Case Law Review – Employees or Self Employed; Probation Dismissal; Protected Disclosure
Here at Action HR Services, we strive to keep you up to date with what is happening in the employment law arena in Ireland. We regularly review employment law cases and how the decisions in these cases might impact your business.
Our top three employment law cases are:
- Employees or Self Employed – Karshan (Midlands) Limited to Domino’s Pizza – v- Rev Commissioners 2022 IECA 124
- Probation Dismissal – O’Donovan v Over-C Technology Limited & Other
- Protected Disclosure – Baranya v Rosderra Irish Meats Group Limited
Case Law Review – Employees or Self Employed – Karshan (Midlands) Limited to Domino’s Pizza – v- Rev Commissioners 2022 IECA 124
Are the pizza workers employees or self-employed (The Domino’s Pizza Delivery Drivers High Court Case)?
This was an interesting case in that it was the first the Irish High Court had to decide upon. The Court of Appeal overturned the High Court’s decision on the 31st of May 2022, finding that the delivery drivers were self-employed independent contractors and not employees thus responsible for their own tax affairs.
The Revenue Commissioners had previously decided that the delivery drivers who delivered pizzas on behalf of Domino’s Pizza were employees for tax purposes. Domino’s Pizza had insisted they were responsible for their own tax affairs and returns as they were self-employed. Domino’s Pizza appealed the decision of the Tax Commissioner to the High Court on a number of grounds.
The four key areas looked at:
- Mutuality of obligation-that is, does the company have to provide work, and does the delivery driver have to accept it? The company argued that the delivery drivers were not obliged to work, they could pick and choose their jobs, and therefore the necessary mutuality of obligation between the parties was absent.
- Substitution-normally- if you are allowed to substitute someone else to do your job or carry out duties you are not an employee, you are self-employed.
- Integration-were the delivery drivers integrated into the business? If they were then they were likely to be employees, but the company argued they were an “accessory” to the business, not integral to it.
- Contractual terms-the company argued that the Revenue Commissioners did not place enough weight on the actual terms and conditions between the parties and placed too much emphasis on how the contract was operated.
The High Court Findings Included:
High Court upheld the Revenue Commissioners’ decision that the delivery drivers were employees, and treated as so, for tax purposes for the following reasons:
- The High Court found that once the drivers filled out an availability sheet, they then had an obligation to be available. Because of this the High Court held there was mutuality of obligation.
- The High Court also found that the purported substitution clause only allowed the driver to nominate a replacement who would then be approved and paid by Dominos. This was not true substitution.
- The Court, in looking at the question of integration into the business, found that the drivers were integral to and played a vital role in the business. It also noted the drivers were obliged to wear uniforms and take orders from Dominos, not the general public or end user.
- When it looked at the contractual terms the High Court found the Revenue Commissioners made a mistake in looking at how the contract was actually performed, as opposed to the terms and conditions set out in the written contract.
The Court of Appeal Findings: (This was a split 2:1 majority decision)
- There was no obligation on the drivers to work and no requirement for them to initiate an agreement with the appellant unlike the position in Weight Watchers where there was an express contractual obligation on the Leaders to initiate the individual contracts.
- There was no obligation on drivers to turn up for an agreed shift and they were free not to attend a particular shift for any or no reason. There was no sanction if a driver failed to attend.
- Significant statutory intervention in England and many of the authorities turn on the statutory definition of a “worker”, an intermediate category between an employee and an independent contractor, which does not exist in Irish law.
- To adapt the law is to modify or change it. The Commissioner did not purport to do so. It was not open to her to adapt the law to modern means of employment at all. She certainly was not entitled to do so by opting to follow English law rather than established Irish precedent to the contrary. It was not open to the High Court to introduce such a significant change (or indeed this Court) either. Such a change is for the Oireachtas and must be prospective.
The Court concluded that the individuals involved were independent contractors and not employees. This has important implications for employers who need to be aware of the emphasis that will be placed on the actual relationship between the parties, and not just on what is contained in the written contract. The outcome highlights the importance of
- Ensuring that contracts for services make it clear that there is no obligation on independent contractors to carry out any work, and that the arrangement operates accordingly in practice.
- There is no obligation on a business to provide any work to its independent contractors and businesses ought to be able to demonstrate that this is in fact the case.
This case will have significant implications from an employment law and revenue perspective.
Case Law Review – Probation Dismissal – O’Donovan v Over-C Technology Limited & Other
This is another case heard by the Court of Appeal in February 2021. The case was a Probation Dismissal for Performance and therefore would not have the level of service required for a claim under the Unfair Dismissals Act 1977.
Mr O’Donovan was employed as the Chief Financial Officer with Over-C Technologies Limited in August 2019. Mr O’Donovan was hired under a six-month probationary period which was stated in his employment contract.
“An initial probationary period of six months applies to this position. During this period your work performance will be assessed and, if it is satisfactory, your employment will continue. However, if your performance is not up to the required standard, we may either take remedial action or terminate your employment. Any continuous period of absence of four weeks or more will suspend your probationary period until your return to work.”
O’Donovan was terminated in January 2020 on the grounds of poor performance and was paid 1 month in lieu of notice.
Mr O’Donovan went to the High Court and sought an injunction preventing his dismissal. He claimed
- Purported dismissal was carried out in violation of the express and/or implied terms of his employment contract.
- That the disciplinary process as established was not fair on the grounds set out.
Mr O’Donovan claimed he was dismissed for misconduct. However, the High Court nevertheless inferred a right to “fair procedures” into the dismissal process.
The Court of Appeal decision overturned the High Court decision and removed the uncertainty created by the High Court’s original decision. The Court of Appeal acknowledged the following:
- It was accepted that the dismissal during probation was for poor performance, not misconduct.
- The contract of employment included an express clause which permitted termination during probation for no reason.
- The Court refused to imply a right to fair procedures into a contract.
- The employee was dismissed pursuant to an express contractual term which entitled the employer to dismiss him if his performance was substandard.
- The employee was appropriately paid his notice.
This case demonstrates that no-fault dismissals are possible. A no-fault dismissal occurs where an employer exercises a contractual right to terminate an employee’s employment with notice, but without fault or without providing a reason.
However, one should always take legal advice when going down this route with an employee on probation. The contractual right around probation should also be clearly stated in the employee contract.
The court of appeal stated two clear principles in their findings:
- Confirmation that an employer can terminate employment for any reason or no reason, provided adequate notice is given. This applies whether or not the dismissal occurs during the probationary period.
- It is authority for the proposition that the principles of natural justice apply to cases involving dismissal for misconduct, but not to termination on other grounds.
A no-fault dismissal is permitted in law and this case supports this as demonstrated in the Court of Appeal decision.
“During a period of probation, both parties are – and must be – free to terminate the contract of employment for no reason, or simply because one party forms the view that the intended employment is, for whatever reason, not something with which they wish to continue”.
Case Law Review – Protected Disclosure – Baranya v Rosderra Irish Meats Group Limited
This case is important to employers addressing Protected Disclosures made in the workplace. It brings the Health and Safety of individuals endangered under consideration by Protected Disclosures.
The Complainant commenced employment with Rosderra Irish Meats Group Limited (the Respondent) in October 2000. Mr. Baranya had worked for the Rosderra Irish Meats for 15 years when he left its employment voluntarily. After some time, Mr. Baranya asked to recommence work for the Respondent and was employed on a new contract. Mr. Baranya claimed that on his return he informed the Respondent that he wished to change role as the work he had been doing caused him pain. Three days later he was dismissed. Mr. Baranya claimed that he had been dismissed for making a protected disclosure.
The Respondent’s position was that Mr. Baranya had not made a protected disclosure but had instead raised a grievance. However, the Respondent added that even if he had made a protected disclosure, it was not the reason his employment had been terminated, where contended it had been terminated because he walked off the production line without giving management an opportunity to address his request.
WRC, Labour Court, and High Court all ruled that the complaint made by the employee did not constitute a protected disclosure for the purposes of the Act as follows:
The Adjudication Officer found that Mr. Baranya had indeed expressed a grievance as opposed to making a protected disclosure and rejected his complaint that he had been dismissed as a result of making a protected disclosure. Mr. Baranya appealed to the Labour Court.
The Labour Court found that Mr. Baranya’s communication to his employer did not constitute a protected disclosure because it did not disclose any wrongdoing on the part of the employer. It noted that Mr. Baranya’s communication appeared to be an expression of grievance and not a protected disclosure.
The matter was then appealed to the High Court on a point of law. Ms. Justice O’Regan dismissed the appeal as she found the claimant failed to establish any error on the part of the Labour Court.
The Supreme Court has recently delivered an important ruling on what constitutes a protected disclosure. It highlighted that it was possible for an employee’s complaint that his health and safety was being endangered due to workplace practices to amount to an allegation of wrongdoing such that it could be considered to be a protected disclosure.
The Supreme Court also held that the communication could not be taken in isolation and instead must be considered in the context of the complaints made in the preceding months. This will have an important implication for employers in assessing whether complaints from employees constitute protected disclosures.
In order to qualify for protection under the 2014 Act, a worker must report a “relevant wrongdoing”. In the Baranya case, the employee alleged that his communication reported the following relevant wrongdoings under the 2014 Act:
- that the employer had failed, was failing or was likely to fail to comply with legal obligations, other than one arising under the employee’s contract of employment; and
- that the health or safety of any individual had been, was being or was likely to be endangered
The Supreme Court noted that it appeared from the 2014 Act that the legislature had intended to exclude purely personal complaints from its scope. However, the 2014 Act had failed to do this and many complaints made by employees which are entirely personal are capable of being regarded as protected disclosures. This was especially so in the case of health and safety concerns which may relate to “any individual”.
Ultimately, the Supreme Court made no determination whether the communication by the employee was a protected disclosure. It held that the Labour Court (whose decision was the subject matter of the appeal to the Supreme Court) had erred in law by drawing a distinction between grievances and protected disclosures and had failed to make the appropriate findings of fact on what was stated precisely by the employee and whether the communication made by the employee amounted to an allegation of “wrongdoing” on the part of his employer. The Baranya case has been remitted back to the Labour Court to determine these questions.
The Protected Disclosures (Amendment) Act 2022 has now been signed into law. The 2022 Act transposes the EU Whistleblowing Directive and amends the existing Irish framework for the protection of whistle-blowers under the Protected Disclosures Act 2014. A statutory commencement order is necessary to bring the Act into operation.
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The information in this article is provided as part of Action HR Services Blog. Specific queries should be directed to a member of the Action HR Services Team and it is recommended that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct at 24/08/2022.