Contractors’ Questions: Can my pay be withheld if I stole from the client?

Contractor’s Question: I was a self-employed data engineer working locally for ‘D8taNet’ (not their real name), and I was subbed to a firm – ‘Co2’ (also not their real name), which holds a contract with an online retailer to do various works involving data. 

I’ve only worked for D8taNet for three months and was paid slightly late on month-one and, on the eve of month-three, was told all pay would be delayed a few days. Then however, on the due date, I heard from a staff member that no wages would be paid until a further few days later. This caused another black mark on my credit score.

Unfortunately, I fell into a desperate situation and stole from the client -- the retailer, just to try and keep my account out of the red. I was caught; the police are aware and I probably face prosecution. I’m ashamed; lost my job and now, D8taNet’s owner is ignoring my calls but owes me a total of £1,176. Can he refuse to pay me? What should I do if I’m entitled to the money?

Expert’s Answer: What a sad story. To both help and answer your question, I need to assume that when you say you are ‘self-employed’ that what you mean is that you are (a) engaging directly with D8taNet, and not through your own company or an umbrella;  and (b) you are not being paid under PAYE.

First, I would ask who controls or tells you what needs to be done, day-to-day? Who are you answerable to? If the retailer, or if Co2, then it would seem that D8taNet would be operating as an employment business, in which case the Conduct of Employment Agencies and Employment businesses Regulations 2003 would apply to the engagement.  

If so, given that you are not working through any intermediary company other than D8taNet and Co2, you would not be able to ‘opt out’ of those regulations.  

Regulation 12 provides that an employment business cannot lawfully withhold payment for time you have worked;  and failure to comply with these regulations is an offence.  

These regulations are ‘policed’ by the Employment Agency Standards Inspectorate, a branch of BEIS  (the Department for Business, Energy & Industrial Strategy). You can send an email to or telephone the enquiry line on 0207 215 5000, and ask to speak to someone in the inspectorate.

If the answer to the question ‘who controls what you do, or tells you what needs to be done, day-by-day’ is ‘D8taNet,’then the above will not apply, and I would  need to look more closely at your relationship with your engager.  

Sight of your contract would be necessary to draw firm conclusions, but I see three possibilities:

  1. You are in fact an employee of D8taNet, even if they and indeed the contract itself say otherwise, and even though D8taNet may not be taxing you as an employee. This might be the case, if there is no genuinely unfettered right of substitution in the contract, if there is some degree of mutuality of obligation, if (as seems likely) you are in some respect subordinate to and subject to the control of D8taNet, and if the contract itself is not inconsistent with employment in some significant material way (i.e. more than simply saying ‘you’re not an employee’).
  1. You are a ‘worker’ (often called a ‘limb b worker’). This describes an individual who, while not (in the strict sense of employment law) an ‘employee’, is nevertheless a person working under a contract “whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.  

Do you advertise your services independently? Do you concurrently provide services to others?  If neither, then it is likely that you are not genuinely self-employed, and are either an employee or a worker, whatever any written contract may say.

If you are an employee or a worker, there is legislation which makes it unlawful for your engager not to pay you, or to make deductions you have not previously agreed from what you are paid other than as authorised by law. This legislation is commonly referred to as ‘unlawful deductions’. Your remedy would be to make a complaint to the Employment Tribunal. There is a three-month time limit.  Oh -- and, as an employee or a worker, you would also be entitled to holiday pay -- so if that has not been paid, you can include it in your claim.

In all the above situations, while the alleged theft may give grounds for termination, it should not affect your right to be paid on time for work you have done.

  1. Finally, the third possibility is that you have the status which your question claims you have.

So if neither of the above scenarios apply, then it seems that you are likely for all purposes to be genuinely self-employed, and you would need to consider court proceedings. Whether or not in these circumstances your engager could use the alleged theft as proper grounds for non-payment is less clear, and you should seek more focussed advice. I don’t see any other quick and easy way. Best of luck.

The expert was contract lawyer Roger Sinclair, legal consultant at egos Ltd.

Monday 24th Sep 2018
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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