We recently posted our view on how limited company contractors are not automatically exempt from the Agency Workers Regulations and this has led to some really interesting debate. Last week, Alan Watts a prominent member of the PCG and himself an experienced contractor shared his views. This week, Rebecca Seeley-Harris, a leading specialist on self-employment law, gives us her opinion.
There is some confusion over the position with regards to Limited Company Contractors (LCC) and the AWR. Firstly, the Government has not sort to expressly exclude the LCC from the Regulations, but what they have done is to provide a mechanism whereby the ‘genuinely’ self-employed are exempted from the Regulations. The position, with regards to AWR and LCCs, is no different to that imposed by IR35, or any other piece of legislation which uses the tribunals and courts to ultimately determine employment status (e.g. National Minimum Wage, Working Time Regulations, etc).
The Government has made it clear that it does not want unscrupulous agencies or hirers abusing the system by the false labelling of agency workers, by forcing them to use a Ltd Company vehicle. (The issue of ‘sham’ in the BIS Guidance is slightly misleading. The Autoclenz v Belcher  case clarifies that the use of the word ‘sham’ is not helpful in the context of employment status.)
LCC vehicles cannot be excluded from the Regulations because it would provide an exit vehicle for unscrupulous agents. The AWR, however, provides examples for both a) a definition of what an agency worker is (Reg 3(1)); and b) what an agency worker isn’t (Reg 3(2)). This provides various points of argument on the basis of either lack of “…direction and supervision…”, or that the Contractor is providing the services as a professional or business undertaking.
Firstly, this is a statutory test of “supervision and direction” not control and they are slightly different tests. Secondly, an agency worker is an individual who has a contract to perform work and services personally for the agency, so the defence argument is that the individual is not an agency worker because a) they do not work under the supervision and direction of the hirer and b) the contract is not one to perform work and services personally for the agency.
Also, the defence is to argue that the individual is not an agency worker if the contract with the agency, or the contract that makes them available to work for the hirer, has the status of a client or customer of a profession or business undertaking carried on by the individual.
This is the same position imposed by any other legislation which seeks to differentiate between the genuinely self-employed and the quasi worker.
All these employment status matters are decided ultimately by the tribunals and the AWR is no different. The AWR will not be invoked unless a contractor brings a complaint to the tribunal and what, realistically, are the chances of that happening? This is especially so where the fee the Contractor is being paid, is higher than a comparable employee, so the contractor may have nothing to gain by bringing a complaint. Although, it may be that certain bonuses may have to be considered.
The government has again put industry in an impossible position. It has shirked its responsibilities and left it to commerce to decide on what action to take. The only commercial guidance is the evidence of history, that LCC’s do not want to be labelled or treated as ‘workers’, agency or otherwise.
Rebecca Seeley-Harris LLB (Hons) LLM MSc is the owner and founder of Re: Legal Consulting, a legal advisory practice which she set up some 12 years ago after becoming involved in a tax initiative called IR35. This led to her becoming a specialist on the legal distinction between being employed or self-employed for the purposes of tax or employment rights (the Employment Status Test). She has lectured at the London School of Economics on the subject on the LLB and LLM courses, and for various other organisations, written many articles and contributed to books and videos and is currently writing a book on Self-Employment Law for a leading legal publisher.
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