Orange Genie cleared of salary skimming despite making deductions from contractor assignment rates

Orange Genie didn’t salary skim or unlawfully deduct wages, but the umbrella company did breach two codes of the FCSA, the accreditation body’s disputes panel has ruled.

Released today, the ruling of the Freelancer & Contractor Services Association’s Independent Arbitration Panel (IAP) follows October 2022 allegations against the Aylesbury company.

In particular, Orange Genie covertly deducted £2 a payslip from its estimated 8,000 contractors a week -- for five years, netting the company £4million, alleged Contractor Voice.

'Clearly, transparently'

The umbrella was penalised and suspended, for breaching the FCSA’s A3e -- ‘Clearly state deductions’, and A17 -- ‘Transparently show an itemised breakdown’.

But according to the IAP ruling which upholds the two breaches, Orange Genie didn’t ‘salary skim’ as it deducted the £2 charge from contractors’ “assignment rate,” not their gross pay.

IAP chair Rebecca Seeley Harris, a tax lawyer ruled: “It is not, therefore, an unlawful deduction of wages, in line with recent case law Zajota v. Umbrella Company Ltd.”

But declining to be named, the boss of an umbrella company observes that the Zajota case concerned the deduction of different sums -- employer NIC and The Apprenticeship Levy.

Orange Genie says that at its own “great expense,” it commissioned MHA Baker Tilly, which is said to have found that the umbrella company operates “within” the law.

'Permissible'

The FCSA commissioned its own second opinion too – from BDO, which determined that the £2 charge (which contractors didn’t know was being deducted) was legally “permissible”.

Orange Genie claims it hasn’t seen the BDO report and FCSA claims it hasn’t seen the Baker Tilly report.

BDO found “nothing [financially is] due back to the worker, as the cost was deducted from the assignment rate.”

'Some FCSA members can still pick their own assessors'

Not sure BDO should have had any say at all, is a former FCSA senior staffer. “BDO are not really independent,” the ex-association staffer began to ContractorUK.

“They’re one of FCSA’s few assessors and [some] FCSA members can still pick their own assessors. And then go off together to have private, potentially lucrative, commercial relations.

“Contractors will be hoping BDO are not Orange Genie’s normally chosen assessor -- the assessor who missed this £2 ‘oversight’ in the first place.”

'Full re-accreditation assessment'

Yet after paying a fine to FCSA, and meeting IAP’s remedial requirements, Orange Genie temporarily became (and still is) a non-member, due to its six-month suspension order by the association.

The suspension ended on May 11th 2023, yet Orange Genie’s FCSA accreditation lapsed on March 31st 2023.

“Should they decide to reapply for FCSA membership, Orange Genie will undergo a full re-accreditation assessment,” clarifies the IAP ruling.

“Orange Genie will therefore not be accredited by FCSA unless and until they have successfully been assessed against the current membership criteria.”

'Limbo'

Having worked closely with the accreditation body’s compliance team, the former FCSA senior staffer isn’t impressed.

“Should Orange Genie, a founder member of FCSA just potentially be allowed to re-fire its membership given that their full audit must have now lapsed – and by quite a few months?

“It’s hard to think of any other firm that would be allowed to exist in this sort of limbo -- still featured on the FCSA website under the banner ‘FCSA Accredited Member,’ appearing above in smaller font, the word ‘suspended.’

''Orange Genie' ought to be taken down from FCSA's website'

The ex-senior staffer at the association continued: “The FCSA rules are clear. You cannot be a member unless you have a current and passed FCSA audit, so really ‘Orange Genie’ ought to be taken down entirely from the FCSA’s website”.

The IAP says today: “Suspension of membership, rather than expulsion, may not have happened had the FCSA Umbrella Code and Disciplinary Procedures been more robust at the time.

“The FCSA are in the process of putting in place amendments to both, so breaches to their codes in future will be treated in accordance with the new procedures.”

'Termination, test case, transgressed'

Cueing up this toughening stance in November 2020 (in light of Orange Genie appealing to it), the IAP said the FCSA code should be revised, with “termination” (albeit for only “a 12-month period”) being among the sanctions.

Asked last night if this “non-binding” recommendation got accepted, the IAP’s chair responded by saying the FCSA, like the panel itself, had to deal with what was in front of it at the time.

“This was an usual case but perhaps more significantly it was a test case,” Seeley Harris told ContractorUK.

“It was the first time FCSA’s procedures were tested in this way, and it was case number one for the only recently formed IAP. And our sole task was to look at two code breaches.”

'Orange Genie were not transparent in their deductions'

Seeley Harris also said that while the panel found that Orange Genie “were not transparent in their deductions,” the umbrella is now compliant with both the umbrella codes which it “transgressed” (A3e and A17).

And the IAP chair emphasised, Orange Genie’s deduction of the £2 charges was not a salary skim, or, in correct legal terminology, an “unlawful deduction of wages.”

Jacob Bellas of Contractor Voice, where news of Orange Genie’s non-transparent deductions first surfaced, says  “the decision…[by the IAP] is extremely disappointing, not just for contractors, but for the entire brolly industry too.

“It is a huge step back…as the message this [ruling risks sending out] is that there is no wrongdoing, if additional hidden margins are deducted from an assignment rate,” Mr Bellas told ContractorUK.

An IT contractor on the NHS, Bellas described a “lack of redress” for thousands of Orange Genie contractors, “who had no knowledge of the deduction until it was exposed". 

'Serious questions remain'

Robert Sharp, CEO of Orca Pay Group agrees that numerous unknowns remain and ought to be addressed.

“While I welcome and support the FCSA's actions and approach to this investigation, I am nonetheless shocked by the outcome. 

“Some very serious questions remain. How was this allowed to happen over so many years, given the [supposedly strict approach to] compliance set out by the FCSA?”

Mr Sharp continued in a statement to ContractorUK: “And why is there no reference in the [IAP’s fully published] findings to any of Orange Genie’s contractor-employees, who have clearly been impacted and affected by Orange Genie’s deductions?

“Were Orange Genie contractors even consulted [before this ruling]? Most importantly, how dangerous is the precedent this now sets [if the assignment rate can be deducted from?’”

'No legal action by Orange Genie against FCSA'

Last month, Orange Genie was rumoured to be taking legal action against the FCSA, after the company was said to have discovered six other FCSA umbrellas which allegedly also made deductions from the assignment rate but, it was further alleged, faced no action by the FCSA.

Orange Genie’s head of finance and accountancy Helen Christopher has denied all the allegations entirely, telling ContractorUK on April 20th:

“Since our [membership] suspension we have been working hard with FCSA and IAP to ensure compliance in line with the [FCSA Umbrella Employment] code.

“We can confirm no legal action has been taken by Orange Genie either individually or as part of a collective against the FCSA.”

'Membership of FCSA founded on compliance'

Chris Bryce, chief executive of the FCSA said on the same day: “Even if FCSA was involved in any legal action, or received a complaint of such a nature, it is our policy not to comment.

“FCSA’s concerns are solely around the compliance of our members with our codes of conduct, and membership of FCSA is founded on that compliance.”  

At non-FCSA umbrella company Orca Pay Group, Mr Sharp has given his fear that umbrellas now have an effective ‘green-light’ to deduct from the assignment rate, following the IAP’s decision that no "salary-skimming" occurred, and following the reported Baker Tilly and BDO assessments that no UK legislation was contravened.

'Devastating, delighted, no deliberate wrongdoing'

Paul Bresnihan, CEO of Orange Genie, said yesterday: “We are delighted with the IAP’s decision and were always clear that there was no deliberate wrongdoing by ourselves.

“We regret the oversights that led to breaches of the FCSA code, and we made changes immediately once we were notified of them.

“New processes have now been put in place by the FCSA and we’re pleased to have been of help in facilitating this process of improvement.”

'Morally wrong'

A legal adviser to the contractor sector interpreted the IAP’s ruling differently, saying this morning to ContractorUK. “Fortunately for the new IAP, the panel didn’t have to get into whether Orange Genie should be reinstated as a member of the FCSA.

“That will now be determined by Orange Genie successfully passing the FCSA’s assessment should Orange Genie choose to reapply.

“But also conspicuous by its absence in the IAP’s full ruling is that the panel makes no comment -- whatsoever -- on whether Orange Genie did anything morally wrong”.

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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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