In October 2023 the Supreme Court has decided that the drivers in this case are employees.
The Supreme Court has issued an important decision in the long running case involving Domino’s Pizza delivery drivers. This is a decision which will have significant impact in other cases which involve the issue of whether an employee is an independent contractor or an employee.
The case is The Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza  IESC 24.
The background is the demand by the Revenue Commissioners in 2014 of €215,718 from Karshan (Midlands) Ltd t/a Domino’s. This demand from the Revenue taking the view that the drivers were employees, not self-employed, independent contractors.
Karshan (Midlands) Ltd t/a Domino’s appealed this decision to the Revenue Appeals Commissioner who agreed that the drivers were employees.
The company then appealed to the High Court who agreed with the Revenue Commissioners that the drivers were employees.
Karshan then appealed to the Court of Appeal who overturned the High Court decision and held that the drivers were self-employed, not employees.
The case was then appealed to the Supreme Court who have now determined that the drivers were employees. The Supreme Court have decided that the ‘mutuality of obligation’ test, which has long been relied upon in the courts when it comes to these types of disputes, has been misinterpreted in the courts.
Mutuality of obligation
It has always been understood that the mutuality of obligation principle, as set out in the decision of Minister for Agriculture v Barry  IR 215, was as follows:
“The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer…. If there is no mutuality of obligation it is not necessary to go further: whatever the relationship is, it cannot amount to a contract of service.”
Since the High Court case of Minister for Agriculture v Barry  IR 215 it has been held up as a test to see if a worker was an employee or not-that is, is it a contract of service or a contract for services. If you did not pass this test, you were not an employee.
The Supreme Court has now decided that the test is not whether an employer is under an obligation to provide work, the obligation is to pay for the work.
“It cannot be disputed that a contract of employment can only arise where the putative employee agrees to provide their own work and skill to the employer. However, the contention that there could only be a contract of employment if the employer agrees to provide the employee with work is misplaced … It has been clear since the decision in Turner v Sawdon  2 KB 653 that the obligation of an employer may be to pay, not to provide work.”
The Supreme Court has now decided that the idea that the obligation must be continuing and ongoing is erroneous. It is possible for a worker to intermittently work for an employer and be considered an employee for those periods of work.
“it is clear from the decisions in McMeechan and Prater that where a worker works intermittently for an employer it is possible for the worker to be an employee for those periods when they are actually working. The fact that the employer has no obligation to offer further work, or that the worker is under no obligation to work if it is offered, does not prevent the agreement between them from being a contract of employment. However, it is also clear from Quashie that where there are no ongoing obligations of this kind, this will be a relevant factor in considering whether the relationship insofar as the individual stints are concerned is one of employer/employee or not.”
The Supreme Court has now held that the mutuality of obligation test is not a threshold test, even though it is relevant in arriving at a decision as to whether the worker is an employee or not.
“The fact is that the term ‘mutuality of obligation’ has, through a combination of over-use and under-analysis been transformed in employment law from what should have been a straightforward description of the consideration underlying a contract of employment, to a wholly ambiguous label. That ambiguity has enabled it to morph from merely describing the consideration that must exist before a contract is capable of being a contract of employment, to its being presented as a defining feature that in itself differentiates a contract of service from a contract for services.”
Employee or self-employed contractor?
The Supreme Court in this decision has referred to the previous Supreme Court decision in the seminal Henry Denny case and has set out five questions that need to be addressed to determine the issue in any given situation:
- Does the contract involve the exchange of wage or other remuneration for work?
- If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?
- If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?
- If these three requirements are met the decision maker must then determine whether the terms of the contract between employer and worker interpreted in the light of the admissible factual matrix and having regard to the working arrangements between the parties as disclosed by the evidence, are consistent with a contract of employment, or with some other form of contract having regard, in particular, to whether the arrangements point to the putative employee working for themselves or for the putative employer.
- Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.
You will note that there are five questions set out above which need to be addressed. But the first three questions are tests which must be passed or questions 4 and 5 do not arise.
The decision also goes on to identify some factors which are incompatible with the contract of employment/contract of service:
“…the law makes it clear that the capacity to profit in a material way from their own skill, the need for the employee to invest significantly in their ability to undertake the work, and the requirement to bring tools or equipment to the task all lean against the existence of a contract of employment.”
The decision also flags up the question of control and states:
“It is appropriate to consider control again at this stage, as there will be cases in which it is so extensive as to point overwhelmingly in the direction of employment, just as there will be cases in which it is so attenuated as to push the agreement towards another type of relationship … it is not possible to separate the question of control from the question of whether the evidence points to the worker carrying on business on their own account.”
Domino’s pizza delivery drivers
Applying the five questions set out above to the Domino’s deliver drivers’ case the Supreme Court agreed with the Revenue Commissioners and Appeals Commissioner that these drivers were employees and not engaged in their own independent businesses.
It is worth noting that the drivers were given contracts in which it was set out four separate times that they were independent contractors. Thus, it is easy to see that what the written contract states is only one factor to be considered in these types of cases and is no determinative of the status of the worker.
The Supreme Court, in agreeing with the Appeals Commissioner, held that
“…the Commissioner was entitled to reach the conclusion she did. The drivers worked at and from Karshan’s premises wearing uniforms directed by it, conducting a critical part of its business, delivering in accordance with the directions of the managers, and advertising Karshan’s business as they were required to do. Their remuneration was fixed by Karshan, as was the rate at which they would be paid for each pizza delivery. They did this on foot of a contract which had the effect that they committed to do the work a week or so prior to their assignment and the employer was required if not to give them work then certainly to pay them for the rostered time. They brought little by way of personal investment to the activity and had but a very limited opportunity to increase the profitability of their work. They were controlled by Karshan, and they were not conducting business on their own account. The contract was one that envisaged personal service by them, with the facility for substitution on certain conditions, the substitutes being paid by Karshan and not by the driver originally rostered. The Commissioner was entitled to find that they were employees.”
The court also warned against trying to apply this decision across the so-called gig economy as each case must be decided on its own particular facts and circumstances.
Nevertheless the principles set out in this decision, including the five questions to apply, are an extremely useful guide for anyone grappling with the question of employee/independent contractor in any situation.
Here is the full decision of the Supreme Court.
To understand the background to this 13 year case read these posts: