Written by Brabners LLP
The recent decision in Ryanair DAC and Storm Global Ltd v Lutz [2023] is the latest case to examine self-employed status and to find that an individual is actually a worker, despite being treated as a limited company contractor.
The Employment Appeal Tribunal (“EAT”) has found that Mr Lutz, a pilot, was a worker despite having been supplied to Ryanair via a personal service company. It also found that My Lutz was an agency worker within the meaning of the Agency Workers Regulations 2010 (“AWR”).
The Law:
The AWR define an agency worker as an individual supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer. However, the truly self-employed are excluded from the scope of the AWR.
Additionally, workers and employees (but not self-employed individuals) are entitled to paid annual leave. There is specific working time legislation relating to pilots and other air crew members called the Civil Aviation (Working Time) Regulations 2004 (“CAWTR”).
The Facts of the Case:
Mr. Lutz was supplied by an aviation recruitment company called MCG Aviation Limited (“MCG”), to work as a pilot for Ryanair. Due to regulatory requirements, he was not allowed to work for another commercial airline while working for Ryanair. A tripartite contract was drawn up between Mr. Lutz, MCG, and Dishport, a service company set up at MCG’s request. According to the contract, Mr. Lutz was an “independent consultant”; the contract was to last for a five-year fixed term and Mr Lutz had the contractual right of substitution. Mr Lutz was, however, never a director, shareholder or employee of the service company (i.e Dishport).
Mr. Lutz filed claims for holiday pay under the CAWTR and parity pay under the AWR 2010.
Despite arguments from MCG and Ryanair that he was self-employed and therefore could not benefit from these regulations, the employment tribunal determined that Mr. Lutz was an agency worker and a crew member under CAWTR, rejecting the notion that he was a self-employed contractor.
Key Findings and Decision:
On appeal, the EAT upheld the tribunal’s decision that Mr. Lutz’s contract involved personal performance. The limited right of substitution did not constitute an unfettered right and was considered a “sham”. The Tribunal noted that Mr Lutz was unable to determine his working hours, had a very limited right to send a substitute, was expected to wear the Ryanair uniform, could not negotiate his pay and faced disciplinary action if he did not attend a shift.
Comment:
This case highlights the importance of accurately determining employment status, taking into account factors such as personal performance, substitution rights and supervision, direction and control.
The impact of this case extends beyond the aviation sector, affecting all organisations engaging self-employed contractors through service companies. Merely using an intermediary company will not automatically render an individual self-employed. The case further emphasises that tribunals will look at the reality of working relationships rather than merely what the contract says, potentially exposing organisations to costly holiday pay and AWR claims.
This bulletin is for general guidance only and should not be used for any other purpose.
Brabners is a Limited Liability Partnership