TUPE may protect workers! Plus, IR35 news.

13 December 2019

The London Central Employment Tribunal has recently decided that workers, as well as traditional employees, are protected under TUPE (Dewhurst v Revisecatch & City Sprint). This may turn out to be one of the most significant decisions on employment rights of recent years!

This case involves cycle couriers who had originally been engaged by City Sprint on a self-employed basis. The couriers challenged this and were found to be workers of City Sprint and, therefore, entitled to holiday pay, amongst other rights. City Sprint did not pay the holiday pay and lost a service contract which was later awarded to Revisecacth. Revisecatch engaged the cycle couriers, who believed there had been a TUPE transfer to Revisecatch. The couriers claimed that, as workers, they should have the same rights under TUPE as normal employees, including the right to be informed and consulted on the TUPE transfer and to claim the outstanding holiday pay from their new employer, Revisecatch.

Other Employment Tribunals and Courts do not have to follow the decision of the London Central ET, however, if Revisecatch appeal (which is expected) and the Employment Appeal Tribunal reach the same conclusion, the decision will be binding and will give workers the following rights:

1. To transfer to the new employer on the same terms and conditions as they previously enjoyed;

2. To be included in any information and consultation exercise about the transfer, before it takes place;

3. if the previous employer was in breach of contract, the new employer will be liable for the breach;

4. to bring claims against the new employer if it does not honour any of the above.

This case follows on from other high-profile gig economy cases where staff engaged on a self-employed basis have been found to be workers.

Anyone involved in the sale of a business or outsourcing/insourcing exercise should ensure they carry out a thorough due diligence exercise on all individuals engaged by the outgoing business and take into account the potential duties and liabilities relating to those engaged as workers.

IR35 news – new CEST tool

HMRC have updated the Check Employment Status for Tax (CEST) tool and added a new section to the Employment Status Manual (ESM), which provides guidance on the new tool.

The CEST tool is designed to help individuals and organisations decide if a worker should be treated as employed for income tax and NICs purposes by taking users through step-by-step questions. It has been updated to take into account the changes to IR35, which are due to come into effect on 6 April 2020. Under the new rules, medium to large sector employers in the private sector will become responsible for deciding the employment status of some contractors and may be liable to pay the income tax and NICs of those contractors.

The ICAEW have reviewed the new CEST tool and guidance and commented that there is still room for improvement, in particular:

1. CEST says that the organisation hiring the contractor needs to operate PAYE on the contractor’s earnings. This is only correct if the client is in the public sector, or, from April 2020, either a public sector employer or a medium to large employer in the private sector;

2. it does not cover mutuality of obligation in an employment law sense, despite recent case law placing more emphasis on this test.

For more information on the upcoming changes to IR35 and how to be prepared, please click here.

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Sandra Martins