EMPLOYMENT LAW:
Are Pizza Delivery Drivers Employees or Independent Contractors?
It has been widely accepted, although somewhat controversial, that having workers off your books and treated as independent contractors, rather than ordinary employees, is less onerous for employers and saves them substantial PRSI payments, holiday pay and other benefits. Arguments over whether so called independent contractors are really employees in reality have become more frequent with the arrival of the gig economy with operators like Deliveroo.
Delivery drivers in a particular pizza restaurant, in the midlands, should be considered as employees and not contractors, the Supreme Court has held in a decision that has wide consequences for both the workers and owners who are involved in similar type businesses.
The case concerned delivery drivers who were signed up to contracts in 2010 and 2011 by Karshan (Midlands) Ltd, trading as Domino’s Pizza.
The drivers, not surprisingly, insisted they were, in reality, employees for tax purposes but Karshan said they were totally independent contractors under “contracts for service” and therefore liable for their own taxes.
Karshan appealed a 2018 decision of the Revenue Commissioners that the delivery drivers should all be regarded as PAYE workers. The High Court rejected that appeal, but the Court of Appeal, in a 2-1 majority, overturned that decision.
The Revenue Commissioners sought and were granted a further appeal to the Supreme Court. In a unanimous decision on Friday 20th November 2023, a seven-judge Supreme Court effectively overturned the Court of Appeal decision and found that, under several new criteria it established, it was clear enough that the drivers, in this particular case, were and should be treated as employees.
He said the question of whether a contract is one “of” or “for” services (i.e., independent contractor or employee) should be resolved by reference to five questions based on a number of earlier court decisions.
The first three that must be met are: does the contract involve the exchange of wage or other remuneration for the work?; if so, is the agreement one in which the worker is agreeing to provide his own services to the employer and not outsource them to another party?; and if so, does the employer exercise sufficient control over the putative employee and is the work required to render the agreement one that is capable of being an employment agreement?
If those three requirements are met, the decision maker must then determine whether the terms of the contract between employer and worker, interpreted in the light of the admissible factual evidence and having regard to the working arrangement between the parties, are more consistent with a contract of employment or some other form of contract.
Regard must also be had to whether the agreed working arrangements point to the putative employee working for themselves (as independent contractors) or for the putative employer (as an employee).
Finally, the judge said, it should be determined whether there is anything in the particular legislative regime under consideration, such as Taxation laws, which requires the court to adjust or supplement any of the foregoing requirements.
He said the Tax Appeals Commissioner was entitled to conclude in this case, as she did, that the drivers were employees of Karshan for the purposes of the relevant provisions of the Taxes Consolidation Act 1997. The evidence disclosed “close control” by Karshan over the drivers as to when they work, what and to whom they delivered and what time schedules they were to operate under.
While some aspects of their activities were more consistent with their being independent contractors engaged in business on their own account, such as the hours they chose to work, the Commissioner was entitled to conclude that the preponderance of the evidence pointed to the drivers spending all of their time carrying on Karshan’s business rather than their own, he found.
The contract was one that envisaged personal service by them, with the facility for substitution of drivers on certain conditions with the substitute drivers being paid by Karshan and not by the originally rostered driver, he said.
In comments made while delivering the judgment, Mr Justice Murray said it should be pointed out that the finding that these drivers were employees, did not necessarily apply to any other driver who wanted to argue that they were not an employee but an independent contractor and where the evidence they produced suggested that different outcome.
The Revenue Commissioners v. Karshan Midlands Ltd t/a Domino’s Pizza [2023] IESC 24.
A.C. FORDE & CO. LLP
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