This one is important since, if the chippy was right, you contractors would see a mile-long queue of subcontractors outside your door claiming employee holiday pay on top of the rate per square whatnot you agreed. Oh, there was nothing sneaky about Costello's claim; it was a nice try and he might easily have won. Contractors taking on self-employed tradesmen will have to watch out because in law, you might not be taking on a self-employed wallah at all; the bloke may turn out to be an employee.
Let me tell you the story. Costello first worked for the Wimpey subsidiary back in 1997. At that point, he entered into a formal labour-only subcontract. He completed that contract and moved on. In August 1999, the builder asked him to do some more work. A new contract wasn't drawn up this time. They just pressed on. The job was all done in February. That is the 32-week period. That's when he asked for his £1430 holiday pay. I bet the builder blinked hard.
Well, said Costello, I am classed as a "worker" under this newfangled working time thing. And if he is a worker as defined in those regulations, he gets his holiday cash.
He pointed to the definition of worker. It is not only an ordinary contract of employment that employees have but is also any other contract whereby the individual, such as Costello, undertakes to do or perform "personally" any work or services for an employer. Put shortly, if the chippy is "by way of business", he isn't a worker and doesn't come within the regulations, and doesn't pick up his holiday pay.
Well, now, was Costello a subbie? Was he in business? Was he in a contract for services? Was he first in a contract but by passage of time did he become a "worker", an employee?
If the chippy was right, you contractors would see a queue of subcontractors outside your door claiming holiday pay
First, how was Costello paid? Was it by way of business? He submitted invoices. They described the work and were met with payment. They did not refer to hours; they referred to work on particular house plots on each site. Costello paid tax as though he was a self-employed person and paid his own class two and four National Insurance contributions. Midland paid his travel expenses. The tribunal said it was not bound by the position taken in regard to tax arrangements. The Inland Revenue's views on Costello's status were irrelevant.
The tribunal's eye was then attracted to Costello's exposure to business risk. For example, if his work was bad or he damaged something, he would be liable to put things right out of his own pocket. True, a chippy in employment who went wrong might lose his bonus, but not his basic pay. Costello was at risk for all he earned.
It was also attracted to the issue of whether the work was to be done personally by the chippy. They found that Costello never asked anybody else to do the work for him; he never sent anyone else to site. But there was nothing to stop him doing so. Indeed, the builder said that other subcontract labour-only people did sometimes send replacements.
Eventually this all added up to Costello not carrying out work on a personal arrangement. He was running a business by selling his own labour. He had a greater opportunity to make a profit than someone who was directly employed. He was free to work for another builder. On a superficial basis, Costello looked like a direct employee; he did an 8am to 4pm day but he was, in law, "genuinely self-employed". Therefore, he was not a "worker" within the regulations and not entitled to accrue holiday pay. His claim was dismissed.
Cases like this depend largely on impression. In Smith vs Henry Boot Homes Ltd, Mr Smith claimed that he was a worker and therefore an employee. Yet he had a three-year-old
Postscript
I am obliged to solicitor Steele & Co, Norwich, for the judgment. It represented Midland. Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or e-mail him on info@tonybingham.co.uk.
