|
|||||||||
| |
What is inherent in a contract of employment is that the worker has to perform the job personally and cannot ordinarily substitute themselves with another worker. The right to substitute, therefore, can be seen as an indication that the contract is one for services and that the worker is a self-employed contractor. An element of caution must be exercised here, however, as there may be other factors which affect the decision as to the worker's status. It may be that the right to substitution is conditional upon the client being able to veto the substitute for whatever reason, or that the contract contains a 'substitution clause' but, the clause has never been utilised. There is much debate, at present, over the form that a right of substitution clause should take. There are those of the opinion that if the clause is the 'right of substitution' the clause does not confer a 'right' unless it is unfettered. So, the contract clause would be for example : Clause 1There is one problem with this type of clause and that is it is unlikely to be accepted by the industry. In the vast majority of cases the client will not allow a contractor to fulfil the services without knowing that they have the requisite skills and experience. The client may also want to do security checks on an individual where the contractor will be working with sensitive information. Although this type of clause might be seen as a necessity in order to comply with IR35, the commercial reality is that it is unreasonable to expect a client to accept an unfettered right of substitution. This has little to do with whether the contractor is or is not a 'disguised employee' it just makes commercial sense. By the same token, being over-cautious is as ineffective as being commercially unrealistic. Many contracts have been drafted with a substitution clause where the client has an absolute veto on consenting to a substitute. This effectively nullifies the clause because in some cases both the client and the agency can refuse to allow the company to substitute without even having to give an explanation. An example of this would be: Clause 2These clauses represent the position of the industry versus the contract draftsman. Clause 1 is the type of clause that the lawyers would prefer, looking at the situation from a purely legal angle. Clause 2 is the type of clause that the client or agency prefers based on the fact that they are over-cautious about exposing themselves to liability. In neither clause has the contract as a whole been considered. It is implied in the contract, or in some cases expressly stated, that if the Company provided a substitute that was not qualified to perform the services the Company would be in breach of their performance obligations. It is easy to lose sight of the objective but, at the end of the day what is required is a clause that allows the Company to provide a substitute that the Client will be happy with. Such a clause might be expressed as: Clause 3This clause is not conditional upon the Client's consent it is conditional upon the substitute being capable of fulfilling the contract services. Additions to this clause, to placate the agency, maybe that the Client has to notify the Agency in writing that they are satisfied, so there is no dispute at a later date. Another addition maybe that the proposed substitute agrees to abide by the terms and conditions of the contract. There are two main cases that discuss the right of substitution; Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance [1968] 2 QB 497 and Express & Echo Publications Ltd. v. Tanton (1999) ICR 693 . Both cases involved delivery drivers who had the right to substitute themselves with another driver albeit, with certain conditions attached. In the Ready Mixed Concrete case the Minister of Pensions & National Insurance took the view that Mr Latimer (L) and two other owner/drivers were working under a contract of service and by virtue of that were liable to pay a flat rate contribution of National Insurance. In the appeal case, the question of the right to substitution was raised. In the contract between L and the Company there was provision for the owner/driver to hire a competent driver, with the consent of the Company, should L not be able to drive at any time. In reliance on this, a relief truck driver was employed by the nine owner/drivers with the knowledge and approval of the Company. The relief driver was employed to take over the operation of any vehicle whose regular owner/driver was absent through sickness or holiday or any other reason. In the more recent case on the right to substitution Express & Echo Publications Ltd. v. Tanton (1999) ICR 693 , Mr Tanton, the applicant, was a delivery driver employed by Express & Echo (the company). There were many factors in this case which pointed towards Mr Tanton being under a contract of employment, not least that the Inland Revenue from the outset took the view that he was an employee for which he was taxed accordingly. One factor, however, which Gibson L.J., in the Court of Appeal found to be "…a remarkable clause to find in a contract of service." was Clause 3.3 which gave Tanton the right to substitute himself with another. "Clause 3.3In the event that the contractor is unable or unwilling to perform the services personally he shall arrange at his own expense entirely for another suitable person to perform the services."In addition to this, it was stated in paragraph 13 of the Schedule: In the event that the contractor provides a relief driver, the contractor must satisfy the company that such a relief driver is trained and is suitable to undertake the services."Gibson L.J., held (p.694A): "…that, where a person who worked for another was not required to perform his services personally, as a matter of law the relationship was not one of employee and employer; and that, accordingly, clause 3.3 of the contract (not to perform any services personally) was a provision wholly inconsistent with the contract being one of service…"It can be seen from both these cases that there was a 'right of substitution' but, that in Ready Mixed Concrete it was with the "…knowledge and approval of the Company…" and in Express & Echo the contractor had to satisfy the Company that the substitute was "…suitable to undertake the services." Without the court's opinion, however, at this stage it is purely speculative as to what type of clause is commercially and legally acceptable. In reality, however the clause is drafted, it must reflect the true nature of the situation. That is not to say that the parties are not free to contract how they will but rather, is a substitution clause appropriate given the circumstances? |
||||||||
