Vicarious liability and the Coronavirus Job Retention Scheme: how important is it to identify employment status?

Employers, from SMEs (small and medium sized enterprises) to large corporations, are in uncertain times. COVID-19 has undoubtedly been at the forefront of the minds of most and has, unsurprisingly, been the most pressing issue for many employers during the last six months. The Morrisons and Barclays Supreme Court judgments may well have bypassed the consciousness of many a business as a result. They are however extremely important decisions and demonstrate a concerted effort by the Supreme Court to clarify the scope of vicarious liability across its two part test. The Barclays decision focused on the first part of this test; whether the relationship between the tortfeasor and the company was so akin to an employment relationship so as to impose vicarious liability on the company. The decision has highlighted the importance of the way workers (whether employees or otherwise) are categorised, depending on the legal issue. This article looks briefly at the Barclays judgment and how the definition of worker has had a significant impact on the COVID-19 measures initiated by the UK Government.

Barclays Bank plc v Various Claimants

There has been a general blurring of the traditional lines between the self-employed and employees in recent years, with the rise of the gig economy zero hours contracts agency staff and personal service companies.

This created a great deal of uncertainty for employers and employees, and thus, the clarification provided by the Barclays decision is very welcome. This judgment has now made it clear that in principle, an employer will not be vicariously liable for independent contractors, where previously the law may have imposed such a liability. Whilst this is good news for businesses, the decision stops short of aligning employment status with the concept of vicarious liability, making it difficult to fully consider where working people (whatever category they may fall into) sit on the “spectrum” of vicarious liability. Lady Hale commented in the judgment that:

It is also apparent from the judgment that vicarious liability may extend beyond employees to encompass “workers”. This isn’t a hard and fast rule, however, and the courts will still need to consider on the facts whether the relationship is such as to warrant the imposition of vicarious liability.

Coronavirus Job Retention Scheme

An example of where concepts of employment and worker status are colliding and causing confusion is in the implementation of the UK Government’s Coronavirus Job Retention Scheme (CJRS) and its application to “limb (b) workers”. The CJRS is designed so that employers can claim in respect of full and part time employees, those on agency contracts, those on zero-hour contracts and apprentices. It also applies to workers, including, “limb (b) workers” provided they are paid through the employers’ PAYE system. Their employment status in this regard is therefore determined by tax law rather than employment law principles.

The fact that the CJRS is based on a tax law definition in determining eligibility for the scheme, has meant that many contractors, who for all intents and purposes are “limb (b) workers” at any other time, have not been able to be furloughed, if they are not paid through the PAYE system. In this situation, the only option available to contractors is to apply for Self Employment Income Support (and whilst waiting for that, Universal Credit) if they are self-employed. Alternatively, if they work through their own limited company, to apply for the government's Small Business Relief Loan (or other Local Authority Hardship Funds).

Comment

Employment status therefore remains a concept that is fluid, depending on whether you are looking at vicarious liability, employment law, tax law or social security rules. Without standardisation, employers remain uncertain and workers of whatever category may find themselves unintentionally “slipping through the gaps” in terms of the support available to them.

Related items:

• Chancellor vows to “protect, support and create jobs” in his Summer Statement
• Flexible furlough – the devil is in the detail
• Coronavirus Job Retention Scheme – furlough is changing in the UK
• Vicarious liability: the Supreme Court redresses the balance