Independent Contractor had Worker Status and Entitled to Holiday Pay

In Hospital Medical Group Ltd v Westwood the Court of Appeal has upheld a tribunal’s decision that a doctor, although not employed under a contract of employment, was a ‘worker’ for the purposes of S.230(3)(b) of the Employment Rights Act 1996. The Court held that there was no test of universal application to judge whether someone is a ‘worker’ under S.230(3)(b). However, the ‘integration test’, set out in Costwold Developments Construction Ltd v Williams, ‘will often be appropriate’.

W, a doctor, carried out hair restoration work for HMG Ltd on a self-employed independent contractor basis. When that agreement was terminated, W lodged claims for, among other things, unlawful deductions from wages and unpaid holiday pay. A tribunal rejected W’s argument that he was an ‘employee’ within S.230(3)(a). However, it found he was a ‘worker’ under S.230(3)(b) as he had a contract to perform work personally for HMG Ltd. The tribunal found that HMG Ltd was not ‘a client or customer of any profession or business ’ carried out by W, which would have excluded W from S.230(3)(b). Instead, W was an independent contractor engaged by HMG Ltd to treat patients who were HMG Ltd’s clients or customers. On appeal, the EAT held that the tribunal’s decision was ‘plainly and unarguably right’. The Court of Appeal initially refused permission to appeal on the papers, but eventually granted it after an oral hearing so that it could consider the consistency of EAT jurisprudence on S.230(3)(b).

HMG Ltd argued that the tribunal was wrong to find that HMG Ltd was not W’s client, given its finding that W was engaged in business on his own account dealing with HMG Ltd. HMG Ltd cited the EAT’s decision in Smith v Hewitson, that stewards selling refreshments on coaches were carrying on a business with the coach company as their clients. The Court of Appeal stated that although it had reservations about that decision’s correctness it accepted it as unique on its own facts. The Court focused instead on the EAT’s decision in Cotswold Developments Construction Ltd v Williams, which set out an ‘integration test’ to judge whether someone is a worker. Mr Justice Langstaff there emphasised factors such as the individual marketing services as an independent person to the world in general as pointing towards the purported ‘employer’ in fact being a client or customer, whereas being recruited to work by a company as an integral part of their processes suggests the opposite. In James v Redcats (Brands) Ltd (Brief 826) the EAT stated that there may be difficult cases where that approach is not appropriate. In such cases, the ‘dominant purpose test’ may help identify the nature of the contract in question.

Rejecting the appeal, the Court noted that the EAT had correctly avoided propounding a test of universal application in both the Cotswold and Redcat cases. While there is not a ‘single key with which to unlock the words of the statute’ in every case, in the Court’s view, the integration test will ‘often be appropriate’. After considering these cases, the tribunal in the instant case had reached the correct conclusion that W was a worker. If Parliament had intended to exclude those in business on their own account it would have done so explicitly. It was difficult to see HMG Ltd as just another purchaser of W’s medical skills. Although W was not working for HMG Ltd under a contract of employment, he was clearly an integral part of its undertaking.