I have recently taken over the HR function at a carpet business. The company engages around 50 self-employed carpet fitters who do the carpet fitting jobs that we arrange for them. We provide the tools, insurance and uniforms, but then deduct a set fee from their payments for this. The carpet fitters are paid according to how many carpets they fit.
Now one of the carpet fitters (Caroline) who is pregnant is saying that the Company has to pay her maternity pay when she has a baby. I have checked the terms of the contracts with the fitters and it definitively says that fitters are not employees. Surely she can’t go back on the document that she has signed?
If I am wrong, there is another problem, the Company also has a similar contract with an engineer (Emily) who fixes the carpet making machines. She heard about the complaint and has said that if the fitters are entitled to paid maternity leave then so is she. The thing is that it would be really difficult for me to work out what the average weekly pay would be for the engineer because she often sends other people to do the work instead of her, or doesn’t turn up at all if she doesn’t like the job and we haven’t kept any records of when that has happened in the past. The fitters are technically allowed to do that too under their contracts, but in reality they wouldn’t be allowed to refuse a fitting job or to send someone else.
You are right that whether or not you have to pay Caroline maternity pay depends on whether or not Emily is an employee. It was recently confirmed by the Supreme Court in Autoclenz Ltd v Belcher  IRLR 820 that even if a contract expressly says that an individual is not an employee, the court can look behind what the contract actually says and look to the true nature of the relationship between the parties to determine what the obligations of the parties actually are.
The key factors when deciding whether someone is an employee or self-employed are:
- whether personal service is required: employees usually have to go to work personally and cannot usually send someone in their place;
- mutuality of obligation: this means whether there is an obligation on the company to provide work and on the individual to accept that work;
- control: how much control the company has over the individual; and
- other factors: this can include a number of things such as for example: who provides and maintains the tools or equipment used, whether the person hires their own help, the degree of financial risk adopted; the degree of investment in and management of the business; whether the individual has the opportunity to profit from their own good performance; etc.
Caroline’s situation is really quite similar to the facts of Autoclenz. Going through the factors which I have outlined above, it seems that even though the terms of the contract say that Caroline can send someone in her place or choose not to work, in reality this is not how the contract is operated. It seems that the carpet fitters have to provide a personal service and that there is mutuality of obligation in the sense that the Company provide the carpet fitting jobs and the fitters are obliged to accept them. The Company control how many fitting jobs the fitters do, what they wear, etc so it also seems that the Company has a sufficient degree of control to point towards an employment relationship. In the other factors category, it may be seen as important that the fitters have no real opportunity to manage or develop the business or to increase their profits, other than by taking on more fitting jobs. In addition the Company provides all of the equipment and a fixed fee is charged for this (its seems) rather than the true cost of the tools being reflected.
It seems that Caroline is likely to be an employee and that the Company must therefore allow her to take maternity leave and pay her statutory maternity pay during that period.
Emily’s situation is very different even though her written contract is on similar terms. She does not have to provide a personal service and can send a replacement of her own choice. There seems to be little mutuality of obligation because she does not turn up when she does not fancy a job. Although I would need a little more detail it seems that you have much less control in relation to Emily, as she does not even have to tell you when she sends someone else.
Emily seems to be a self-employed contractor and if this is the case there would therefore be no obligation for the Company to pay her statutory maternity pay.