‘In business’ factors have been an important consideration in some notable court rulings on employment contracts.
When looking at an engagement from a status perspective, the courts will scrutinise the presence or absence of ‘in business’ factors. These help to establish whether the worker in question is “in business on their own account”, and whether they could profit from sound management of their affairs.
‘In business’ factors are the feature that is almost always missing from a contract of employment. Some examples are the requirement for the worker to provide their own equipment, hold their own business insurances, raise invoices for any works rendered, and be liable for any defective services and provisions that confirm the worker is free to engage in other business.
Hall v Lorimer
Of course, ‘in business’ factors must be considered within the industry of the service in question, so not all will be present in every self-employed engagement. For example, it’s common for contractors to use a client’s equipment: in Hall v Lorimer (1993), Mr Lorimer, who was engaged in the production of TV programmes as a self-employed mixer, had to use his client’s mixing equipment, because the machinery would have been too expensive for him to purchase himself.
The courts ruled that Lorimer not providing any equipment did not preclude his self-employed status. They recognised that Mr Lorimer had significant financial risk, finding that “the more efficient he is at running the business of providing his services, the greater is his prospect of profit”.
The Hall v Lorimer case produced one of HMRC’s preferred quotes: that no single factor can be relied upon to determine status – instead, one must “paint a picture” using all the relevant details, and stand back to appreciate the situation as a whole.
Another example in which ‘in business’ factors were relied on to determine status is a recent case involving the television presenter Kaye Adams’ limited company, through which she was providing services to the BBC.
In HMRC v Atholl House Productions Limited (2021), it was found that personal service, control and mutuality of obligations were present. However, the First Tier Tribunal ruled that the presence of the irreducible minimum is not enough, on its own, to create a contract of employment if all the other provisions of the contract are inconsistent with employment. The parties had intended to create a business-to-business agreement, and Ms Adam’s having been a freelancer for over 20 years was enough to sway the judgement in her favour.
The above case touches briefly on another aspect: intent. This is something the courts always consider: what relationship did the parties intend to create? It’s possible for situations to arise where the parties draw up a written contract which does not necessarily represent the arrangements between them. This is where considering the initial intentions of the parties could prove useful.
For example, in Massey v Crown Life Insurance Co (1977), Lord Denning ruled that a Mr Massey was self-employed despite numerous indications that he was an employee of Crown Life Insurance Co, purely because that was the intention of the parties at the outset.
After being employed by Crown Life Insurance Co for two years, Mr Massey terminated his employment in order to be engaged as a self-employed individual. He gained the tax benefits of being self-employed, even though the agreement between the parties was largely identical to his previous contract of employment. In 1975, he brought an unfair dismissal claim against the company after being terminated with only a month’s notice. Lord Denning famously commented that “having made his bed as being ‘self-employed’, he must lie in it”.
Express & Echo Publications Ltd v Tanton (1999)
Another relevant case from 1999 involved a Mr Tanton, a delivery driver for Express and Echo Publications who occasionally provided a substitute to carry out his work. The courts found that the intention of the parties was a crucial feature, stating: “One starts with the common intention of the parties that Mr Tanton should not be an employee, but a self-employed contractor”. It was established that the intention to create an independent contractor relationship was adequately reflected within the contract, and that Mr Tanton therefore had the right to send a replacement driver. He regularly exercised this right, meaning he could not legally be an employee of the company.
While intention and “in business” factors must be considered and weighed up in all cases as part of “painting a picture”, each case must be considered on its own merits. The same factor may not carry the same weight in different cases – this is why Kaye Adams’ case had limited applicability to freelancers in other industries.
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