Ryanair Faces Tribunal Turbulence as ‘Agency Worker’ Pilot exposes ‘Self-Employed’ Sham
Key Contact: Claire Knowles
Author: Esther Baranski
In a significant Employment Tribunal decision, it was ruled that Mr Lutz, a Ryanair Pilot, was in fact a worker of MCG and an agency worker for Ryanair, rather than a self-employed contractor as the parties had intended. As an engaged worker, Mr Lutz had accrued certain employment rights.
Mr Lutz applied to be a pilot for Ryanair and was successful. He was then engaged by MCG who agreed to supply Ryanair with pilots. MCG set up a personal service company in order for Mr Lutz to operate as self-employed. The personal service company then entered into a five-year fixed term contract with MCG under which Mr Lutz was to work exclusively for Ryanair and either Mr Lutz ‘or an agreed acceptable and qualified nominated substitute’ would perform the work. Mr Lutz received no holiday pay under this structure.
Holiday Pay and Working Conditions Claim
Mr Lutz brought claims against both MCG and Ryanair for holiday pay and for fairness in basic working conditions, respectively. ‘Workers’ are entitled to basic employment rights such as holiday pay while ‘agency workers’ are entitled to the same basic working conditions as comparable employees performing the same role, after a twelve-week qualifying period. The crucial element that the Tribunal needed to establish was, therefore, the status of Mr Lutz’ employment. It was held that as both a worker and an agency worker, Mr Lutz was entitled to certain rights such as fair working conditions, a limitation of maximum working hours, and annual leave.
Agency Worker or Self Employed?
The Tribunal held that Mr Lutz was a worker engaged by MCG and an agency worker placed by MCG with Ryanair. He was not self-employed, nor an employee of Ryanair as there was no contact of employment between them. The tribunal held that in order to be an agency worker, the work provided by the worker must be temporary. The five-year fixed term contract between the service company and MCG was not indefinite and was therefore temporary.
Furthermore, the Tribunal held that Mr Lutz had a contract with MCG to provide his services personally and not via the service company, as despite the intention set out in the contract. One important factor towards the personal service test was that Mr Lutz’ ability to swap shifts was not a genuine substitution but merely a rearrangement of the day and time when his personal service was required. There was, in fact, no unconditional right of substitution. Only another Ryanair pilot could take the shift and permission from Ryanair was mandated. The tribunal ruled that any documents purported to show that Mr Lutz was self-employed, and Ryanair was a customer of his personal services, were a sham. Mr Lutz was expected to wear the Ryanair uniform, could not negotiate his pay, and was unable, in practice, to determine his working hours. Ultimately, Mr Lutz had a contract with MCG to provide his services personally to Ryanair and was subject to Ryanair’s framework of control.
Why Is This Decision Significant?
As noted by the Tribunal, this case has wide implications due to the many purportedly self-employed pilots in the aviation industry who are engaged under similar contracts. If these pilots are also considered workers, and/or agency workers, then they will be entitled to the right to be paid annual leave and other basic employment rights.
This relevance of this case transcends that of the aviation industry as the existence of a service company will not be sufficient to prevent an Employment Tribunal deciding that the individual in question is a worker and/or an agency worker, dependant on the circumstances. The Tribunal will consider the reality of the individual’s situation, looking behind any contractual agreements. This could expose businesses to potentially costly employment claims. Our Acuity Employment Team are highly experienced in supporting your business with employment status categorisation and compliance.
If you require any further information, please contact the Acuity Employment team.