Independent Contractor or Employee-the Crucial Significance in an Unfair Dismissal Case

independent-contractor-employee

When a person brings a claim for unfair dismissal under the unfair dismissal legislation, there is one essential proof that they must establish at the outset: they must prove they were an employee.

In most cases this is clear and is not a problem.

But if the employer can show that the person was an independent contractor and not an employee, then is is “game over” and the case cannot go ahead as an unfair dismissal case.

You would imagine by now that the law surrounding whether someone was an employee or independent contractor, that is self employed, or not would be clear.

But this question continues to be litigated in the Employment Appeals Tribunal and the Courts.

This occurred again in a High Court case in May, 2014-Murphy -v- Grand Circle Travel [2014] IEHC 337 .

Sabina Murphy had been dismissed from her job with Grand Circle Travel and brought a case for unfair dismissal to the EAT. It decided that she was not an employee but an independent contractor and found against her.

Murphy appealed her case to the Circuit Court and was awarded compensation of €50,900 plus costs.

Grand Circle Travel appealed this decision to the High Court and central to their case was an independent contractor agreement signed by both parties.

Murphy claimed she was pressured into signing this agreement without independent legal advice but the High Court judge found it difficult to believe that someone who had conducted her case so well as a lay litigant could have been cowed into signing the agreement:

I do not readily see a lady who has sturdily asserted her rights before the Defendant and the legal system meekly assenting to the signed endorsement of a document expressly purporting to commit her to a regime fundamentally at variance with her perception of her engagement already then over several months.

Justice Moriarty, in coming to his decision, stated:

I have carefully considered all the matters which seem to me to throw light upon the nature of the relationship between the parties, including any documentation purporting to record that nature, in addition to correspondence and memoranda relating to daily dealings during the three seasons of engagement, and documentation recording renumeration and other financial dealings between them. It is well settled from the Irish and English case-law cited that controversies of this nature can rarely be resolved by an aggregation of documentation all pointing utterly unequivocally to one conclusion or the other.

I have come to the view that the overall probabilities, including my feeling that the Plaintiff’s work over the three years involved a degree of engagement by tourism entities other than the Defendant in excess of the small incidence she referred to in evidence, warrant a finding that the relationship was that of an independent contractor.

Read the full decision of the High Court here.

Comment

Whether someone is an employee or independent contractor is, therefore, not a simple academic argument: it is vital in determining the outcome of many unfair dismissal cases.

Factors to Consider

Factors which will be taken into account in deciding whether someone is an independent contractor or an employee will include:

  • Control-what is the degree of control over the independent contractor/employee?
  • Can he set his own holidays?
  • Can he get someone else to stand in for him?
  • Can he sub-contract the work?
  • Must he do the work? Has he a choice?
  • Has he more than one client?
  • Who is responsible for the tax affairs of the person doing the work?

These are the types of questions that will be looked at when a decision maker-WRC, Labour Court, Civil Court-will look at in making a decision.

Clearly, the decision has major consequences for both the “employer”/person who engaged the services, and the person who performs the work/service.

Do you need an independent contractor agreement/contract? If so, contact me.

Avoid This Costly Mistake in Your Employment Settlement Agreement

settlement-agreement

I nearly threw up my porridge when I read of this case.

Joan Healy and Michael Healy against Bia Ganbreise Teoranta (full decision here).

This case involved the effectiveness of a settlement agreement to prevent future claims arising from the employment.

This is a common type of agreement used to settle many employment related disputes.

It is also used when making an employee redundant and intends to provide protection for the employer.from future claims by that employee.

In this case the appellants, Joan and Michael Healy, sold their business to company F in 2008 and commenced working with F.

In September 2010 the Healys issued Circuit Court proceedings against Co. F claiming damages for breach of contract for failure to pay each of the appellants certain wages.

In 2011 the Healys compromised their Circuit Court claim after their employment had ceased with F and they were offered new employment with X, which with F had bought the entire share capital of A, a subsidiary of F.

When they compromised their claim the settlement agreement contained a “full and final settlement” clause which is common in these types of agreement. The settlement sum was €31,750 in respect of unpaid wages for a 2 year period.

In 2012 X placed the Healys on a temporary lay off. They in turn served a RP9 form claiming  redundancy payments from X.

X  informed the Healys that their positions in X were redundant and no suitable alternative positions were available.

In July 2012 the Healys initiated appeals under the Redundancy Payments Acts with the Tribunal, each appellant seeking a redundancy lump sum payment from the respondent.

The respondent contended that the Employment Appeals Tribunal had no jurisdiction to hear the appeals under the Redundancy Payments Acts 1967 to 2007 by virtue of the settlement agreements, in particular by virtue of clauses 7 &13 thereof.

X also contended that, in any event, the appellants did not have the requisite two years’ service to entitle them to a redundancy lump sum payment.

Section 51 of Redundancy Payments Act 1967

51.—Any provision in an agreement (whether a contract of employment or not) shall be void in so far as it purports to exclude or limit the operation of any provision of this Act.

However, the Tribunal accepted that it was well accepted that this does not preclude severance agreements or agreements compromising claims containing such exclusions.

The settlement agreements in this case contained these 2 clauses:

  1. Clause 7 The Employee agrees that the terms of the Agreement provide a full and final settlement of the proceedings and all or any claims that he/she has or may have against the company and /or the employer and/or any of their respective group of companies, officers and/or employees agents and shareholders, howsoever arising, including, without limitation, arising out of or in connection with the employment of the Employee of the company and /or the employer and /or any of their respective Group companies, and the employee hereby fully and finally releases all such entities from all or and any such claims, whether in statute or common law in tort, in equity or otherwise howsoever arising
  2. Clause 13 This Agreement shall enure to the benefit of and be binding upon the respective parties hereto and their respective personal representatives and successors.

In Hurley v the Royal Yacht Club [1997] ELR 225 Buckley J.in the Circuit Court considered a waiver clause in an agreement in the context of the Unfair Dismissals Acts and having concluded that there must be informed consent to such a waiver later in his judgement set out what this requires:

         “I am satisfied that the applicant was entitled to be advised of his entitlements under the employment protection legislation and that any agreement or compromise should have listed the various Acts which were applicable, or at least made it clear that they had been taken into account by the employee. I am also satisfied that the applicant should have been advised in writing that he should take appropriate advice as to his rights, which presumably in this case, would have been legal advice. In the absence of such advice I find the agreement to be void”

This statement of the law was applied by Smyth J. the High Court in Sunday Newspapers Ltd v Kinsella and Brady [2008] ELR 53.

In this case the Tribunal accepted that the Healys were legally advised and gave their informed consent to the waiver.

However, Clause 7 of the settlement agreements neither lists the various Acts under which the appellants might have waived their entitlements nor does it make clear that they had been taken into account by the appellants.

The unsworn and uncontested evidence on behalf of the appellants was that the unpaid wages of the appellants was the only issue discussed in the negotiations leading to the settlement agreement. This fact is corroborated by a number of other uncontested facts: the settlement figure of   €31, 750.00 was the precise amount of the unpaid wages owing to the appellants; payslips dated 30 July 2011 in this amount with the usual deduction made therefrom were issued to each of the appellants and the respondent’s letter of 23 September 2011 to the Office of the Revenue Commissioners confirming that that the payment was in respect of a number of weeks worked in 2009-2011

The Tribunal found  that there was no break in the appellants’ employment between 7 July 2011 and 16 July 2011 and that on the purchase of the entire share capital of Co A by Co X in May 2011 the rights of the employees remained unaffected.

Similarly, a change of company name does not affect those rights.

Accordingly, for the above reasons the Tribunal finds that the appellants did not waive their statutory entitlement to a redundancy lump sum payment, their employment had been continuous from the time they became employees on 8 July 2008 until it was terminated by reason of redundancy on or around 22 March 2012.

Conclusion

I have come across standard “template” type forms which employers are using when they are paying redundancy to an employee.

This case shows the importance of having a properly drafted settlement agreement in settling any claim or paying off an employee by way of redundancy.

Bullying and Workplace Stress as a Personal Injury-a Notable High Court Decision in 2014

workplace-stress

I regularly meet employees who complain of being stressed. And who want to make a claim against their employer as a result.

But it’s not quite that straightforward.

Because of the difference between occupational stress and workplace stress.

Workplace stress is actionable. Occupational stress isn’t.

A March, 2014 judgment in the High Court in the case Glynn v Minister for Justice Equality and Law Reform (2014 IEHC 135) is well worth looking at because it deals with workplace stress, bullying, and personal injury claims in the workplace.

The claimant was a civil servant and worked in Gort Garda station in Co. Galway. Her claim was that she suffered stress as a result of pressure placed on her in 2005 to complete monthly accounts for the Garda station.

Prior to this incident there were other incidents-not getting on with a Garda who she felt was constantly checking on her-going back to 1996 and she had taken sick leave in November of that year.

She returned on a 3 day week in 1997.In 2004 she was promoted to the position of Finance Officer.

In May, 2005 she worked on the accounts for 4 days during which she suffered considerable stress.

She then raised with Garda Headquarters her concerns about a cheque for expenses in favour of the Superintendent. She claimed the Superintendent told her he would take her job from her if she didn’t do what he told her.

She then went on sick leave for 6 months and returned when the Superintendent had retired from the station.

In cross-examination the claimant admitted that she had suffered from depression prior to the incidents complained of. She also had failed to contact the Employment Assistance Services of the Department of Justice in 1996 re her bullying allegation.

The defence case was that there was no bullying and the Superintendent had no issues with her, nor was there a problem with the expenses cheque.

The Legal Issues and Principles

The High Court, Justice Kearns, observed:

“…..bullying, workplace stress and occupational stress are all things which, conceptually at least, are quite different from each other, though on occasion they can overlap and coincide. Occupational stress is not actionable given that occupational stress is something which every employed person may experience at some stage of his or her working life and can occur for reasons quite distinct from and unrelated to bullying.…”

The Court noted that workplace stress can be actionable if certain criteria are met. However it is different from bullying insofar as it lacks the degree of deliberateness associated with bullying.

“Workplace stress can also be the result of negligence where excessive demands are made of an employee or where complaints about shortcomings in the workplace go unheeded. It lacks however that degree of deliberateness which is the hallmark of bullying”.

The Court said the following question should be asked in relation to the claim of bullying:

“whether the behaviour complained of, by reference to an objective test, imports that degree of calibrated inappropriateness and repetition which differentiates bullying from workplace stress or occupational stress“

It also referred to the legal definition of bullying set out in Industrial Relations Act 1990 (Code of Practice Detailing Procedures for Addressing Bullying in the Workplace) (Declaration) Order 2002 (S.I. No. 17 of 2002) viz
“repeated inappropriate behaviour, direct or indirect, whether verbal, physical or otherwise, conducted by one or more persons against another or others, at the place of work and/or in the course of employment, which could reasonably be regarded as undermining the individual’s right to dignity at work. An isolated incident of the behaviour described in this definition may be an affront to dignity at work but, as a once off incident, it is not considered to be bullying.”

The Court noted that this definition required an objective test to decide whether bullying had occurred.

The Court referred to Quigley v Complex Tooling and Moulding Ltd [2009] 1 I.R. 349 and the acceptance by the Supreme Court in that case of the definition of bullying or harassment at work as set out in S.I. No. 17 of 2002 above.

Justice Kearns observed that the relevant legal principles for workplace stress were laid down in Berber v Dunnes Stores [2009] E.L.R. 61 (which accepted the practical propostions set out in the 2002 case Hatton V Sutherland [2002] 2 All E.R.1).

These legal principles are:
1. The ordinary principles of employer’s liability apply.

2. The threshold question is whether the kind of harm to the particular employee was reasonably foreseeable: this has two components (a) an injury to health (as distinct from occupational stress) which (b) is attributable to stress at work (as distinct from other factors).

3. Foreseeability depends upon what the employer knows (or ought reasonably to know) about the individual employee. Because of the nature of mental disorder it is harder to foresee than physical injury, but may be easier to foresee in a known individual than in the population at large. An employer is usually entitled to assume that the employee can withstand the normal pressures of the job unless he knows of some particular problem or vulnerability.

4. The employer is generally entitled to take what he is told by his employee (including what he is told by the employee’s medical adviser) at face value unless there is good reason to think to the contrary.

5. The indications of impending harm to health arising from stress at work must be plain enough for any reasonable employer to realise that he should do something about it.

6. The employer is only in breach of duty if he has failed to take the steps which are reasonable in the circumstances, bearing in mind the magnitude of the risk of harm occurring, the gravity of the harm which may occur, the cost and practicability of preventing it, and the justifications for running the risk.

7. An employer can only reasonably be expected to take steps which are likely to do some good: the court is likely to need expert evidence on this.

8. If the only reasonable and effective steps would have been to dismiss or demote the employee the employer will not be in breach of duty in allowing a willing employee to continue in the job.

9. In all cases it is necessary to identify the steps which the employer both could and should have taken before finding him in breach of his duty of care.

10. The claimant must show that the breach of duty caused or materially contributed to the harm suffered. It is not enough to show that occupational stress has caused the harm.”

The Decision

The High Court in this case held that 2 things exercised the plaintiff:

1. a sense of injustice that she, as a civilian employee, was not being paid the same rate as a Garda colleague and

2. the working conditions she had to work in in 1996 (in a portacabin/temporary accommodation).

The Court also observed that there was no acceptable explanation by the plaintiff as to why she did not disclose a prior history of depression and accepted that the Superintendent’s evidence was reliable and credible.

Justice Kearns stated that he could not see that anything in the behaviour of the Garda colleague or Superintendent constituted bullying or harassment.

Furthermore

“the events upon which the plaintiff relies to mount her claim turn on the events of a few short days in May, 2005 a time span more identifiable with a once-off or single incident rather than the kind of ‘repetitive’ and ‘inappropriate’ conduct which constitutes the wrong of workplace bullying or harassment“.

The court concluded that the plaintiff had not made a case for bullying or workplace stress causing or contributing to foreseeable injury or damage. She had no complaints of workplace stress for the eight years between 1997 and 2005.

Justice Kearns went further and said

“Even if mistaken on these issues I would also be of the view that the plaintiff failed to demonstrate that her stress was attributable to the matters she complained of in this case. She had a prior history of stress and depression which was not disclosed until it was uncovered through the discovery process. I believe any subsequent stresses suffered by the plaintiff were attributable both to life events (including the tragic death of her nephew and the death of her father) and, in 2005, to occupational stress only”.

You can read the full High Court decision here.

Employees-the Facts You Should Know About Employers’ Insolvency

employers-insolvency

Employers’ insolvency.

Disaster for you as an employee.

An employer’s insolvency causes huge problems for employees, especially in relation to arrears of pay, holiday pay, sick pay, and notice entitlements.

The insolvency can fall into one of a number of categories e.g. has a receiver, liquidator, or examiner been appointed?

The appointment of an examiner or a receiver does not immediately terminate the employment relationship.

The appointment of an official or provisional liquidator may lead to termination but not in all circumstances.

So how are employees protected in a situation of an insolvent employer? Who pays arrears in wages, holiday pay, and other pay related entitlements?

The Protection of Employees (Employers’ Insolvency) Act 1984 provides that employees may claim for arrears in pay, holiday pay, pay in lieu of statutory notice entitlements, and certain other employment related entitlements from an Insolvency Payment Scheme.

The scheme also covers awards made to employees for unfair dismissal, minimum wage, working time, discrimination, and certain unpaid pension and Prsa contributions.

These claims are generally made through the receiver or liquidator, depending on the circumstances, who processes them through the Insolvency Payments Section of the Department of Social Protection.

Redundancy Payments

If the employer is unable to pay statutory redundancy payments the Redundancy Payments Scheme will pay out. This is a different scheme from the Insolvency Payments Scheme even though both are funded from the Social Insurance Fund.

Insolvency Payment Scheme

For an employer to be covered by the Insolvency Payment Scheme he must be insolvent as defined in the Protection of Employees (Employers’ Insolvency) Act 1984.

The 4 broad categories are
1. bankruptcy
2. liquidation
3. receivership
4. deceased insolvent employer

However an employer that ceases trading but does not go into official liquidation is not covered. The employer must become insolvent within the terms of the Act.

Payments Made Under the Scheme

There are limits in respect of payments for sick pay, holiday pay, pay in lieu of statutory notices, and arrears of pay. The maximum weekly rate is 600 euro per week with a maximum of 8 weeks.

Generally the Scheme only covers entitlements arising in the 18 months prior to insolvency or termination of employment.

The payments are taxable with PAYE and PRSI being deducted by the receiver or liquidator.

If a claim is disallowed the employee may make a claim to the Workplace Relations Commission. This appeal is supposed to be made within 6 weeks of the decision although the EAT can extend this at its discretion.

A payment made to an employee under the Insolvency Payments Scheme does not prevent an employee from making a claim to the Redundancy Payments Scheme.

Injunctions and the Contract of Employment in Ireland-What You Need to Know

 

employment injunction

What is an injunction? It is a Court order restraining a person from carrying out a specific act or requiring him to perform such an act.

 

In employment law the use of an injunction where there is a threatened or actual dismissal has increased in the last few decades. And its use is not confined to only dismissal situations.

They have also been sought in relation to sick pay, pickets, advertising positions, ending suspensions etc.

However the increasing use of the employment related injunction must be viewed against the backdrop that Courts are very reluctant to order specific performance of a contract of personal service.

Prohibitory or Mandatory?

The most common form of injunction sought is a prohibitory injunction seeking to restrain the employer from doing a specific act.

An interim or interlocutory injunction is generally sought on an ex parte basis to preserve the status quo in a dispute until the action can be tried in Court (interlocutory) or until a further order can be made by the Court prior to the hearing (interim). It is generally applied for where the matter is particularly urgent.

Principles governing the granting of an injunction

The principles were summarised in Campus Oil v Minister for Industry and Energy [1983] and are

  1. That there is a fair or bona fide issue to be tried-in other words the claim must not be frivolous or vexatious;
  2. If there is a bona fide issue to be tried the Court must then consider whether damages would be an adequate remedy or not. If so the Plaintiff will be required to give an undertaking as to damages, that is, in the event of the injunction being refused the Plaintiff will pay damages to the person injuncted;
  3. That the balance of convenience favours the granting of the injunction rather than its refusal.

As stated above, Courts will refuse to order the specific performance of a contract of employment. Because it would be impossible to supervise and because damages should be an adequate remedy. However there are exceptions but there must be mutual trust and confidence between employer and employee.

When will Courts grant an injunction in an employment law case?

Over the last 30-40 years the Courts have affirmed the traditional position that damages are an adequate remedy in cases of purported wrongful dismissal. However case law has shown that injunctions may potentially be granted in the following 6 situations:

1. where the dismissal is in breach of contract eg the absence of the contractual notice period or the absence of a contractual disciplinary process;

2. where the dismissal is ultra vires;

3. where the dismissal is in breach of fair procedures;

4. where the purported grounds for dismissal are absent eg alleged redundancy;

5. where the dismissal is in breach of a constitutional right;

6. non dismissal injunctions eg preventing the advertising of a position pending the trial of the action.

Wrongful dismissal at common law and statutory unfair dismissal

(3) Where proceedings for damages at common law for wrongful dismissal are initiated by or on behalf of an employee, the employee shall not be entitled to redress under this Act in respect of the dismissal to which the proceedings relate.(Section 15 Unfair Dismissals Act, 1977)

The employee must therefore choose between suing for damages at common law or claiming relief under unfair dismissals legislation. So the employee when seeking an injunction or declaration will not include a claim for damages for breach of contract in order to keep open the door to the unfair dismissals legislation.

Generally, injunctions are sought be employees on an ex parte basis, that is without notice to the other side. However where the application is unsuccessful the consequences for the employee can be serious on two significant grounds:

1. Court costs and

2. the fact that the employee’s application would have been predicated on the subsistence of the employment relationship-clearly this makes it difficult to then claim unfair dismissal at the Employment Appeals Tribunal.

If you are considering seeking a Court injunction in an employment matter, make sure to obtain professional legal advice first.