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Court of Appeal rules on definition of ‘worker’

19th November, 2012

Some employment rights are conferred only on employees, whereas other rights are available to a wider category of workers, which includes but is not limited to employees. The overlap in terms of definition is a common area of confusion. In the case of The Hospital Medical Group Ltd (“HMG”) v Westwood [2012] EWCA Civ 1005, the Court of Appeal has ruled that a general practitioner, Dr Colin Westwood, who carried out minor surgery as a private contractor was correctly categorised as a worker for the purposes of legislation regarding holiday pay and unlawful deductions from wages. HMG operated cosmetic surgery clinics and engaged Dr Westwood to perform minor operations, particularly hair transplant procedures under an agreement which defined his role as that of a “self-employed independent contractor”. His remuneration was calculated as a percentage of the company’s income from the patients he treated. He performed this role for HMG as a sideline to his main employment, which was as the senior partner of a medical practice. After the agreement was summarily terminated, Dr Westwood pursued claims for holiday pay and unlawful deductions from wages.

The Employment Tribunal ruled that he was an independent contractor and because he carried on his own business he was not an employee. It was found that his work had been done for HMG and its customers and HMG was not his customer. Accordingly, he was held to be a worker under section 230(3)(b) and his claims succeeded. He was thus entitled to a substantial sum in respect of unlawful deductions from his pay and accrued holiday pay. HMG appealed against this decision. However the original decision was upheld by the Employment Appeal Tribunal. HMG submitted that if Dr Westwood was carrying on business on his own account, it had to be regarded as his client or customer, and the tribunal was wrong to treat the status exception in s.230(3)(b) as an additional hurdle. Permission to appeal against the decision of the Employment Appeal Tribunal was granted so that the Court of Appeal had an opportunity to consider the matter and provide some clarity as to the way in which the relevant law should be construed and applied.

In the Court of Appeal, Lord Justice Kay said that the issue of whether the role Dr Westwood performed for the company brought him within the statutory definition of a worker under Section 230(3)(b) of the Employment Rights Act 1996 was “fact sensitive” and depended upon the nature of the role and the terms of his agreement with the company. In the Court of Appeal’s view, although Dr Westwood was not employed by HMG, he had been contracted specifically and exclusively to carry out hair restoration surgery on HMG’s behalf and HMG could not be seen as “just another purchaser” of Dr Westwood’s professional services. Even though Dr Westwood was in business on his own account, HMG described him as “one of our surgeons” in its marketing material and he was clearly an integral part of its business. The Court of Appeal found that the services provided by Dr Westwood did bring him within the definition of a worker for the purposes of the Employment Rights Act 1996 and HMG’s appeal was therefore dismissed. The court considered the obiter comments of Aikens L.J. in Autoclenz Ltd v Belcher [2009] EWCA Civ 1046, [2010] I.R.L.R. 70 concerning section 230(3)(b). Aikens L.J. had stated that there were three requirements:

  1. The worker was an individual who had entered into or worked under a contract with another party for work;
  2. The individual undertook to perform the work personally; and
  3. The other party did not have the status of a client or customer of the individual carrying on a business.

This decision is likely to have wide-ranging cost implications for public sector business which engage self-employed individuals. For further advice or information in relation to the definition of a worker, please contact Claire Brook on [email protected] or on 01244 405575.

 

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