Agents : Workers in Disguise?
Can a Commercial Agent also be a worker?
A Commercial Agent is “a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of his Principal or to negotiate conclude such transaction on behalf of or in the name of that Principal”. Commercial Agents generally have rights which are governed by the Commercial Agents Regulations (“CARs”), as amended. It is clear from the definition of a Commercial Agent that they cannot be an employee (since they are “self employed”), but it is less clear whether (and if so, in what circumstances) they can be a “worker” for the purposes of employment statutory protection. Worker status is important because a number of statutory rights extend to workers that would not otherwise extend to the genuinely self employed. For example, a worker can bring a discrimination claim, or a claim for unlawful deduction from wages or holiday pay.
A worker is an intermediate class of protected person. They do not have the same level rights and protection as employees, but gradually over the years a new class of protected person known as workers have been created. The legislative intention behind this is to provide protection to workers who are substantively and economically in the same subordinate and dependent position as employees with regard to their employers. There is a statutory definition of “worker” which varies slightly from one statute to another but essentially a worker is “a person who works under a contract where the individual performs the work or services personally for another party who is not a customer or client”. This is generally considered to be a wide definition.
There have been a few recent cases which have suggested that in some circumstances a Commercial Agent could be a worker, although the point is still not completely clear. In Giannelli v Edmund Bell, Giannelli was employed by Edmund Bell from 1988 to 1997. He then signed a sales agency agreement with Edmund Bell. He was allowed at the same time to work for a number of other Principals but in 1999 he stopped working for one of the other Principals and so Edmund Bell paid him a retainer as a “cushion” to stop him from being financially disadvantaged by the fact that he had stopped working for one of the other Principals. In 2004 Edmund Bell then stopped paying him the retainer and Giannelli claimed that this was an unlawful deduction from his wages.
The Tribunal had held that Mr Giannelli was a worker, but importantly they did not rule out the possibility of him both being a worker and a Commercial Agent.
The Tribunal weighed up the factors pointing to worker status and the factors pointing to the self-employed Commercial Agency status. They were persuaded by the fact that :
• There was a high degree of control being operated over Mr Giannelli by Edmund Bell. This was very similar if not identical to the degree of control which had operated when he had been an employee of Edmund Bell.
• Mr Gianelli was also required to attend meetings and exhibitions and continued to be reimbursed for his expenses which he incurred in connection with his attendance at those meetings.
• Edmund Bell provided Mr Giannelli with sales leads in connection with his territory. This therefore continued in a similar way to when Mr Giannelli had been an employee.
• He did not carry any business risk and was financially dependent on Edmund Bell. He was not financially independent of them.
Whilst the Tribunal also looked at a few factors which suggested that he was self-employed including that he was paid on a gross and not net of tax basis, on balance the Tribunal was persuaded that Mr Giannelli was a worker and he was therefore able to claim unlawful deduction from wages. He was awarded about £25,000.
One of the key points to come out of the Tribunal decision is that when the Tribunal considered the relevance of the CARs, they held that there was no suggestion that the CARs were in anyway exclusive or that they precluded worker status. It therefore seems possible following that case that a Commercial Agent could have protection under the CARs and at the same time have protection as a worker. This point has not yet been tested before the Courts and Tribunals, so we will need to watch this space. Note that the decision in Giannelli was a Tribunal decision, and therefore not binding on future cases. But, it demonstrates the approach that Courts and Tribunals seem likely to take.
Employers would be well advised to check the status of their workforce carefully and not to assume that people fall into particular categories (such as employee, worker or Commercial Agent). This should be kept under constant review – particularly when relationships are terminating.
You can register online or follow us on Twitter or LinkedIn to receive our latest news, events and publications.