Employment appeal tribunal rules contractor 'not an employee'
Hewlett Packard has won its appeal against an employment tribunal judgment which found that an independent IT contractor had been unfairly dismissed by the company. The judgment from the appeal finds the contractor was 'not an employee of the company' and has consequently caused further uncertainty regarding the interpretation of 'employment status.'
IT contractor, Martin O'Murphy, had worked for Hewlett Packard through his company, Circle Technology Ltd., for six years. In 2000 his contract was terminated, at which point he claimed unfair dismissal against his client.
As Mr O'Murphy had worked through his own limited company as an independent contractor, HP argued that because he had never been employed by the company he consequently could not be unfairly dismissed.
Mr O'Murphy would, according to legal experts, have met the majority of the criteria necessary to be included within IR35.
The ruling has also re-ignited contractors' arguments that if they are not entitled to the same benefits and protection as employees then it is wrong for the Inland Revenue to attempt to tax them as such.
Hewlett Packard has released the following statement: "The Tribunal found no direct contract existed between Hewlett-Packard and Mr O'Murphy, and that he could not therefore be their employee. Hewlett-Packard pursued this action as it involved an important principle of employment law relating to contractors which would have a significant impact on employers in the IT and other industries. The ruling serves to bring a level of certainty for both employers and contractors."
Tarlo Lyons, a leading IT law specialist, claims that the ruling could make it extremely difficult for the Government to treat independent contractors as employees of the firms they work for despite the fact they seem to fit all of the criteria for falling into the scope of IR35.
The Confederation of British Industry and the Institute of Directors have both voiced fears that the ruling could increase contractors' rates. Employers recently forced to cut the number of contractors they use are expected to welcome the news as successful claims for unfair dismissal against them now seem less likely.
The Inland Revenue has said that decisions by Employment Tribunals are not binding for tax purposes and that it would not change its policy until a test case reached the Court of Appeal.
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Richard Powell, UKTECH