BITING DOWN ON WORKER STATUS
Biting Down on Worker Status: The EAT’s Ruling in Ter-Berg
Dr. Mark Ter-Berg, a dentist, sold his dental practice and subsequently entered into an agreement to provide dental services at the same premises. The agreement explicitly stated that it did not create an employment relationship and included a substitution clause allowing Dr. Ter-Berg to arrange for a locum during prolonged absences. Later, Dr. Ter-Berg brought claims before the Employment Tribunal, asserting that he was either an employee or, alternatively, a worker.
“This ruling reinforces the importance of considering the practical realities of working arrangements rather than relying solely on contractual terms.”
The Tribunal initially determined that he was not an employee—a decision Dr. Ter-Berg did not appeal. However, in a subsequent hearing to assess his worker status, the Tribunal ruled against him again. It reasoned that a finding of worker status would be inconsistent with its earlier conclusion on employment status, leading Dr. Ter-Berg to appeal the decision to the Employment Appeal Tribunal (EAT).
EAT Decision
The Employment Appeal Tribunal (EAT) overturned the Tribunal’s decision, identifying three key errors:
Personal Service and Substitution Rights – The Tribunal concluded that Dr. Ter-Berg did not meet the requirement of personal service due to the substitution clause in his agreement. However, the EAT found that the Tribunal had misapplied case law on substitution clauses, failing to properly assess whether the right of substitution was genuine and unfettered. A contractual substitution clause does not necessarily preclude worker status if, in practice, personal service remains the expectation.
Interchangeability of Employment and Worker Status Tests – The Tribunal mistakenly treated the legal tests for worker and employment status as interchangeable. The EAT clarified that while there is overlap between the two tests, they are distinct, and conclusions regarding employment status cannot be directly transferred to worker status. A person may not qualify as an employee under section 230(1) of the Employment Rights Act 1996 but may still be a worker under section 230(3)(b).
Consideration of Mutuality of Obligation – The Tribunal failed to properly consider mutuality of obligation, which is relevant to both employment and worker status. The EAT emphasized that mutuality of obligation should be assessed in the context of the specific working relationship and not simply dismissed because the individual is not an employee.
Implications for Employers and Workers
This case highlights the need for employers to be cautious when drafting contracts that seek to exclude worker status. The presence of a substitution clause does not automatically negate the requirement for personal service, especially if, in reality, the individual is expected to perform the work personally. Here, the fact that a substitute could only be engaged if Ter Berg was unable to carry out the work. Furthermore, tribunals must carefully distinguish between employment and worker status tests, ensuring they do not conflate the two. This ruling reinforces the importance of considering the practical realities of working arrangements rather than relying solely on contractual terms.
Labour Government’s Proposals for a Single Status of Worker
The EAT’s decision in Ter-Berg coincides with ongoing debates about employment status in the UK. The Labour Party has pledged to introduce a single status of worker, merging the current distinction between employees and workers into one category, with only the genuinely self-employed being treated separately.
Under the current system, there are three employment categories:
Employees (who have full employment rights, including unfair dismissal protection, redundancy pay, and family leave entitlements);
Workers (who benefit from core protections like minimum wage and holiday pay but lack full employment rights);
Self-employed individuals (who have the least protections).
Labour’s proposed reform would simplify employment law by eliminating the ‘worker’ category, ensuring all individuals performing personal work for an employer receive key employment rights. This could significantly reduce litigation over employment status, such as in Ter-Berg, where much of the dispute revolved around whether the claimant fell within the intermediate ‘worker’ category.
Conclusion
The Ter-Berg case reinforces the need for a clearer approach to employment status, which Labour’s proposal for a single worker status seeks to address. Employers should prepare for potential legal changes by reviewing their workforce structures and contractual arrangements to ensure compliance with evolving employment law frameworks.