Contractors' Questions: What if I'm terminated as TUPE doesn't cover me?

Contractor’s Question: For three-and-a half-years, I’ve been in the same job with the same firm as an agency worker. But it lost a contract and us workers are now in a TUPE situation.

I’m classed by the client-firm as a contractor on a self-employed basis yet am PAYE via their in-house agency. So I’ve been told I’m not part of the TUPE process and unceremoniously given an end-date to my contract, which is the same day the contract goes to the new firm. Is there anything I can do?

Expert’s Answer: TUPE is unlikely to apply to you as you were not an employee when the contract moved. However, it is possible your employment status could be disputed, in which case TUPE may apply after all.

TUPE stands for Transfer of Undertakings (Protections of Employment). Essentially it's a way of ensuring that employees retain the protections they are entitled to, for example protection against unfair dismissal, even if their employer has changed as a result of a takeover or a merger. It only applies to employees, not the self-employed and crucially in your case it doesn't apply to agency workers either.

You go on to say that the client has made it clear you are self-employed but you pay tax like an employee, via an in-house agency. I am concerned this arrangement may not be in your best interests, and I would advise that you speak to an employment solicitor. If you are an IPSE member, you can call our legal helpline free of charge.

As a self-employed person, you do not have anything like the same entitlements and protections as employees. A good example is the aforementioned protection from unfair dismissal. Employees are granted this right after two years. You've been with your client for 3.5 years, so had you been an employee, you would have had this right, and under TUPE, you would have retained it even after the employer changed. I'm certain it would have meant your contract would not terminate on the day of the takeover.

Most self-employed understand they don't have an employer and therefore they don't have employment rights. It's a sacrifice they are willing to make in return for being their own boss, choosing the work they want; the potential to increase their earnings, improving their work life balance -- the list goes on.

But most self-employed people also pay tax differently to employees. Tax is not deducted at source (PAYE). The self-employed account for tax themselves (often aided by an accountant) and pay HMRC directly, usually after the financial year has ended.

Under the intricacies of the UK's tax and legal systems, it is possible to have one status for tax and one for employment, as it seems you do. But I don't think it should be that way and neither do many others, including the Office of Tax Simplification.

We believe there should be clarity of status for everyone and that status should be consistent across tax and employment rights. It's one of the main reasons we are so opposed to the changes to IR35 in the public sector, where contractors are being told they must pay tax like an employee, yet get none of the associated rights. We believe if the government wants the people that work for it to pay employment taxes, it should employ them.

I believe the same principle applies to your situation and you may want to consider challenging your client on this. You could, for example, tell them that you believe there is an implied contract of employment and that TUPE should therefore apply. You'll be entering into murky territory -- employment status is unclear at the best of times and having this conversation with a new 'employer' will make it even more difficult. But they will at least have to consider it. If they do not provide a satisfactory response you could make your case at an employment tribunal. If the tribunal found in your favour (that you are in fact an employee), it would likely result in the new 'employer' retaining you, or at least offering some kind of redundancy package.

There is one big practical drawback with this plan: time. Bringing a case before an employment tribunal takes months rather than weeks and by that time it's likely your contract would have ended. It is therefore best in the first instance to take some legal advice and speak to the 'employer' directly. The solicitor may have advice on what you could say to the old and new employer which might prompt them to reconsider the termination. I wish you the very best of luck in resolving this difficult issue.

The expert was Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).

Thursday 20th Apr 2017
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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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