Employee or self-employed? Why it is such an important decision for business owners

Our employment team, recounts a recent landmark case on employment status and considers the implications for the hair and beauty industry and for businesses in general.

Being clear on the status of your workforce is an important and strategic decision for any business owner, regardless of the sector and industry it may operate in. In addition to employment law risks, there is a host of regulatory requirements which employers must comply with when hiring people and recruiting employees.

In a previous blog post published in 2018, What does the Uber drivers’ dispute mean for your business?, we looked at the significance of the Uber case following several drivers successfully bringing employment claims and challenging their worker status. The Uber workers complained of unlawful deductions from wages, failures to pay national minimum wage and failures to provide paid annual leave.

Our employment team outlines below the more recent case of an alleged ‘self-employed’ hairdresser who challenged her work status and subsequently won.

The background to the case

A recent Employment Tribunal found that 26-year-old, Meghan Gorman, an alleged ‘self-employed’ worker, was in fact an employee of the respondent, a Terence Paul Salon in Manchester, where she worked as a hairdresser for six years.

Within the hearing, it was argued that Ms Gorman was in fact treated as an employee as opposed to a self-employed worker and therefore should have benefited from employment law rights including holidays, sick pay and redundancy pay.

It was found that the employer had exercised restricted control over many aspects of Ms Gorman’s work, including:

• Set working hours which Ms Gorman was not able to change.
• A fixed dress-code which Ms Gorman claimed she had to adhere to.
• Set pricing which Ms Gorman had to charge her clients.
• Receiving 67 per cent of Ms Gorman’s takings on a monthly basis.

It’s anticipated that Ms Gorman will now pursue other employment claims against the respondent amounting to unfair dismissal, wrongful dismissal and a failure on the respondent’s part to provide Ms Gorman with a written contract of employment (or at least a Section 1 Statement setting out the basic particulars of employment required to be given to employees under sections 1 to 3 of the Employment Rights Act 1996).

What could this mean for the beauty industry and self-employed workers?

It is clear to see that the ruling in this landmark case could likely have a substantial impact on future claims being pursued by workers within the hair and beauty industry.

Given the high proportion of young workers in the industry who are already feeling the effects of the recession following the implications of the COVID-19 pandemic and lockdown, the ruling has certainly arrived in already challenging times for many business owners and employers.

Females make up more than 80 per cent of people working in hairdressing and barbering and 94 percent of the people working in beauty. Of these 250k workers, more than half of these people are aged between 16 to 34¹. These workers have already felt the implications of the lockdown restrictions quite severely, so the findings on this recent case have been well received.

What should businesses and employers be doing following this latest landmark case?

In the first instance, businesses need to have a clear understanding of who constitutes their workforce. In accordance with statute law, an employee will always be a worker, but a worker won’t necessarily always be an employee.

As we have seen already from these cases mentioned above, simply having an employment contract drawn up isn’t sufficient. The ‘test’ goes much wider and focuses on the working relationship in a practical context as well as within any written agreement.

Before agreeing to any form of working relationship with an individual who is not on the payroll and/or isn’t considered to be an employee, you should consult with an employment solicitor. Seeking professional advice will help ensure you do not fall foul of any legal requirements and will also help to avoid leaving yourself commercially and financially exposed in the event of any worker seeking to challenge their employment status.

As we have seen from Ms Gorman’s case, getting it wrong can be very costly to the employer. It’s not yet confirmed whether the case will go to appeal which may result in further potential costs for the respondent. Either way, as the economy is navigating its way through difficult times and with many businesses already struggling from the effects of the coronavirus pandemic and the lock down – don’t expose your business to any further risk that may be avoidable.

Harrison Drury’s employment and regulatory team can provide expert advice and guidance to help businesses avoid employment claims, as well as giving support to organisations navigating their way through difficult workforce decisions.

If you require any assistance, please contact our team on 01772 258321.

Reference¹: 2019 industry statistics for hairdressing, barbering and beauty as quoted by the National Hair and Beauty Federation