Self-Employment under Irish Law

Legal Definition of 'Employee'

The legal definition of what constitutes an employee varies, depending on the piece of legislation being relied upon. Virtually all employment legislation refers to an employee as being somebody who works under a ‘Contract of Employment’. The Terms of Employment (Information) Act, 1994, Section 1, defines a Contract of Employment as:

“a contract of service of apprenticeship and any other contract whereby an individual agrees with another person, who is carrying on the business of an employment agency within the meaning of the Employment Agency Act, 1971 and is acting in the course of that business to do or perform personally any work or service for a third party (whether or not the third person is a party to the contract)”.

A similar definition is provided for in the legislation on statutory notice periods, unfair dismissal, redundancy, working time, maternity protection, adoptive leave, carer’s leave, parental leave, protection of young workers, part time workers and transfer of undertakings. This definition certainly covers agency workers and apprentices but could be regarded as excluding, in totality, those who are self-employed and most casual workers.

A wider definition applies in two Acts relating to wages. Both the Payment of Wages Act, 1991 and the National Minimum Wage Act, 2000 apply to contracts where an individual has agreed with another person to do or perform personally any work or service for a third party whose status, by virtue of the contract, is not that of a client or customer or any profession or business undertaking carried on by the individual or that person or a third person.

A more expansive definition is also employed in the Employment Equality Act, 1998 which includes contracts whereby:

“an individual agrees with another person personally to execute any work or service for that person”.

The idea of personal services

At the core of the definition of a contract of employment is the requirement for the employee to personally execute the work. It is suggested that the boundary of labour law should be fixed by this requirement and that the work be performed personally as opposed to contracts that permit or expect the contractor to use substitutes or to employ others to do the work. 

Equipment and materials

Generally, employers will be required to supply employees with the equipment and materials necessary to perform the work. In Tierney –v- An Post, the fact that the materials utilised were provided and maintained by the workers in question, was a significant factor in the court concluding that the workers did not meet the threshold of employee.

Intention of the parties

In many contracts, the parties themselves may use particular labels, most commonly that one is an employee, an independent contractor or an employer. However the court will disregard such labels if they do not, in fact, correspond with reality. In Castleisland Cattle Breeding Society –v- Minister for Social and Family Affairs, the Supreme Court held that, notwithstanding the requirement to examine the terms of the written contract in determining whether a contract was one of service or for services, an appeals officer was bound to examine and have regard to what was the real arrangement on a day to day basis between the parties. 

It is also worth noting that, in the case of Millen –v- Presbyterian Church in Ireland, it was determined that a minister of the Presbyterian church was not an employee within the meaning of the Terms of Employment Act, 1994, on account of being issued a P60. It was held that the issuing of such material, that may indicate an employment relationship, would not be determinative and that the working relationship would need to be examined in its totality.

What is a 'Worker?

These wider definitions give much rise to a practice whereby increasing, an individual performing work, is not categorised as an employee but is instead defined as a “worker”. The definition of worker or category of may include a group sometimes referred to as the dependent self-employed, self-employed individuals who most likely enter into contracts to perform work personally for a single entity who have a degree of dependents that is essentially the same as that of employees and who have no regular profession or business of their own. This concept of “worker” is formulated in the same terms as those that are used in the Payment of Wages Act, 1991. 

What is a 'Worker' under European Law?

The European Court of Justice recently gave a preliminary ruling on a reference from the UK Employment Tribunal in the case of B v Yodel Delivery Network Limited regarding determination of worker status. The ECJ rules that the definition of worker status applied by the UK courts is not incompatible with EU law, specifically the working time directive. The ECJ held that the working time directive must be interpreted as precluding a person engaged by is putative employer under a services agreement which stipulates that he is a self-employed independent contractor from being classified as a worker where such person is afforded discretion to use sub-contractors or substitutes to perform the service which they are undertaking to provide, to accept or not accept the various tasks offered by their putative employer or unilaterally set the maximum number of those tasks to provide their services to any third party, including direct competitors of the putative employer, and to fix their own hours of work. The ECJ went on to say that the essential feature of an employment relationship is that, for a certain period of time, a person performs services for and under the direction of another person in return for which he or she receives a remuneration. The classification of an independent contractor under national law does not prevent that person being classified as an employee within the meaning of EU law if their independence is merely notional thereby disguising an employment relationship.

What is 'Self-Employed' under Irish Case Law?

The leading Irish authority in this area is the Supreme Court decision in Henry Denny & Sons –v- Minister for Social Welfare. Here a worker was hired as an in-house demonstrator, demonstrating and marketing the company’s products in supermarkets. In coming to a decision, Justice Keane referred to the English decision of Market Investigations –v- Minister of Social Security where he noted that the English courts asserted that there was no exhaustive list which could be compiled of considerations which are relevant in determining the question of whether a person is or is not on business on his or her own account and could not apply strict rules to be laid out as to the relative weight which the various considerations should carry. Justice Keane concluded that:

“while each case must be determined in light of its particular facts and circumstances, in general, a person would be regarded as providing his/her services under a contract of service and not as an independent contractor where he/she is performing those services for another person and not for himself/herself. A degree of control exercised over how the work is to be performed, although a factor to be taken account, is not decisive. The infirms that the person is engaged in his business or his/her own account can merely be more readily drawn where he/she provides the necessary premises or equipment or some other form of investment where he/she employs others to assist in the business and where the profit where he/she derives from the business is dependent on the efficiency with which it is conducted by him/her”.

A second informative case was that of Minister for Agriculture and Food –v- Barry. The court examined whether a mutuality of obligation existed between the parties. This approach stresses that, without the existence of reciprocal promises between the parties, the relationship lacks a genuine contractual character. However, the fact that the mutuality of obligation approach was an important filter, in its absence the court need not go further in examining the relationship, the existence of such an obligation could not be determinative of the issue. The court went on to say that there was no “one size fits all” test in circumstances where the facts before them were complicated. The court went on to note that determining whether an individual was a contractor or an employee could not be determined by testing the facts against some rigid formulaic way. However, appropriate inferences could be drawn from those facts leading to a particular conclusion.

A third determinative case is that of Ready Mixed Concrete Limited –v- Minister for Pensions and National Insurance. Judge McKenna adopted an open end approach to the question of determining employee status. According to Judge McKenna, a contract of service exists if three conditions are fulfilled. First, the worker agrees that in consideration of a wage or other remuneration, he/she will provide his/her own work and skill in the performance of some service to the putative employer. Secondly, the worker agrees, expressly or implicitly that, in the performance of that service, he/she will be the subject to the other’s control in a sufficient degree to make the other their master. Thirdly, the other provisions of the contract are consistent with its being a contract of service, that the worker must be obliged to provide his/her own work and skill. Freedom to do a job by one’s own hand or by another’s is inconsistent with a contract of service, though a limited allocation of power or delegation may not be. Under the Ready Mix Concrete approach, the degree of autonomy an individual has to perform the work for which they have been contracts, is determinative. 

Given the last of precision with which the legislation has defined a contract of employment, it has fallen to the courts to flesh out this concept even further. The courts have developed a number of tests to use in deciding whether a contract of employment exists. However, while these tests provide a useful framework and are helpful as reference points, ultimately the courts have not been able to develop a particularly sound consensual distinction between employment and self-employment and cases tend to turn on their overall factual matrix. There are a number of tests worth noting.

Self-Employment under the 'Control Test'

One of the first tests developed by the courts focused on the extent to which, under the terms of the contract, the putative employer has control over the worker. In Yewens –v- Noakes, it was held that:

“a servant is a person subject to the command of his master as to the manner in which he shall do his work”.

In Roche –v- Kelly, Justice Walsh held that in a master/servant relationship, the master must have the right to tell the servant what to do and how to do it whether or not he exercises that right. Although the idea of a tight inspection and surveillance of worker that is implicit in the control test is somewhat anarchistic in contemporary employment matters, it is informative if not used as a standalone test. 

Self-Employment under the 'Integration Test'

An alternative test looks at the extent to which a worker is employed as an integral part of the business of the putative employer. In the Sunday Tribune case, a freelance journalist who got commission in advance but was under no obligation to the newspaper to publish her work was held to be employed under a contract for services. By contrast, a staff journalist working 50 hours per week for the newspaper was an integral part of the newspaper and therefore had a contract of service. This case illustrates that the nature of the work itself is not always sufficient as both journalists did the same substantive work, but each had different employment status. 

Self-Employment under the 'Economic Reality' or 'Enterprise Test'

This test essentially asked whether the worker has engaged him/herself to perform the services, performing them as a person in business on his/her own account. This looks at a range of factors and asks whether or not the worker is actually running a separate business. The test was first outlined in the English case of Market Investigations –v- Minister for Social Security where, according to Justice Cooke, the fundamental test to be applied is:

“Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that question is yes then the contract is a contract for services. If the answer is no then the contract is a contract of service”.

This approach was approved by Justice Barr in O’Coindealbhain –v- Mooney. 

Self-Employment under the 'Opportunity and Risk Test'

The extent to which a person has the opportunity to benefit financially from the work over and above a salary or wage or conversely the extent of financial risk or loss will be important in determining if such a person is an employee. In Henry Denny & Sons –v- Minister for Social Welfare, the Supreme Court held that it is easier to infer that a person is engaged in business in his/her own account where the profit which he/she derived from the business was dependant on the efficiency with which it is conducted by him/her. Similarly, in Tierney –v- An Post, the Supreme Court held that, while the extent to which a postmaster could maximise the profit which they derive from carrying on the post office business was relatively modest, it was nevertheless the case that any expenditure in energy or commitment, which had the effect of increasing the volume of profit, would be determinative. 

Revenue Definition of 'Self-Employed'

It is worth noting that Revenue see a legal difference between a contract of employment and a contract for service. According to Revenue, a contract of employment applies to an employee / employer relationship. A contract for service applies in the case of an independent or self-employed contractor. Revenue provide a list of factors to be considered when determining whether or not an individual is a self-employed contractor. 

The first of this determining criterion is whether or not that individual owns their own business. 

Secondly, Revenue examine whether or not an individual is exposed to financial risk. 

Thirdly, Revenue will have due regard to the extent to which an individual has control over what, how, when and where the work is done and whether they do it personally. 

Fourthly, Revenue will have due regard to whether or not the individuals concerned are free to hire other people, on their terms, to do the work which has been agreed on. 

Fifthly, Revenue will have due regard to whether or not an individual can cost and agree a price for the job. 

Other determining factors, considered by Revenue, is the extent to which the individuals concerned supply or provide for their own equipment which has to be determined in relation to this matter.

Conclusion

The various case law on this issue notes that there is no single determinative test that can be applied to determine whether or not an individual is an employee or a contractor. However there are a number of determining factors. The first of these is control. The second of these tests is integration. The third test is economic reality, often known as the enterprise test, which essentially asks if the worker has engaged him/herself to perform the services on their own account.

Furthermore, at the core definition of a contract of employment, is a requirement for the employee to personally execute the work. 

Revenue appear to take a very narrow, rules based assessment, as to what constitutes an employee or an individual who is self-employed. This approach does not tally with the more comprehensive and expansive approach taken under the various case law on this matter.