Self-Employed Radio Presenter Relieved of £140,000 Tax Demands

Distinguishing between employment and self-employment is a multi-faceted task and not just a matter of ticking boxes. That was certainly so in one case concerning a radio personality who was relieved of six-figure tax demands after a tribunal found that he fell into the latter category.

The man had for 18 years presented a humorous sports-related radio show. He had no contract with the radio station and was paid fees for his work through his personal service company. HM Revenue and Customs (HMRC), however, took the view that he was an employee of the radio station in all but name.

HMRC raised demands against the company for over £140,000 in Income Tax and National Insurance Contributions that it claimed should have been deducted from the man’s fees at source. It pointed out that, during the four tax years to which the demands related, he had derived about 90 per cent of his income from the radio station. On that basis, it was submitted that, far from operating as a free entity, presenting the show was effectively his job.

In upholding the man’s appeal against that decision, however, the First-tier Tribunal (FTT) accepted his evidence that the radio show was just one of the strings to his bow and that he saw himself primarily as an independent comedy script writer. He enjoyed a large measure of artistic freedom in creating the content of the show, the success of which depended on his humour and originality.

He performed no other role for the radio station and was paid in the form of a fee for each show he presented. He had no entitlement to holiday or sick pay, pension or paternity leave, and received no retainers or bonuses. He worked simultaneously for other broadcasters, and as a freelance script writer. In the circumstances, his relationship with the radio station was not one of employment.

The ‘Good Work Plan’ Phase Two – Protecting Vulnerable Workers

Following Matthew Taylor’s 2017 independent review on modern working practices, entitled ‘Good Work’, in February 2018 the Government published its response and launched consultations on how best to implement many of the review’s recommendations.

The Government has now announced phase two of the Good Work Plan, which focuses on protecting vulnerable workers. It includes proposals to:

  • give workers enhanced rights to tackle unscrupulous employers who do not comply with the law; and
  • create a single labour market enforcement body, with powers to enforce minimum wage regulations, including ensuring agency workers are not underpaid, and the law relating to workers’ entitlement to holiday pay.

Business Secretary Greg Clark also confirmed that Matthew Taylor has been appointed as the interim Director of Labour Market Enforcement.

A consultation on the latest proposals has been launched. This closes at 11:45pm on 6 October 2019.

Employment Tribunals Don’t Punish, They Compensate

Some employers treat their staff disgracefully but, no matter how bad their conduct may be, the objective of the tribunal system is not to punish them but to compensate those who suffer at their hands. A case on point concerned an immigrant worker who was plunged into depression after suffering extortion at his boss’s hands.

The man, an Indian national, was employed as a PR consultant and sales adviser by a travel agency which had sponsored his entry into the UK on a five-year visa that required him to be paid at least £23,000 a year. He purportedly received that salary, but the agency’s managing director threatened that if he did not repay half of his wages each month, his employment would be terminated.

Although he complained that he did not have enough to live on, he initially complied with that demand. Following an angry confrontation with his boss, however, he went on sick leave, suffering from anxiety and depression. He had been in the job for only about six months and was still on sick leave when he was dismissed.

After he launched proceedings, an Employment Tribunal (ET) found that he had been automatically unfairly dismissed for making a protected disclosure. His boss’s demand was nothing short of extortion and, in subsequently claiming that he had been given two previous warnings and had committed an act of gross misconduct, the agency had sought to contrive bogus reasons for his dismissal.

Despite the relatively brief duration of his employment, the ET awarded him a total of £124,658 in compensation. That included the pay he should have received had he remained in the agency’s employ throughout the period of his visa. A 25 per cent uplift was applied to the award to reflect the agency’s complete failure to comply with the Acas Code of Practice.

In upholding the agency’s challenge to the award, the Employment Appeal Tribunal (EAT) found that the ET had erred in law in a number of respects. Amongst other things, it had awarded full loss of earnings in respect of the man’s post-dismissal sickness period without making any finding as to whether, or to what extent, the dismissal had worsened or prolonged his depression.

The ET had also failed to consider whether he could have been lawfully dismissed on the basis of long-term sickness absence and whether he could reasonably have been expected to mitigate his loss by returning to India in search of alternative work. The ET should also have stood back and considered the overall size of the award before deciding to apply the full 25 per cent uplift. Given that the man had valued his claim at only about £64,000 in his schedule of loss, the award of almost double that sum had effectively taken the agency by surprise.

The EAT noted that, in cases of such serious employer misconduct, there is always a danger that ETs may, consciously or subconsciously, adopt a punitive approach. However, it was satisfied that the ET in this case had not fallen into that trap. In the circumstances, the matter was sent back to the same ET for reassessment of the man’s compensation in the light of the EAT’s ruling.

Sexual Stereotyping in the Workplace Exists – But How to Prove It?

Businesses in which women are under-represented in senior roles invite speculation that the imbalance results from discriminatory sexual stereotyping. However, as a case in the context of the banking sector showed, Employment Tribunals (ETs) are required to base their decisions not on surmise but on hard evidence.

The case concerned a female vice-president who worked in a multinational bank’s compliance department. She claimed, amongst other things, that she had been passed over for a promotion due to her sex. Her sex discrimination and harassment claims were upheld by an ET, principally on the basis that a senior manager’s decision to appoint a male external candidate to the role she had coveted was infected by sexual stereotyping.

In its decision, the ET noted that, whilst men in the workplace may be praised for their ambition, forceful personalities and commitment to their jobs, women in the same position may be criticised for their obsession with work. Another common stereotype is that women are more divisive, causing toxic relations by becoming too emotionally involved in office politics. Sexual imbalance in senior positions also tends to be perpetuated by the propensity of men to prefer the views and qualities of other men.

In upholding the bank’s challenge to the ET’s decision, however, the Employment Appeal Tribunal (EAT) noted that it had been no part of the woman’s pleaded case that the manager’s decisions were based on stereotypical sexual assumptions. That suggestion was not the focus of evidence in the case and had been raised for the first time in the ET’s ruling. The bank and its witnesses had thus been deprived of any fair opportunity to respond to the contention. The woman’s sex discrimination and harassment claims were sent back to a fresh ET for reconsideration.

The EAT, however, went on to dismiss the bank’s challenge to the ET’s finding that the woman had suffered maternity leave discrimination. Because of assumptions made as to what women should be doing whilst on maternity leave, she had been discouraged from attending a quarterly review meeting. Advantage of her absence had also been taken in sidelining her and passing significant elements of her role to another employee. There had been no real intention to reinstate those aspects of her work on her return.

Restrictive Covenants and Restraint of Trade – Supreme Court Guidance

Professionally drafted restrictive covenants in employment contracts are a legitimate means of protecting businesses from unfair competition – but only insofar as they do not amount to an unreasonable restraint on an individual’s freedom to work. In an important test case, the Supreme Court considered where the balance is to be struck between those two competing interests.

The case concerned a senior employee’s contract of employment with an executive search and recruitment company. It included a non-competition covenant which, for six months following her departure, forbade her from being engaged, concerned or interested in any competitor business. Shortly after her employment came to an end, she informed the company of her intention to start working for a competitor. She contended that the covenant was an unreasonable restraint of trade and void.

The company launched proceedings and obtained an interim injunction against the former employee, holding her to the terms of the covenant. That order was, however, subsequently overturned by the Court of Appeal on the basis that the covenant was unreasonable, in that the term ‘interested in’ was so wide as to prevent her from having even a minor shareholding in any competing business.

In ruling on the company’s appeal against that decision, the Supreme Court noted that the term ‘interested in’ has long been included in standard precedents used in the drafting of non-competition clauses. However, on the basis of its natural and ordinary meaning, the term sought to prohibit the former employee from any shareholding, large or small, in any competing business. That objective was too broad and amounted to an unlawful restraint of trade.

In unanimously upholding the appeal, however, the Court ruled that the offending words could be severed from the covenant, rendering the balance of its contents valid and enforceable. Applying a blue pencil to the term ‘interested in’ neither fundamentally changed the character of the contract nor did it generate any major change in the overall effect of the post-termination restrictions on the former employee’s conduct. Although those restrictions had long since expired, the Court formally reinstated the injunction.