The law surrounding employment and worker status is complex, with the legal position evolving through case law. It is important to consider an individual’s employment status (i.e. whether they are an employee, worker or self-employed) at the outset of any relationship as this will help the parties understand their respective rights and obligations (for example, whether the individual is entitled to receive paid holiday) and could potentially minimise the risk of a dispute between the parties in the future.

The legal approach is fact specific with general tests developed by the courts to assess employment status. One of the key tests in determining employment status is whether there is a mutuality of obligation between the parties, i.e. whether the employer is under an obligation to provide the individual with work and the individual is under an obligation to make themselves available to do the work.

The mutuality of obligation test has recently been considered by the Employment Appeal Tribunal (EAT) in the case of Nursing and Midwifery Council v Somerville UKEAT/0258/20, which ruled that, where there is an overarching contract between the parties in which an individual agrees to perform services personally, there is no additional need to demonstrate an irreducible minimum of obligation to establish worker status.

Irreducible minimum of obligation

The Nursing and Midwifery Council (NMC), which is the regulator of nurses and midwives in the UK, has a Fitness to Practice Committee which determines allegations where a person’s fitness to practice may be impaired. NMC maintains a pool of individuals who sit as panel members on this committee. The Claimant was appointed as the panel member chair for a four-year term in 2012, and was re-appointed for a further four-year term in 2016. The Claimant was treated as being self-employed and therefore did not receive any statutory benefits afforded to employees and workers, such as holiday pay.

The Claimant issued a claim against NMC for unpaid statutory holiday pay in 2018 and argued that he had either employment or worker status, and that he was not genuinely self-employed.

The Employment Tribunal (ET) considered whether the Claimant had employment status, and whether he was therefore entitled to bring a claim against NMC for unpaid statutory holiday pay. The ET concluded that the Claimant was a worker within the meaning of the Employment Rights Act (ERA) 1996 and the Working Time Regulations (WTR) 1998, and noted the following points in support of this conclusion:

  1. Overarching Contract: There were a series of individual contracts between the parties each time the Claimant agreed to sit in a hearing, for which NMC agreed to pay him a fee. There was also an overarching contract between the parties; this was evidenced by way of letters of appointments and a Panel Member Services Agreement which was entered into for each four-year term of appointment. These written materials represented the parties' true agreement;

  2. Mutuality of Obligation: There was no contractual obligation on the Claimant to offer/ accept a minimum amount of sitting dates and he was free to withdraw from any of the dates he had accepted. Accordingly, there was insufficient mutuality of obligation to give rise to an overarching employment contract or an employment contract in relation to individual assignments that he accepted;

  3. Personal Service: The Claimant had no right of substitution under the contracts and he agreed to provide his services personally to NMC; and

  4. Client/ Customer Exception: NMC was not a client or customer of a profession or business carried on by the Claimant.

NMC appealed the ET’s decision, and argued that the absence of any obligation on the Claimant to accept and perform some minimum amount of work was fatal to the proposition that he was a worker.

The EAT dismissed the appeal, and concluded that an irreducible minimum of obligation was not a prerequisite for satisfying the definitions of worker status under the ERA and WTR in circumstances where an overarching contract exists between the parties under which the individual agrees to perform services personally. The EAT held that the absence of an irreducible minimum of obligation was not fatal to a conclusion of worker status and that the ET was entitled to find that the Claimant was a worker.

Implications for employers

This case acts as a reminder to employers that labelling an individual as an independent contractor will not prevent an Employment Tribunal from finding worker or employee status. Employers should be mindful that individuals who provide their services on an irregular basis, and without any obligation to do a minimum amount of work, may be considered to be workers and could therefore be entitled to any associated statutory benefits, such as the right to be paid the National Minimum Wage and holiday pay.