Miscategorisation of Employment Status within the Dentalcare Industry
Key Contact: Claire Knowles
Author: Saskia Musacchio
Miscategorisation of employment status is an issue too often underestimated as has been recently demonstrated in a string of cases in the dentalcare industry including Gilder v TDSML and the ongoing case of Sejpal v Rodericks Dental Ltd. Accurate employment status categorisation is essential to avoid potential tax and employment risks, including:
- Backdated PAYE deductions including NICs and income tax;
- Backdated employment-related payments such as annual leave entitlements;
- HMRC penalties and/or investigations into other contracts and payment histories;
- Entitlement to various employment rights and protections, e.g. dismissal protections; and
- If nothing else, the threat of a claim could bolster an individual’s negotiating power.
Sejpal v Rodericks Dental Ltd
The Claimant, a dentist, had worked as an associate with the Respondent for nine years. The Claimant’s contract contained a substitution clause that if the Claimant did not use the Respondent’s facilities for a continuous period of more than 14 days, the associate would make arrangements for the use of the facilities by a locum. If the associate failed to make such arrangements, the Respondent could engage another operative on behalf of the associate (paid for by the associate).
The Claimant went on maternity leave in December 2018, and at the end of this month, the Respondent closed one of their locations where the Claimant worked. The Respondent terminated the Claimant’s contract, whilst seemingly the Respondent redeployed other associates. The Claimant pursued claims for maternity and sex discrimination to a preliminary hearing where the employment tribunal assessed her employment status and, therefore, whether she had the right to pursue such claims.
In order to pursue her discrimination claims, the Claimant needed to demonstrate that she was an “employee” under the Equality Act 2010 (EqA), which has a wider meaning than the Employment Rights Act 1996 (ERA) and includes those who are ‘workers’ but not ‘employees’ under the ERA. The Claimant, therefore, sought to demonstrate that she was a ‘worker’, i.e. that she was under a contract to work for the Respondent personally and the Respondent was not a client or customer of any profession or business undertaking carried on by the Claimant.
The Employment Tribunal (ET) found that the Claimant did not meet the required thresholds, focusing on the wording of the contract, the apparent lack of an ‘umbrella contract’, and the presence of a substitution clause. However, on appeal, the Employment Appeals Tribunal (EAT) disagreed.
Upon appeal, the EAT disputed the ET’s reliance on the wording of the contract. Instead, the EAT adopted a holistic approach and gave comparatively little weight to the wording of the contract. The EAT considered the reality of the agreement between the parties and the actual effects of the substitution clause. Analysing holistically, the predominant purpose of the contract was personal service and the existence of the right of substitution was not enough to avoid that conclusion. The EAT concluded that the substitution clause was not unfettered, and was in fact limited, as the contract did not allow for a locum to be appointed before Mrs Sejpal had been absent for 14 days and the locum had to be acceptable to the Respondent. The EAT also acknowledged that no substitute had been provided by Mrs Sejpal during her nine years with the practice.
Before the Claimant can be classified as a worker, the Claimant must satisfy the final requirements that she carried on a profession or business undertaking and that the Respondent is not her client or customer. Such issues are yet to be decided. There are a number of factors that the ET will need to consider which appear to have been overlooked at first instance. Now remitted to a different ET, they will need to consider elements of control, integration, financial risk, etc as practiced in reality and in the round in order to determine these remaining statutory tests of undertaking and customer status.
Gilder v TDSML
Interestingly, a recent employment tribunal judgement also pertaining to employment status in the dentalcare industry, determined employment status at preliminary hearing. In the matter of Gilder v TDSML, the Claimant worked as a dental hygienist with the Respondent for a decade and a half, during which the parties agreed she was self-employed.
The Claimant contended that she was actually an employee pursuant to the Employment Rights Act 1996. Due to the following factors, among others, that the Claimant was required to work personally and could not provide a substitute: she worked a fixed number of days per week; she was expected to see patients referred to her; and she had her holiday entitlement controlled by the Respondent. The ET found in her favour. The case demonstrates the importance of holistically analysing the relationship and that the wording of the contract is not definitive of the employment status to which it relates. It serves as a cautious reminder to all businesses, and the dentistry industry more specifically, of the importance of correctly classifying employment status.
If you would like further advise on managing individuals and other consultants in practice, please contact the Acuity Employment team.