Posted: Friday 4 November 2011
FSA Compliance Requirements Point Towards Employee Status
It goes without saying that the question of whether an individual worker is to be classed as employed or self-employed can have a variety of legal implications, with many employment-related rights arising only if there is an employer-employee relationship.
Assessing which factors point to employed or self-employed status is not always straightforward and is something which the courts have grappled with over the years. The current prevailing approach is the ‘Multiple Factor Test’. As the name suggests, applying this test involves considering a variety of factors which may be of relevance in any particular case.
I noticed a recent case before the Employment Tribunal, which I suspect is causing ripples within FSA circles, Johnson-Caswell v MJB (Partnership) Ltd (Case No. 3101854/2011), further consideration has been given to this issue and the outcome might come as a bit of a surprise...
The Claimant, Mr Johnson-Caswell, worked as an independent financial advisor for MJB. He lodged various claims before the Employment Tribunal against MJB including one for unfair dismissal. The preliminary issue of whether Mr Johnson-Caswell was an employee was key to determining whether or not his unfair dismissal claim was able to proceed.
In considering the question, the Tribunal took into account a variety of factors, including the fact that the Claimant’s contract stated he was self-employed and that he had a substantial amount of flexibility and discretion in terms of his working arrangements. In addition, the fact that he was paid by way of commission and was responsible for organising his own tax and national insurance contributions suggested self-employed status. Notwithstanding this, the Tribunal concluded that Mr Johnson-Caswell was in fact an employee and was therefore able to proceed with his claim. Interestingly, a factor which was central to its assessment was that Mr Johnson-Caswell was required to observe the Financial Services Authority’s compliance requirements. The Tribunal was of the view that this demonstrated a sufficient degree of control of the Claimant by MJB to indicate that their relationship was one of employer-employee.
While it is well-established that ‘control’ is an important factor pointing towards employment, the notable point in this case is that much of that control came from the industry regulator (the FSA), as opposed to the employer itself. The Tribunal held however that this did not detract from the fact that the Claimant was ultimately controlled by MJB.
This decision was reached at a Pre-Hearing Review based on the facts of this particular case and so its impact will be limited in terms of setting a precedent. Nonetheless, I think it provides food for thought for employers in the financial services industry or other sectors which are subject to extensive regulation. The decision also underlines the fact that the employment status of an individual is not always as clear cut as organisations might assume.
If you have found this blog post interesting please share it with your online community using the Share button above or below. Thank you.
