Employee rights risks for freelancers

Contractors tempted to bring claims against end users on the back of recent employment tribunal rulings are putting themselves in financial jeopardy and are harming the freelancing community warns giant group, the contractor services group.

Some recent rulings have suggested that in certain instances they may have the same rights as employees.

According to giant group, recent debate about whether contractors may be entitled to sue end users, for example, for unfair dismissal has been prompted by a spate of recent tribunal rulings and trade union agitation over the proposed Agency Workers Directive.

No green light

Matthew Brown, Managing Director, giant group, said: "Recent cases have raised a few eyebrows but contractors shouldn't take them as a green light to bring claims against end-users.

"The outcome of one case is not necessarily any indication of how tribunals will rule on future claims, particularly when you consider the often idiosyncratic nature of contractors' individual working arrangements."

Apart from the high chance of future employment claims resulting in expensive failure, giant group warns that by bringing claims contractors risk drawing Revenue & Customs' attention, possibly resulting in a retrospective demand for unpaid national insurance and PAYE.

Matthew Brown said: "Logic dictates contractors can't be self-employed and employees simultaneously. It might only be a matter of time before we see truly joined up government, whereby claims by contractors for employment rights automatically trigger tax investigations.

"Contractors who try to bring claims ought to consider the impact their actions have on the wider freelance community."

One of the main reasons end-users engage contractors, giant group points out, is that they are not employees - the more contractors resemble employees, the less attractive they will become.

Muscat vs. Cable & Wireless

Muscat vs. Cable & Wireless was one of the first tribunal rulings that did not involve a low paid temp - Mr Muscat was a relatively well-paid telecoms contractor. However, he was a long-serving employee of Cable & Wireless, who left work on Friday as an employee and returned on Monday as a contractor. C&W even paid his incorporation costs. Following incorporation, he continued to be directed on a day-to-day basis, retained an employee number and so on.

Giant claims that Muscat v. Cable & Wireless was not a typical scenario. The case, which was heard earlier this year, said that even contractors engaged through their own personal service companies might, in certain circumstances, be deemed employees of the end client. However, according to giant, assuming all contractors have employment rights because of the Muscat case would be a mistake.

Matthew Brown said: "The 'evidence' that Mr Muscat was a disguised employee of C&W was fairly extensive. C&W made some fairly basic errors which few other end users are likely to repeat - especially now the courts have indicated precisely how they should not behave."

Agency Workers Directive

The stalling of the Agency Workers Directive also puts the employment rights issue in doubt. According to giant group, momentum is now gathering against the notion that contractors should have the same rights as employees.

The Agency Workers Directive has been in the pipeline for some time. It aims to provide protection for temporary workers, but there are fears that the UK's freelance community could be caught by the terms of the Directive.

The Agency Workers Directive (AWD) may now be substantially re-written, or even ditched altogether, in the wake of a major EU drive to cut Red Tape announced at the end of September.

Matthew Brown said: "The EU had been threatening to settle the employment rights issue once and for all but it looks as though the Lisbon Agenda, which set targets on economic deregulation and workforce flexibility in the EU, is again in the ascendancy.

"If the AWD rises from the dead it is likely to be in a diluted form. A number of member states, including the UK and Germany, are keen to ensure that the directive does not reduce the flexibility of their labour markets."