Introduction
In this article, we provide a summary of the Supreme Court decision of the Revenue Commissioners v Karshan (Midlands) Ltd T/A Domino’s Pizza, which serves as a useful reference when determining whether a worker is a contractor or an employee.
Background
This case related to the engagement of delivery drivers who were contracted by Karshan (Midlands) Ltd, operating under the trade name Domino’s Pizza, between the years 2010 and 2011.
The drivers engaged in a dispute on their employment status for tax purposes, with Karshan asserting that they should be classified as independent contractors based on the “contracts for service” they had entered into.
Karshan lodged an appeal against a ruling made by a Tax Appeals Commissioner in 2018, which determined that the delivery drivers ought to be classified as employees under the Pay As You Earn (PAYE) scheme. The appeal was dismissed by the High Court; however, the Court of Appeal, with a majority of 2-1, reversed the aforementioned ruling.
Employee or contractor?
The Supreme Court emphasized the difference between a contract for service and a contract of service, with the former being between an employer-employee relationship and the latter being between an independent contractor and their client.
The court outlined five questions to determine whether a contract is a contract for service or contract of service:
- whether the contract involves an exchange of remuneration for the work;
- whether the agreement is written so that the worker is agreeing to provide their own services;
- does the ’employer’ have sufficient control over the worker to make the agreement capable of amounting to an employment agreement;
- are the terms of the agreement consistent with an employment contract; and/or
- whether any legal reasonings mean a court should adjust these requirements.
Giving the court’s decision, Mr Justice Brian Murray said central to the appeal was whether a requirement that the employer and worker owe each other certain “mutual obligations” was necessary to the establishment of the employment relationship.
Conclusion
The ruling has wide implications for Irish employers, as courts will now look to whether the employer had “close control” over an individual acting in the course of employment to establish an employment relationship.
This comes with more robust rights for workers under various employment legislation, including the Organisation of Working Time Act 1997, the Employment Law (Miscellaneous Provisions) Act 2018, and the Terms of Employment (Information) Act 1994.
