237: Construction workers held to be employees, not self-employed

In Harris and Kearny v Excel Brickworks Ltd, the Employment Tribunal has ruled that two construction labourers who had signed self-employment contracts were in fact employees.

Mr Harris had worked for Excel Brickworks Ltd as a site foreman for 17 years and Mr Kearny as a bricklayer for less than one year. They had both been required to sign Excel’s standard operative contracts which referred to them as self-employed contractors providing services. Mr Harris and Mr Kearny were subsequently both dismissed without notice and brought claims in the Employment Tribunal. A preliminary hearing was held to decide their employment status.

According to Excel that the claimants were self-employed, relying on the contract for services they had both signed. The contract stated that they could do whatever work they wished, refuse any offers of work, choose their hours and method of work, leave a site without permission, and send a substitute with similar experience and qualifications to carry out their work. The claimants were never paid sick pay or holiday pay and paid national insurance on a self-employed basis. They also occasionally took on other work.

The Employment Tribunal rejected Excels’s arguments, ruling that the contract did not reflect the practical reality of the working relationship. Having looked at all the facts, the Tribunal concluded that there was an employer / employee relationship between Excel and the claimants. For example, although the contract provided for a right of substitution, this was unworkable in practice due to site security and health and safety requirements. The right to provide a substitute had never been used and in reality would not have been acceptable to Excel. Excel also exercised a significant degree of control over when and how the claimants worked, and the Tribunal found that Mr Harris was integrated into its operations. Both claimants were part of a core group of workers who, in practice, could not turn down a job.

The Tribunal acknowledged that some factors pointed away from an employment relationship, including the wording of the contract, the claimants’ self-employment status for tax purposes, and the fact that they both undertook some work at weekends on their own account. However, the factors pointing towards an employment relationship far outweighed these factors.

This decision has potential implications for the construction industry as a whole, although it is only a first instance decision and is likely to be appealed by Excel. It is a reminder that Tribunals will look behind the written terms and the label given by the parties to their employment status in order to establish the factual reality. Particularly with the extension of IR35 to the private sector in April 2021, it is vital that employers review the status of all workers as soon as possible and check that written agreements reflect the practical reality of working arrangements. To do so will prevent further costs down the line if a worker applies to the Tribunal to achieve employment rights.