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The employment status challenge: Key considerations for employers in Ireland

20 April 2022

With labour supply a top priority for employers, our employment experts in Ireland consider the importance of the distinction between different employment statuses. 

When engaging the workforce how does the law distinguish between different categories of employment status?

In Ireland there are two categories of employment status: an employee and those who are self-employed. We do not have a third category of "worker" as is the case in the UK.

Employee

An employee is defined in the Unfair Dismissals Act 1977 as amended ("the UDA") as: “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment…."

In most cases it will be clear whether a person is employed or self-employed. However, it may not always be clear, and this can lead to confusion in relation to employment status. There is no single, clear legal definition of the terms ‘employed’ or ‘self-employed’ in Irish or EU law. In order to determine a person’s employment status, both the written or oral contract and the reality behind the contract must be taken into consideration. Although the intention of the parties and any written agreement is given due consideration, they do not on their own determine the employment status. While the terms of a contract might be quite clear in saying that a person is engaged as a self-employed contractor, courts and statutory bodies may still conclude that they are, in fact, an employee. 

Similar to the UK, we have seen many years of case law applying the long-established legal tests of personal service, control, integration into the workforce and mutuality of obligations to help determine an individual's employment status. In recent case law, the concept of mutuality of obligation was given particular importance. 

What are the different rights and protections for each different employment status?

There is a significant distinction in rights and protections between employees and self- employed contractors:

  • Employees are entitled to employment protection including the right to a written statement of employment particulars, family-related leave, redundancy pay and the right to claim unfair dismissal. Some of these rights require a qualifying period of service before they are available, for example, 12 months service in the case of unfair dismissal rights. Employees are also protected under whistleblowing legislation and against discrimination. Employees will be automatically transferred in an asset sale under the Transfer of Undertakings (Protection of Employment) Regulations SI 131 of 2003 ("TUPE"). 
  • Self-employed contractors on the other hand have very little employment protection. Typically, an independent contractor would own their own business and be exposed to financial risk by having to bear the cost of making good faulty or substandard work carried out under the contract. An independent contractor would also have control over what is done, how it is done, when and where it is done and whether he or she does it personally.

What are the current themes with regard to employment status?

With the rise of the gig economy in Ireland employment status has been a high priority for the Government. There is a particular focus on clamping down on the abuse by certain companies of engaging individuals on a self-employed basis (bogus self-employment) and seeking to avoid employment law protections and tax obligations. 

The series of recent UK cases on employment status ranging from bike couriers to plumbers to taxi drivers have been monitored closely here. However, as there is no third category or "worker" in Ireland, the case law is of limited value. 

We are in a period of labour shortages across many sectors and high inflation so employers will have to offer more incentives to attract employees. 

Also, as we have emerged from the Covid 19 pandemic there is an acknowledgement by the Government that vulnerable workers in low paid precarious employment who were on the front line need to have better legal protection. 

Get an insight into the current situation in other jurisdictions from our global legal team.

 

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Further Reading