The "Conduct Reg's" are virtually unenforceable against your intermediary

[northernladuk]

But surely IR35 does play a part here or have I got this totally wrong...

The article clearly mentions the term 'control' a number of times. e.g.

But, contrary to BIS’s claim that Mouchel took “control” of the IT contractor and his company, the judge found that Mr Butt was not any time “under the control of other persons” -- an essential criterion of what constitutes an ‘employment business.’

In fact, to be an employment business, the recruiter must be in a business “supplying persons, in the employment of the person carrying on the business, to act for and under the control of other persons,” states Section 13(3) of the act.

Surely your IR35 dictates the situation here. To be outside IR35 you cannot be under the control of your client therefore the agent cannot be an employment business. Our own efforts around IR35 dictate the situation... Or can control be construed differently in this situation?

[malvolio]

What I am saying, is that regardless of whether you opt in or opt out of the "Conduct Regs" the statute will not be enforceable if you as a sole director of a PSC and your hirer are not willing to argue that the contractor has handed over predominant control to that hirer.

That is a very difficult argument to make for a number of reasons. Of which should you wish to know why, I will elaborate. To say it has nothing to do with IR35 is misunderstanding the legislation.

I am not on here to gloat at all, having been a contractor myself. If you knew what the contractor did, then you would realise the stance we took.

Just to be pedantic, you can't opt in: the regs apply unless you opt out. And I've been studying IR35 since it arrived in 1999, I think I have reasonable grasp of the subject.

I think you're arguing this backwards, so please do explain "the statute will not be enforceable if you as a sole director of a PSC and your hirer are not willing to argue that the contractor has handed over predominant control to that hirer." since I haven't' been through the Clearwater judgement in detail. Are you saying that the statute doesn't apply if you admit to the client exercising D&C? 'Cos if you do, the contract being inside IR35 is a certainty, but that doesn't mean your opting out or not was the cause.

[DirtyDog]

Is there a link to the Clearwater judgement? I can only find the CUK article easily.

[Rory Dwyer]

It must have been pretty bad for you to withhold £15k of his invoices (as well as trying to charge the extra £39k).

The contractor was one of circa 20 contractors at this particular client. He along with another and a sales manager of our company, whilst under contract and employed respectively set up a competing company 'SAP Select Ltd' unbeknownst to the Directors of CNL and attempted to acquire the proprietary confidential information of CNL.

This act, regardless of being unethical and immoral, was a clear breach of contract and the monies were withheld for damages, of which they were substantial. That is another issue, which I am not at liberty to discuss due to on-going civil litigation.

Interestingly, another reason why the "Conduct Reg's" could not be enforced in this regard also.

All of the other contractors were paid in full and without issue.

[cojak]

It will come as a shock to some to discover that the contractor was being a tulip and trying to do the dirty.

But you've fallen at the the first hurdle Rory. While I'm sure some of us sympathise with you in this instance, coming on here to tell us that because of this judgement we will lose in future cases is a definite no-no.

Will the next case fall over if the contractor explicitly opts in and subsequently behaves ethically before trying to go direct after contract expiry? We shall see....

[Rory Dwyer]

Just to be pedantic, you can't opt in: the regs apply unless you opt out. And I've been studying IR35 since it arrived in 1999, I think I have reasonable grasp of the subject.

I think you're arguing this backwards, so please do explain "the statute will not be enforceable if you as a sole director of a PSC and your hirer are not willing to argue that the contractor has handed over predominant control to that hirer." since I haven't' been through the Clearwater judgement in detail. Are you saying that the statute doesn't apply if you admit to the client exercising D&C? 'Cos if you do, the contract being inside IR35 is a certainty, but that doesn't mean your opting out or not was the cause.

Dear Malvolio,

You can declare yourself opted in or opted out, no declaration or an ineffective declaration means you by default are opted in.

Putting the "Conduct Reg's" to one side for the moment, the issue here is "the predominate control" issue and not just "any control" which in legal terms is considered the definite article.

[Rory Dwyer]

It will come as a shock to some to discover that the contractor was being a tulip and trying to do the dirty.

But you've fallen at the the first hurdle Rory. While I'm sure some of us sympathise with you in this instance, coming on here to tell us that because of this judgement we will lose in future cases is a definite no-no.

Will the next case fall over if the contractor explicitly opts in and subsequently behaves ethically before trying to go direct after contract expiry? We shall see....

Dear Cojak,

I am neither taking a moral or ethical stance for any future cases (unless I am involved with it, of course). As it happens, neither do the courts, they are only concerned with the law and that is all I am sharing, having been staring the dragon in the eye, I now know it quite well.

I am sharing the legal difficulty any contractor will face should they try to rely on the "Conduct Regs"

Therefore, one could argue, as I do, that by knowing this, one can construct their contracts without falsely believing they have protection where they do not.

You might even thank me for it one day !

[Ticktock]

Dear Malvolio,

You can declare yourself opted in or opted out, no declaration or an ineffective declaration means you by default you are opted in.

Putting the "Conduct Reg's" to one side for the moment, the issue here is "the predominate control" issue and not just "any control" which in legal terms is considered the definite article.

So, in other words, since I ensure to the best of my ability that I am not caught by IR35, the regulations do not apply, therefore I do not need to Opt Out.

I'm guessing your company will NEVER ask a contractor to opt out now, or tell them "You're the first person to refuse to", or "Our client might not like it if you don't", or the myriad other tactics tried?
After all, the Conduct Regs don't apply, so why try to force a contractor to opt out?

[DirtyDog]

Will the next case fall over if the contractor explicitly opts in and subsequently behaves ethically before trying to go direct after contract expiry? We shall see....

Looking at some of my old contracts, I see that at least one of them says "<agency> enters into this Contract in its capacity as an Employment Business as defined in the Conduct Regulations"

Since part of the judgement seems to hinge on CNL not being defined as an Employment Business (and therefore there is nothing to opt out of), I'd be interested to see whether that has any impact on any future cases.

[Rory Dwyer]

So, in other words, since I ensure to the best of my ability that I am not caught by IR35, the regulations do not apply, therefore I do not need to Opt Out.

I'm guessing your company will NEVER ask a contractor to opt out now, or tell them "You're the first person to refuse to", or "Our client might not like it if you don't", or the myriad other tactics tried?
After all, the Conduct Regs don't apply, so why try to force a contractor to opt out?

Dear Ticktock,

By declaring oneself "opted out" and this "opt out" being effectively communicated to the hirer in accordance with the statute will remove any ambiguity for either parties position.

So my advice to any agency is to follow their processes on the basis that the "Conduct Regs" may be enforced.

Should an issue arise, regardless of whether the parties have opted in or out, then there is clearly a precedent to utilise a defence that pre-dominant control had not passed and the "Conduct Regs" do not apply.

My advice to a contractor is to not falsely believe that the "Conduct Reg's" provide you with any protection unless you and your hirer are willing to argue that pre-dominant control has passed from the individual and the work seeker (de facto) to the hirer, and to ensure that which ever version of the contract they sign, they are willing to abide by it.