknowledged by both parties that Mr Haggar could work for other people whilst he worked for the Respondent. Mrs Duffy said that she always knew that he did this and she had no objections at all, indeed she had proposed him to other businesses who had expressed a need for assistance with their bookkeeping. Mrs Duffy added that this was consistent with Mr Haggar being a freelance bookkeeper. Mr Haggar admitted that he considered himself to be self-employed in the other bookkeeping posts that he held and that in each of those jobs he set his fee which was paid directly to him and no deductions were made from these fees for ITIS or Social Security.

15. The Tribunal noted some confusion in the evidence from Mrs Duffy regarding the use of the terms ‘employee’ and ‘independent contractor’ and it was apparent that Mrs Duffy was not clear at all regarding Mr Haggar’s status at times and the difference between the 2 roles. Mr Haggar gave evidence that after 9 years of work for the Respondent, ‘he had a level of expectation’ and considered himself ‘to be a key member of staff’.

THE LAW 16. Article 1A(1)(b) of the Employment (Jersey) Law 2003 (‘the Law’) describes an ‘employee’ as someone who is employed by an employer. An ‘employer’ is defined in Article 1A(1)(a) as a person who employs another person. Clearly therefore the Law does not provide a comprehensive definition of an ‘employee’ and it is necessary to look at existing case law the common consensus of which is that there is no single and conclusive answer.

17. Over the years the Courts have developed various tests to distinguish a ‘contract of service’ (for an employed person) from a ‘contract for services’ (for a self-employed person). These tests are as follows: (i) the control test (ii) the integration or organisational test (iii) the economic reality test (iv) the multiple test 18. The control test is based on the amount of control an employer exercises over the work of another, based on the premise that an employer is likely to control the hours of work of an employee, the pay of that employee, the holidays taken and the method of working. Whereas an independent contractor will retain control over all of these factors because, in fact, that person works for himself and is just providing his services to the employer for a fee.

19. The integration test is based upon an assessment of the extent to which the employee was integrated into the employer’s organisation, for example, does the worker enjoy the same benefits of the other employees, is he subject to the employer’s disciplinary process and so on.

20. The economic reality test is based upon the alternative view of the integration test – just how independent is the worker of the organisation that he is working for? The question to be asked here is, is this person performing the services as a person in business on his own account? See Market Investigations Ltd v Minister for Social Security 1969 2 QB 173, per Mr Justice Cooke.

21. However modern employment relationships are often not clear cut. It is not surprising to find that many independent contractors for example are subject to stringent controls on their activities by their clients when they are working for them and many employees are subject to little day to day control by their employers. Accordingly the modern approach to determining employment status involves a consideration of all these factors and this is known as the multiple or mixed test.

22. It was established in Ready Mixed Concrete (South East) Ltd v Minister for Pensions and National Insurance 1968 1 AER 433, QBD, that the following 3 questions must be asked: (i) did the worker agree to provide his or her own work and skill in return for remuneration? (ii) did the worker agree expressly or impliedly to be subject to a sufficient degree of control for the relationship to be one of master and servant? (iii) were the other provisions of the contract consistent with it being a contract of service?

23. It is important that the Tribunal does not adopt a checklist approach to the employment relationship by weighing up each of the factors as listed in the first part of this decision as being indicative of employment or not. Instead the Tribunal must, ‘consider all aspects of the relationship, no single one in itself being decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account’, per Sir John Donaldson MR in O’Kelly and ors v Trusthouse Forte plc 1983 ICR 728.

24. In any event every employment contract must have at its heart an ‘irreducible minimum of elements’ in order to exist, that is to say control, mutuality of obligation and personal performance: Carmichael and anor v National Power plc 2000 IRLR 43. With regard to control it is necessary for there to be some element of direct control over what the worker does by the employer so that the employee is subject to the employer’s orders and directions. In respect of mutuality of obligation, the parties must be under some sort of obligation to each other. In a contract of service this is usually expressed as being an obligation on the employer to provide work and an obligation on the employee to accept and perform the work offered. Finally there must be some obligation of personal service upon the employee and any power of delegation must be very limited. THE TRIBUNAL’S DECISION 25. It is clear that over the 9 years that Mr Haggar worked for the Respondent an element of routine had entered the relationship: both parties knew the work that Mr Haggar had to do and expected him to get on with it in a quiet, routine manner. Mr Haggar’s chose the hours he worked and the Respondent had no objection. It was clear that Mr Haggar’s opinion was sought on some subjects and that he had an intimate knowledge of how the Respondent’s business worked. In turn Mr Haggar was entrusted with the

business’ keys and his work was clearly not interfered with or checked by the Respondent; he even paid himself for the hours he said that he worked and he issued himself with a pay slip without recourse to the directors. Clearly, Mr Haggar was part of the furniture but the question remains was he employed or working for his own account? The facts are clear that until 2007 Mr Haggar considered himself self employed as up to that date he paid his own social security contributions at a self employed rate. The Tribunal is of the opinion that that status continued to at least 2009 when Mr Haggar received his first ‘contract of employment’ from the Respondent. It is only after that date that the position becomes unclear. The Tribunal heard evidence that the inclusion of Mr Haggar on the Respondent’s Social Security return as an employee was an arrangement put in place for the convenience of Mr Haggar and the contract of employment issued in 2010 was given to him in order that this unusual arrangement should not be noted by the Social Security Inspection. The fact that this contract was the same as the one issued in 2009 does not alter the fact that the contracts were issued only to support the arrangement and not to represent the fact that Mr Haggar became an employee at this point. However in April 2010 Mr Haggar asked for a pay rise and confusingly it was agreed that, instead of paying him at a higher rate, the Respondent would henceforth not seek reimbursement from him of the employer’s social security contribution on the monies he earned and Mr Haggar could benefit in that way. Therefore if Mr Haggar was an employee at all, such status only commenced at that point.

26. As stated above there is little doubt that Mr Haggar was fully integrated into the Respondent’s business. The fact that Mr Haggar did not go to staff parties is meaningless as such attendance is rarely compulsory. The fact that Mr Haggar did not attend staff meetings also does not assist the Tribunal as these meetings involved operational staff and he worked in the office, so they did not affect the conduct of his work at all. The fact that Mr Haggar was given an annual bonus shows that his contribution to the success of the business was valued but nothing more. The Tribunal has paused to consider Mr Haggar’s paid leave arrangement with the Respondent as that is an unusual feature in an independent relationship, but Mr Haggar gave evidence that he has similar arrangements in other jobs where he considers himself to be self employed so the Tribunal concludes that perhaps Mr Haggar is skilled at negotiating this benefit and it does not automatically point to an employed status. The Tribunal heard evidence that Mr Haggar issued himself with a payslip throughout his employment – even when he considered himself to be self employed – so the existence of this document does not assist the decision. It was an acknowledged fact between the parties that Mr Haggar worked for other people as a freelance bookkeeper. Mr Haggar also gave evidence that he never issued invoices for his

services to any of his clients – even when he considered himself to be self employed in the relationship, so the fact that Mr Haggar seems to have arranged for the Respondent to pay him personally but subsequently accounted for his income tax to the authorities through his limited company is no different to any other business that Mr Haggar had a relationship with. Although it was clear that Mr Haggar valued his job with the Respondent, as he was certain that he would not have changed his hours or days with the Respondent without seeking the prior approval of Mrs Duffy; the Tribunal considers that this does not indicate that he was employed either, as it is perfectly reasonable for an independent worker to be loyal to a particular longstanding client.

27. The issue of control is interesting in this relationship. Mrs Duffy was quite clear that she had no control over Mr Haggar’s holiday dates and in fact he did not dispute this as there appeared to be an assumption by him that his holidays over Christmas and New Year suited the Respondent – he certainly does not seem to have asked if they were acceptable, otherwise he would have been aware of the inconvenience to Mrs Duffy. It is also clear that Mr Haggar worked completely alone in the performance of his duties, especially with regard to the payment of his wages, and his work was not checked by the Respondent. The Tribunal notes that the evidence indicated that Mr Haggar always informed the Respondent that he needed to increase his fees; no evidence was heard that the Respondent proposed an increase first. It was also Mr Haggar’s idea that the Respondent should treat him as an employee for Social Security purposes in order that the amount of his contributions should decrease. Further, it is important to note that Mr Haggar was reluctant to do some work involving another business interest when it was given to him by Mrs Duffy. The exchange of notes between them indicates that Mrs Duffy gave him an instruction to do the work but the evidence heard and the tone of Mr Haggar’s note in reply shows that Mr Haggar was still unwilling to do this extra work without charging the time

spent on it separately to that other business. This indicates that Mr Haggar was firmly in control of the work he undertook for the Respondent and saw lines of division in his tasks. He also clearly contemplated the other business as a separate client for his bookkeeping services. An employee is expected to do the work given to him by his employer – he may complain that he may not have time to undertake that work in the time allotted to him but he does not consider himself entitled to refuse to do it at all as Mr Haggar did in this case. The Tribunal has also noted the evidence given by Mrs Duffy, which was not disputed by Mr Haggar, that when she informed him that they were letting him go, he answered that, ‘it was OK, as he was self employed anyway’.

CONCLUSION 28. The Tribunal concludes that whilst all the circumstances in this case indicate that Mr Haggar was firmly integrated into the Respondent’s business, Mr Haggar’s arrangements for Income Tax and Social Security purposes make the Tribunal doubt if Mr Haggar has ever considered himself to be employed by the Respondent. The Tribunal believes that Mr Haggar was extremely disappointed that his arrangement with the Respondent was terminated and following a period of reflection realised that he could attempt to highlight the unusual elements of this working relationship so that it appeared that he was employed by the Respondent and therefore eligible for a redundancy payment and a potential unfair dismissal award. The evidence points to the fact that all the terms of Mr Haggar’s appointment were negotiated by him in order to be advantageous or convenient to him. However the fact remains that Mr Haggar remained in control of his working environment throughout his relationship with the Respondent and for that reason the Tribunal finds that Mr Haggar was not an employee of the Respondent.