The spotlight on false self-employment and the gig economy has intensified recently with the introduction of a new ad campaign from the Department of Employment Affairs and Social Protection. The ads invite individuals who believe that they may be in false self-employment to apply to the department for an assessment of their employment status.

What is false self-employment?

While no definition of 'false self-employment' exists in Irish legislation, the term has been used to describe a situation where an individual is treated like an employee – for example, they may have a prescribed work schedule, a uniform and a company email address, but are required to provide their services as a self-employed contractor. Typically, their services are provided directly or via a company by way of a contractor agreement as opposed to an employment contract.

What is the risk of engaging individuals as self-employed contractors?

There has always been a risk that, depending on how self-employed contractors are treated in practice, they could be deemed to be employees.

This has implications from an employment law perspective, as the individual would be protected under employment legislation, as well as from tax and social welfare perspectives. This is because the employer should have applied tax and social welfare contributions to the individual's pay.

These implications are not new. However, the Department of Employment Affairs and Social Protection's recent ad campaign puts them into sharp focus and significantly increases the risk of self-employed contractors trying to ascertain whether they are, in fact, employees.

What will happen if an individual applies for a determination?

Investigation The Department of Employment Affairs and Social Protection will refer the individual's case to a social welfare inspector for investigation. The inspector will interview the individual and the company separately and will likely ignore any labels that the parties might have attached to the relationship.

Instead, the department has said that it will look at a number of factors, including:

  • how much control the company has over the individual;
  • whether the company provides training;
  • how often the individual must eport into the company;
  • whether the individual has to personally carry out the work or if they can send a substitute;
  • whether the individual is free to work for someone else;
  • how integrated the individual is in the business;
  • whether the company provides the equipment necessary to carry out the role;
  • whether the individual can work away from the company's premises; and
  • how the individual is paid (eg, a fixed weekly rate or per task).

The individual and the company may be required to provide certain documents and information – for example:

  • written contracts;
  • lists of duties and instructions;
  • accounts; and
  • annual returns.

The inspector will then submit a detailed report back to the department.

Determination

A deciding officer will review the report and make a determination. If the determination confirms that the individual has been correctly categorised as self-employed, no further action will be taken.

If the determination confirms that the individual has been falsely self-employed, the department will amend the individual's pay-related social insurance contribution record. This may require the employer to back-pay social welfare contributions.

Appeal All determinations can be appealed by either party. Appeals must be sent in writing to the Social Welfare Appeals Office within 21 days of the date of the determination.

Follow-up The department liaises with the Office of the Revenue Commissioner to ensure, as far as possible, consistency in decision making in both organisations for the classification of employment. Therefore, an investigation by the department could also result in an investigation and further determination from the Office of the Revenue Commissioner.

An individual who has been determined to be an employee by the Department of Employment Affairs and Social Protection or the Office of the Revenue Commissioner might use that determination as evidence in a claim before the Workplace Relations Commission (WRC) to assert employment rights. Such a claim could also encourage the WRC to initiate its own investigation into the employer's work practices.

Comment

False self-employment and the gig economy have been hot topics across the globe over the past two years. The debate – and the general concern – tends to focus on the lack of:

  • job security;
  • guaranteed wages; and
  • basic employment-related protections.

The Department of Employment Affairs and Social Protection's ad campaign is the latest and most high-profile government response to this debate. It shows that this issue is not going away any time soon.

Businesses that engage individuals on a self-employed basis should take steps to ensure that their work practices are appropriate and will stand up to scrutiny in the event of an inspection.

For further information on this topic please contact Lucy O'Neill at Mason Hayes & Curran by telephone (+353 1 614 5000) or email ([email protected]). The Mason Hayes & Curran website can be accessed at www.mhc.ie.

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