IR35 Great Victory – then Judge Sends it Back

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Close to Victory

Contractors came very close to a victory that would have helped them as far as IR35 is concerned – or rather, the Inland Revenue breathed a sigh of relief in a related case.

The case was about determining Employee Status.

An applicant, Raymond Franks was suing Reuters for wrongful dismissal. He had been supplied by an agency to Reuters, initially on a temporary basis and afterwards on a permanent full time basis. He worked for Reuters on their Helpdesk from 1993 to 1999, when he was told by Reuters that his services were no longer required.

Whilst working at Reuters, he had been paid an agreed sum for the hours he worked, and his holiday pay was paid by the employment agency from fees it received from Reuters for his services.

He was not paid any sick pay.

Not Employed

Despite all this, a North London Employment Tribunal reached a decision that he was not employed by Reuters, citing Carmichael v National Power (1999) 1 WLR 2042 as the authority.

According to this, mutuality of obligation was a necessary condition of an employment relationship.

They rejected the fact that he had six years of service as an indicator that he was an employee.

They concluded that there was no mutuality of obligation, as at any time Mr. Franks could have told the agency that he no longer wished to work for Reuters, and the agency would have had to find him work elsewhere,

Nearly Giant Blow

If this Employment Tribunal verdict would have been upheld, then that could have blown a giant hole through IR35.

If this guy was not an employee, then which contractors would be? If he and Reuters had no mutuality of obligation, despite him working there for 6 years on a permanent basis, then who would be caught by IR35?

Even those contractors who had worked at the same site for 5-10 years would have been re-examining whether they were caught by IR35 or not.

Sent Back

However, the judges rejected this at the court of Appeal. They said that they were sending it back to the Employment Tribunal to instruct them to take account of the length of service that Mr. Franks had with Reuters as a factor in whether there was any Mutuality of Obligation, and whether he was an employee or not.

Of course, the Employment Tribunal may meet again, consider the judges‘ instructions, and then still say that Mr. Franks wasn‘t an employee.

However, if the Court had ruled that the Employment Tribunal were correct, that Mr. Franks was not an employee, despite his length of services, and that there was no mutuality of obligation between him and Reuters, then that could have brought a great deal more contractors outside IR35.

Shame!

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