Unite celebrates final victory in employment agency and bogus self-employment battle

Unite, the UK’s largest union, has secured the final victory in a long running legal dispute which strengthens the union’s hand in pursuing the rip off merchants including payroll companies, umbrella companies and employment agencies operating ‘sham contracts’ with full repayment of the wages their member should have received.

Last month (May 2018) pipe fitter Russ Blakely was paid over £2,500 compensation for unlawful deductions and holiday pay by employment agency On-Site Recruitment Solutions Ltd after they accepted full responsibility for the claim two days before going back to court, after an Employment Appeals Tribunal (EAT) had previously found in his favour.

The EAT made several decisions which create legal precedents and will be used in future employment tribunals. These Include:

  •  Mr Blakely was a worker
  •  When deciding whether there was a contract (part of the test of whether someone is a worker) an employment tribunal has to consider the intentions of the worker and not just the employer
  •  There was a contract between Mr Blakely and On-Site. The use of an umbrella/payroll company did not avoid this relationship
  • Mr Blakely and other agency workers paid via a payroll/umbrella company could be a worker of the agency, the payroll company or both. The possibility of being a worker for more than one body potentially dramatically reduces the amount of payroll/umbrella company rip offs.

Unite assistant general secretary, Howard Beckett, said: “Following a two year battle Mr Blakely has finally received the compensation he deserved.

“While the sums are not huge the principles established at the EAT will be vital in fighting the scourge of umbrella and payroll companies in construction and other sectors. We are pleased to see On-site accepting its responsibility for its workers and hope this will be a turning point for them.

“Unite will now be ensuring that the decisions contained within this case will be applied to other similar cases and the rip-offs inherent in the employment agency, umbrella company/ payroll company model are tackled and stamped out.

“This case absolutely underlines why workers need to be a member of a trade union. A worker without first-class free legal support would have been denied employment justice in such a long-running and complicated case.”

The case began in January 2016 when Mr Blakely applied for work at Broadmoor Hospital in Berkshire. The main contractor was Keir and the mechanical contractor was Fascel. However Mr Blakely was recruited via On-Site.

On-Site then informed him that in order to be paid he needed to contact payroll/umbrella company, Heritage Solutions City Limited. He was charged £18 (management deductions) a week to be paid in this manner. He also had employer’s national insurance contributions deducted from his pay.

When in March 2016 he was asked to ‘sign a contract of services’ which claimed he was neither an employee nor a worker but was self-employed. Had the contract reflected the real working relationship, it would have meant that Mr Blakely was not entitled to even basic employment rights including holiday pay. Mr Blakely refused to sign the contract and when he took holiday in May 2016 he was not asked to return.

With the support of Unite he took an employment tribunal case for unfair deduction of wages (for the management fee and employer’s national insurance) and also claimed for unpaid holiday pay. The case was initially heard at the Reading employment tribunal which, wrongly ruled against Mr Blakely in the mistaken belief he was self-employed.

With the support of Unite’s Strategic Cases Unit, the case was appealed to the EAT, which heard the case in December 2017 and saw through the sham contractual arrangement.

The case was referred back to the employment tribunal to decide whether the agency or payroll company should carry the can for the claim, but agency On-Site accepted full responsibility two days before the case was heard. Payroll company Heritage Solutions took no part in any of the legal proceedings, as the company has ceased trading and is facing being struck off as a registered company. Any award against Heritage would have been a pyrrhic victory.

Mr Blakely’s case was also historic for Unite as, as well as being the first appeal court decision involving the use of a payroll company in a bogus self-employment sham, it was first appeal case taken by Unite’s Strategic Cases Unit.