Employment Status – Self-Employed Hairdresser Held To Be Employee In Reality

Laws surrounding employment status

The law recognises a number of different employment statuses, including employees, workers and those who are genuinely self-employed – not all individuals who work for others are considered to be ‘employees’.

In determining the status of an individual, Employment Tribunals will consider a number of different factors and consider the reality of the situation and working arrangements in practice. This will often involve looking behind just the paperwork that is in place between the individual and the entity in question and examining the true nature of the arrangement in practice. The Tribunals are then required to carry out a balancing act in weighing up what ‘category’ an individual falls into.

The issue of employment status is important, as different statuses afford different levels of protection. For example, ‘employees’ enjoy wide ranging protections, such as the right not to be unfairly dismissed, maternity leave and redundancy pay, whilst workers and those who are self-employed have more limited employment rights.

Factors which point towards ‘employee’ status include:

• The company is under an obligation to provide regular work to the individual, who is under an obligation to make themselves available to do that work;
• The individual is required to provide their services personally;
• The individual is under the control of the company in terms of what they do, how they do it and when they do it, and facilities and equipment are provided in order to carry out their job;
• The individual is integrated into the company, for example they wear a uniform and are subject to company rules and procedures,; and/or
• The individual is paid a regular wage or salary and receives employment benefits, such as holiday or sick pay.

The issue of employment status has been hotly debated in recent years, particularly with the growth of the gig economy. Most recently, in the case of Gorman v Terence Paul (Manchester) Limited, a Tribunal ruled that a hairdresser who had entered into a self-employed arrangement with a salon was actually an employee in practice, giving her the right to bring claims for notice, holiday and redundancy pay, unfair dismissal and discrimination.

Facts of the case

Upon qualifying as a hairdresser, Ms Gorman entered into an independent contract for services with the salon, pursuant to which she worked as a self-employed hair stylist.

Despite the provisions of the contract that was in place, Ms Gorman was obliged to attend the salon to work between the hours of 8.45am to 6pm Monday to Saturday, with the exception of a Thursday when she worked 10am to 8pm. Whilst working, Ms Gorman was expected to conform to the standards of dress set by the salon at all times.

In addition, Ms Gorman was provided with products to use by the salon in order to carry out her role and the treatments she offered and the price of those treatments was determined by the salon. The salon described the clients and customers as Ms Gorman’s clients, however, in practice the salon decided the clients upon whom Ms Gorman would attend to and kept guard of its client lists and information very carefully, with Ms Gorman’s access to that information being restricted to the extent that if she needed any client information she had to ask the manager of the salon for it.

In the event that Ms Gorman could not attend work, she was not paid and any appointments she had booked for that day were handed to one of her colleagues to cover instead. The salon kept records of the hours that Ms Gorman worked as well as any holidays, and in the event that Ms Gorman wanted to take any time off, she had to request and give notice of this in advance and receive the salon’s permission before that time off could be taken. When Ms Gorman did attend work, she was paid one third of the money that was charged to the client for her work, with the salon retaining the remainder of the money for its overheads.

Decision

The Tribunal considered the provisions of the contract between Ms Gorman and the salon and the evidence of the factual circumstances in which Ms Gorman performed work for the salon. It held that the nature of the relationship did not depend solely on the contract that was in place and that the contract that was in place did not reflect the reality of the working arrangements that Ms Gorman was required to adhere to and the obligations and restrictions placed on her by the salon.

With the exception that Ms Gorman had to deal with her own tax matters, the Tribunal found that the salon exercised a significant degree of control over everything that Ms Gorman did during their opening hours and that in fact the relationship between the parties was one of employee and employer.

Comment

This case is the next in what seems to be a never-ending series of landmark cases regarding employment status and will have significant consequences for many working in the beauty and hairdressing industry, which is an industry known to have a high proportion of people working under supposed self-employed arrangements.

It serves as a vital reminder that contracts must reflect the day to day working arrangements in place and the true status of the individual in question. Whilst many individuals and companies prefer to have self-employed arrangements in place because of the greater flexibility and lesser responsibility for the company and the associated tax advantages for the individual, failure to assess and establish the correct employment status at the outset of the arrangement can be a very costly mistake for companies to make. Employment Tribunals and the Government have illustrated that they are keen to call out false self-employment and that the question of status goes much further than simply what the contract says.