Reply to: Outside IR35 and suffered discrimination

[John Antell]

So in short - a contract can be covered by the legislation - as long as they argue they are effectively a "disguised employee"...

Not exactly.

At the risk of over-simplification there are three categories:

1. Employees (employed under a "contract of service")

2. Self-employed who agree to do work personally (often, though not necessarily, because they are engaged for their reputation/personal abilities)

3. Self-employed who agree to get work done but do not agree to necessarily do it personally

Category 1 is covered by employment legislation in the strict sense (e.g. unfair dismissal). 2 and 3 are not.

Categories 1 and 2 are covered by discrimination legislation. 3 is not. (NB the fact that the word "employee" is used in the Equality Act 2010 for 1 and 2 is just down to the drafting - it does not have any wider significance and does not mean that people in category 2 are employees in the usual sense of the word - it is just convenient in the context of drafting to use a single word and give it an extended meaning - a bit like giving a data item in a computer program a short name - the name is just a convenient label and not a precise description of the data it contains)

"Disguised employee" is not a term with a precise legal meaning but it is used by HMRC to describe people who are generally in category 1 but for some technical reason do not have a contract of service (for example, because, with the intervention of an agency, the person exercising control - the client - is not the same person who has a contract with the worker).

So, in summary, people in category 2 are covered by discrimination legislation but are not "disguised employees".

Bear in mind that discrimination legislation is very wide and applies not just to employment. A purchaser of goods, for example is protected against a supplier refusing to supply him on the grounds of his race/nationality/religion etc. This is so whether the purchaser is an ordinary consumer buying a single pizza or a self employed builder employing 100 staff and buying large quantities of building materials. There is no implication that business people are not covered by discrimination law. Or, put another way, the fact that you are covered by discrimination law does not imply that you cannot have a real business.

In fact the impetus for much UK discrimination law is EU directives, originally reflecting the fact that an important part of an efficient Europe-wide single market is the removal of barriers to trade caused by discrimination by one member stage against entry into its domestic market by businesses of a different nationality.

It might be true that some business people prefer to just find another private-sector customer rather than insist on their legal rights, but that would be a pragmatic business decision rather than a reflection of the legal position.

Where businesses tender for large contracts with government bodies, legal action (or at least threatened legal action) by unsuccessful bidders is quite common and often used tactically by businesses aware that government bodies generally dislike litigation.

[centurian]

So in short - a contract can be covered by the legislation - as long as they argue they are effectively a "disguised employee".

Given that the OP has gone to great lengths to argue this is not the case...

[John Antell]

Agreed! It would be very difficult to bring such a case against a large company. Which does not exactly discourage discrimination against contractors who are outside IR35!

I do not think this will improve under the new Agency Workers Directive rules to be implmented in October 2011. As I believe business to business relationships are excluded.

Someone earlier in the post suggested letting the Equality Director know about what happened. As he is based at the company European HQ which is in the same country as my other nationality!

Without getting into the specifics of an individual case, and as a general proposition, the position with regard to contractors and discrimination is:

1. The Equality Act 2010 uses the word "employee" but it is given a special meaning (in s.82(2) and means:

"employment under a contract of employment, a contract of apprenticeship or a contract personally to do work"

Thus it is not limited to "employees" in the usual sense of the word but covers contractors as well providing the understanding is that they will do work personally.

2. There are special provisions which ensure that such contractors are covered even if an agency is involved (so that there is no direct contract between contractor and client carrying out the discrimination) - s.41 "A principal must not discriminate against a contract worker..."

3. The Court of Appeal has held under previous (but similar) legislation that the interposition of a limited company does not affect the protection provided against discrimination Abbey Life v Tansell - John Antell barrister

4. There are some exceptions where discrimination is allowed but these need to be looked at carefully because often they do not provide blanket exemption but are subject to limitations. For example s.192 provides that "A person does not contravene this Act by doing, for the purpose of safeguarding national security, anything it is proportionate to do for that purpose." So any claim to rely on this exemption would have to show that the discrimination was proportionate - i.e. reasonable in the circumstances, not using a sledge hammer to crack a nut.

[Sysman]

Tyke: When the contract TAA are drawn up the company could have asked that anyone with UK security clearance and dual nationality within the EU or NATO would have the right to work on ITAR related stuff. But they failed to do that.

If they had added that clause then everyone would be happy (including the Americans) and all UK / EU equality laws would be adhered to.

By not doing so they are discriminating against people in the UK.

The US has been doing that for years, and I'm not even talking about ITAR or defence related stuff. I seriously recommend that you avoid official complaints and simply move on. You won't win, and could end up getting bitter about it. Simply write it off to experience and move on.

[TykeMerc]

And I think this is the crux of the point.

1. up4it - if they had advertised for ITAR clearance in the first place, then you would have been better informed. ClientCo screwed up by giving you the role in the first place.

As an employee, you would probably have had extra rights to compensation.

2. But if an organisation contracts a business for services, but then realise they've made a mistake, then they are locked into the contract they have signed, but nothing more. There is no expectation of continued service on either side - and if the contract allows them to give you unconditional notice, that's just tough.

3. Look, beyond the occasional whinge, we're generally an open minded bunch here, but I'm struggling to see anyone is agreeing with you that you've suffered discrimination here. What you've suffered from is bad business practices, but not discrimination.

1. There's no such thing as ITAR clearance, security clearance is almost always required to be involved in work that involves ITAR licenced materials, however ITAR licence terms frequently specify nationalities (even country of birth or long term residence) that are NOT able to come into contact with the materials even by association.
2. Indeed, but as ITAR licenced material might not have been involved until after the project had been resourced or if the licence terms were revised the client could quite easily have been taken by surprise. End result being that one or more resources are unable to work on the project at little or no notice. To a contractor that's obviously game over where as a permie would just be moved to a different project.
3. Discrimination by the client? Nope, at the most it's discrimination by the US DoD. Without knowing comprehensive details of the project and ITAR licences involved it's impossible to know if the client didn't think their resourcing through.

[centurian]

I am surprised the client didn't give you notice immediately the circumstances came to light. I think you did well to get 5 months out of it.

And I think this is the crux of the point.

up4it - if they had advertised for ITAR clearance in the first place, then you would have been better informed. ClientCo screwed up by giving you the role in the first place.

As an employee, you would probably have had extra rights to compensation.

But if an organisation contracts a business for services, but then realise they've made a mistake, then they are locked into the contract they have signed, but nothing more. There is no expectation of continued service on either side - and if the contract allows them to give you unconditional notice, that's just tough.

Look, beyond the occasional whinge, we're generally an open minded bunch here, but I'm struggling to see anyone is agreeing with you that you've suffered discrimination here. What you've suffered from is bad business practices, but not discrimination.

[yorkshireman]

Agreed! It would be very difficult to bring such a case against a large company. Which does not exactly discourage discrimination against contractors who are outside IR35!

I do not think this will improve under the new Agency Workers Directive rules to be implmented in October 2011. As I believe business to business relationships are excluded.

Someone earlier in the post suggested letting the Equality Director know about what happened. As he is based at the company European HQ which is in the same country as my other nationality!

I think the suggestion that you take this up with the Equality Director was made by an earlier poster when they thought this issue was about discrimination. You are not an employee. If there is no work to do your contract is terminated. This seems no more discrimination than if you were terminated because you needed to know Java and didn't or needed a driving licence and had been banned.

The only place I can see you sensibly raising this is with the US DoD as they imposed the contractual condition that means that your Company cannot work on the clients contract.

I am surprised the client didn't give you notice immediately the circumstances came to light. I think you did well to get 5 months out of it.

[up4it]

There's nothing stopping you from bringing a case as a business, but it will be significantly harder and more costly - and you already know this.

Agreed! It would be very difficult to bring such a case against a large company. Which does not exactly discourage discrimination against contractors who are outside IR35!

I do not think this will improve under the new Agency Workers Directive rules to be implmented in October 2011. As I believe business to business relationships are excluded.

Someone earlier in the post suggested letting the Equality Director know about what happened. As he is based at the company European HQ which is in the same country as my other nationality!

[centurian]

Centurian: Exactly. If a contractor is outside of IR35 then it seems that it is perfectly acceptable to discriminate against them and get away with it!

No, not acceptable at all - and I never said that.

There's nothing stopping you from bringing a case as a business, but it will be significantly harder and more costly - and you already know this.

If you want to insist you are not an employee (and take the tax benefits of which), you can't whine when you don't get access to things specifically designed for employees.

[up4it]

Then there is always Restriction Of Trade!

[up4it]

I do admit to being a little angry.

But as for being mad then that is debatable!

[up4it]

Centurian: Exactly. If a contractor is outside of IR35 then it seems that it is perfectly acceptable to discriminate against them and get away with it!

[up4it]

SueEllen: Agreed. As I said in an earlier post, I am pretty sure they would probably throw the National Security issue at me anyway!

That way they can discriminate against anybody they like!

[up4it]

Giillsman: That is a good point I have considered from the start. I have been working outside of IR35 and want to keep it that way.

Being treated as an employee would not strengthen my case at all! Should the IR ever investigate me again (Got the all clear last time!)

[centurian]

Okay, this could get me flamed from other quarters, but what's got me wound up is that you want to have it both ways in respect of IR35. You've spent a great deal of effort to ensure that you are not an employee - and have probably avoided a shed load of tax as a result. Nothing wrong with that at all - most of us do it.

But now all of a sudden, you want to use the taxpayer subsidised Industrial Tribunal system, which is designed for employees of an organisation - arguably funded by the very tax you have avoided - and to have any chance of success, you will have to argue that you are basically a disguised employee.

If you feel you've been discriminated against, sorry about that. But either you're a business, or you are an employee.