Unite sets legal precedent against umbrella company in bogus self-employment case

07 June 2018

Unite has set a legal precedent in its case on behalf of an agency worker, who suffered unfair deductions from his wages as the result of a bogus self-employment “scam”.

Pipe fitter Russ Blakely secured work at Broadmoor Hospital in Berkshire through On-Site recruitment, which told him he would be paid through Heritage Solutions City Limited (a payroll/umbrella company). Heritage Solutions then deducted £18 a week from his wages in ‘management’ fees, as well as the employer’s national insurance contributions.

He was then asked to sign a contract of services that determined him to be self-employed, which would mean that he would not be eligible for basic workers’ rights such as minimum wage and holiday pay. He refused to sign the document and, on return from annual leave, was not offered more work.

Initially, the case was taken to Reading employment tribunal (ET) to claim for unfair deductions from wages and non-payment of holiday pay. However, the ET ruled that Mr Blakely had no case because it accepted that he was self-employed. An Employment Appeal Tribunal (EAT) has now confirmed that the ET erred in its judgement as to his employment status.

The EAT ruled that Mr Blakely was a worker, clarified that ETs should consider the intentions of the worker as well as the employer when deciding whether there was a contract, and confirmed that there was a contract between the claimant and On-Site.

Further, it decided that agency workers may be the worker of either the agency or the payroll/umbrella company or both – an key point, as Unite believes this ruling “potentially dramatically reduces the amount of payroll/umbrella company rip offs”.

Unite Assistant General Secretary, Howard Beckett, said that “the principles established at the EAT will be vital in fighting the scourge of umbrella and payroll companies in construction and other sectors”, promising that Unite will ensure the ruling is applied in other similar cases.

“This case absolutely underlines why workers need to be a member of a trade union,” he continued. “A worker without free legal support would have been totally denied employment justice in such a complicated case.”

Although the case was referred back to the ET in order to decide the level of compensation owed to Mr Blakely, On-Site chose to settle out of court shortly before the case was heard, handing over £2,500 for the lost wages and holiday pay. Heritage Solutions has ceased trading and faces being struck off as a registered company.