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[Sandra Martins](https://www.linkedin.com/in/sandramartins1/), Head of Employment at Radius Law, recommends these 8 practical steps on what in-house counsel can do to prepare and make sure your organisation remain compliant:

1. Undertake a full audit of the existing contractor workforce and determine how the company wants to engage with these people going forwards: i) who should bear the costs of any potential implications of the changes? ii) would it be useful to offer an employment contract?
2. Enter into a dialogue with contractors — this is not just an issue for HR, but also one for general counsel and those commissioning the work
3. If you want to remain out of the IR35 regime you will probably need to give up a lot of control over factors such as how the work is done or who is doing the work — will it be worth it?
4. Consider whether outsourcing would ease some of the pressure on the company
5. Carry out a status determination statement (SDS) on relevant contractors and issue this to the worker and the party the client contracts with
6. Put in place an IR35 policy and processes to identify challenges: i) keep records on relationships with contractors and review them at least once a year. ii) train managers on how to comply with the new rules iii) update relevant privacy notices to provide for information sharing under IR35
7. Determine who has the upper hand between contractor and employer and draft your contracts accordingly
8. Review contracts with intermediaries

A common question is whether the judgment in *[Uber BV and others v Aslam and others](https://www.lexisnexis.com/uk/lexispsl/commercial/document/316762/621S-S153-GXFD-81VH-00000-00/Uber-BV-and-others-v-Aslam-and-others)* - *one of great importance as an explanation by the Supreme Court of how worker status is to be assessed - will change things in this area.*

*The judgement held that whether a contract is a ‘worker’s contract’ is not to be determined by applying ordinary principles of contract law. Rather it is a matter of statutory interpretation, not contractual interpretation.  As such, it is important to regard the purpose of a particular provision and to interpret its language, so far as possible, in the way which best gives effect to that purpose.*

*Further, the Supreme Court therefore looked at the relative degree of control exercised by Uber and drivers respectively over the service provided to passengers.*

*For the full story and practical implications of this judgment to consider, you can read the LexisNexis news analysis on it [here](https://www.lexisnexis.co.uk/legal/news/supreme-court-confirms-that-uber-drivers-are-workers-uber-bv-others-v-aslam-others?utm_source=Event&utm_medium=Blog&utm_campaign=IR35).*

**Where can I find more information about the IR35 off-payroll rules?**

Practice Note: [IR35—off-payroll workers](https://www.lexisnexis.co.uk/legal/guidance/ir35-off-payroll-workers?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) is a comprehensive guide produced in partnership with [David Smith](https://www.linkedin.com/in/david-smith-90278634/?originalSubdomain=uk) of [DLA Piper](https://www.dlapiper.com/en/uk/), covering issues such as:

* precisely which ‘engagements’ are covered
* the conditions that apply where the intermediary is a company
* the ‘notional contract’
* the requirements in relation to the status determination statement (SDS), and
* the consequences where the off-payroll IR35 regime applies

  
**As an end-client, what practical steps should I be thinking about?**

Practice Note:[IR35—off-payroll workers—practical considerations for the end client](https://www.lexisnexis.co.uk/legal/guidance/ir35-off-payroll-workers-practical-considerations-for-the-end-client?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) examines:

* how to identify the end client (and the fee-payer)
* how to approach the business’s overall stance on compliance obligations
* ascertaining which engagements are affected
* assigning responsibility within the business
* dealing with the SDS obligations
* contractual arrangements
* relevant HMRC guidance

**Our organisation will be a fee-payer under the IR35 off-payroll rules. What steps should I be taking?**

Practice Note: [IR35—off-payroll workers—practical considerations for the fee-payer](https://www.lexisnexis.co.uk/legal/guidance/ir35-off-payroll-workers-practical-considerations-for-the-fee-payer?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) examines:

* how to identify the fee-payer (and the end client)
* dealing with the SDS obligations
* the ‘deemed direct payment’
* contractual arrangements
* payment practicalities
* HMRC guidance

Also see our Checklist: [Off-payroll IR35 regime for medium and large private sector entities—checklist](https://www.lexisnexis.com/uk/lexispsl/tax/document/393990/5YSN-B143-CGXG-0087-00000-00/Off_payroll_IR35_regime_for_medium_and_large_private_sector_entities_checklist).

**Does a contractor who falls within IR35 then become entitled to rights under the agency worker regulations?**

Rights under the Agency Worker Regulations 2010 depend on whether the worker in question falls within the definition of ‘agency worker’ in those Regulations. For further information on that definition, and the implications of protection under the Regulations, see Practice Note: [Rights under the Agency Workers Regulations 2010](https://www.lexisnexis.co.uk/legal/guidance/rights-under-the-agency-workers-regulations-2010?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) and Practice Note: [Agency worker status](https://www.lexisnexis.co.uk/legal/guidance/agency-worker-status?utm_source=Event&utm_medium=Blog&utm_campaign=IR35).

**Does a contractor who falls within IR35 then become a worker for employment protection purposes?**

As with the IR35 regime generally, where the off-payroll IR35 regime applies, it operates for income tax and NICs purposes only. The legislation does not confer wider employment status on the individual and accordingly the individual does not accrue employment rights with the end client or any other third party in the relevant contractual chain.

However, the usual status tests will still apply. For further information, see Practice Notes: [Worker status](https://www.lexisnexis.co.uk/legal/guidance/worker-status?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) and [Employee status](https://www.lexisnexis.co.uk/legal/guidance/employee-status?utm_source=Event&utm_medium=Blog&utm_campaign=IR35).

* Sign up to the free General Counsel [slack channel](https://radiuslaw.co.uk/flying-solo/). This online forum is an extension of [Flying Solo](https://www.lexisnexis.co.uk/in-house-legal/flying-solo?utm_source=Event&utm_medium=Blog&utm_campaign=IR35) - a forum for sole in-house lawyers or those in small teams. It is run by a committee of in-house lawyers and facilitated by LexisNexis, Radius Law and Flex Legal.
* LexisNexis Practice Note*:* [IR35—off-payroll workers](https://www.lexisnexis.co.uk/legal/guidance/ir35-off-payroll-workers?utm_source=Event&utm_medium=Blog&utm_campaign=IR35), produced in partnership with [David Smith](https://www.linkedin.com/in/david-smith-90278634/?originalSubdomain=uk) of [DLA Piper](https://www.dlapiper.com/en/uk/), for a comprehensive guide to the off-payroll IR35 regime.

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IR35: what you need to know

<p><a href="https://flex.legal/">F-LEX</a> was very pleased to be joined by <a href="https://www.linkedin.com/in/iainlarkins/">Iain Larkins</a>, Director &amp; Founder of <a href="https://radiuslaw.co.uk/">Radius Law</a>, and <a href="https://www.linkedin.com/in/sandramartins1/">Sandra Martins</a>, Senior Solicitor at Radius Law on this week’s Virtual Lunch for paralegals and junior lawyers. Iain and Sandra gave excellent overviews on topical cases surrounding employment status and vicarious liability, and provided useful commentary on the forthcoming changes to the UK immigration system and IR35 rules.</p><h1 style="white-space:pre-wrap;"><strong><em>(1) Employment Status</em></strong></h1><p>In the UK, an individual may be engaged to carry out work in one of three ways: as an employee, a worker, or a self-employed contractor. Each employment status affords a different degree of legal protection and benefits to the individual, with employees being the most protected and the self-employed being the least.&nbsp;</p><h2 style="white-space:pre-wrap;"><strong>What determines your employment status?</strong></h2><p>There are a lot of variables. Employees typically have an employment contract with their employer, and are provided with a regular stream of work which they must carry out personally. If you are self-employed, you are responsible for finding and engaging with clients yourself, and you usually invoice for specific pieces of work you have been contracted to complete. Worker status falls somewhere between the two, and it can often be unclear. Workers have a ‘contract for services’ which may be written or verbal, they must carry out the work personally, however they have little obligation to receive or complete any work. A typical example of a worker is someone working on a zero-hours contract.</p><h2 style="white-space:pre-wrap;"><strong>So why does any of this matter?&nbsp;</strong></h2><p>In short, your employment status governs your legal rights, which define how much bargaining power you have with your employer. If you are engaged as an employee, you are protected from unfair dismissal and have the right to statutory redundancy pay (among many others). These rights are not granted to the self-employed or workers. Similarly, workers must be paid the National Minimum Wage and receive holiday pay, but self-employed contractors are not legally entitled to either. By understanding your employment rights, you are in a far stronger position to realise if they are being infringed upon. For more details, check out <a href="https://www.acas.org.uk/checking-your-employment-rights">Acas</a>.</p><h2 style="white-space:pre-wrap;"><strong>Key Cases</strong></h2><p><a href="https://www.bailii.org/ew/cases/EWCA/Civ/2018/2748.html"><strong><em>Uber v Aslam </em>[2018]</strong></a>&nbsp;</p><p>This case has been going up and down through the courts, with Uber trying to fight decisions regarding the employment status of their drivers, and was brought by Mr Aslam and others. Mr Aslam argued that he and the other drivers were workers, and therefore were entitled to be paid the National Minimum Wage and for annual leave. This argument was upheld in the Court of Appeal, with Uber’s contention that each driver directly engaged with a passenger to complete a contract rejected. Uber is set to appeal this decision in the UK Supreme Court on 21st and 22nd July 2020.</p><p><a href="https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62019CO0692&amp;from=EN"><strong><em>B v Yodel Delivery </em>[2020]</strong>&nbsp;</a></p><p>Here, the ECJ issued a useful preliminary ruling on whether a Yodel courier could be considered a worker instead of a self-employed contractor. As the courier had the right to appoint another courier to carry out the deliveries, and also had latitude on whether to accept or reject deliveries, the ECJ found them to be an independent contractor. The case has since been remitted back to the Tribunal to decide on the specific facts whether the courier could be considered a worker.</p><p><a href="https://www.supremecourt.uk/cases/uksc-2017-0053"><strong><em>Pimlico Plumbers</em> [2018]</strong></a></p><p>This case was a landmark ruling by the UKSC, and concerned a plumber who had worked for a number of years as an ostensibly self-employed contractor. In reality, his working conditions were more akin to that of a worker: he had to carry out the work personally, his employer limited what he was paid, and there were limitations on him working for competitors. The UKSC confirmed that his employment status was indeed that of a worker. Subsequently, the plumber brought a Tribunal claim for backdated holiday pay amounting to £74,000. This was unsuccessful in the first instance, however an appeal is set to be heard in the Employment Appeal Tribunal shortly, having been postponed in March 2020.</p><p><a href="http://supremecourt.uk/cases/docs/uksc-2017-0020-judgment.pdf"><strong><em>Lee v Ashers Baking Company</em> [2018]</strong></a></p><p>A Northern Irish bakery was taken to court after refusing to bake a cake with the writing ‘Support Gay Marriage’. The UKSC found no discrimination on grounds of sexual orientation, religious belief or political opinion. The case is currently waiting to be heard in the European Court of Human Rights.</p><h1 style="white-space:pre-wrap;"><strong><em>(2) Vicarious Liability</em></strong></h1><p>Vicarious liability means that employers may be liable for tortious acts committed by their employees when these acts occur ‘in the course of business’ (<a href="https://uk.practicallaw.thomsonreuters.com/9-200-3629?transitionType=Default&amp;contextData=(sc.Default)&amp;firstPage=true&amp;bhcp=1">ref</a>). For the principle to be effective, there must be a relationship between the employer and the wrongdoer, as well as a sufficient connection between the act committed and the nature of the employment.</p><h2 style="white-space:pre-wrap;"><strong>Key Cases</strong></h2><p><a href="https://www.supremecourt.uk/cases/docs/uksc-2018-0213-judgment.pdf"><strong><em>Morrison Supermarket v Various Claimants</em> [2020]</strong></a></p><p>Over 9,000 employees brought claims against Morrisons for a data protection breach. The tort was committed by a disgruntled employee who downloaded and published payroll information. Although Morrisons was held to be vicariously liable by the Court of Appeal, this decision was overturned in the UKSC on the basis that the data disclosure was not part of his functions as an employee and it was an unauthorised act. Despite this finding, it is important to note that the UKSC concluded that employers may be liable under the Data Protection Act 1998 for breaches committed by employees.</p><p><a href="https://www.supremecourt.uk/cases/docs/uksc-2018-0164-judgment.pdf"><strong><em>Barclays Bank v Various Claimants</em> [2020]</strong></a></p><p>An unpleasant case dating back to the 1970s and 80s, in which Barclays hired a doctor on a self-employed basis to carry out medical assessments of job applicants. The doctor proceeded to sexually assault over 100 women. The UKSC confirmed that, because the doctor was genuinely self-employed, Barclays could not be held vicariously liable.</p><h1 style="white-space:pre-wrap;"><strong><em>(3) Forthcoming Legislative Changes</em></strong></h1><h2 style="white-space:pre-wrap;"><strong>Points based immigration system (January 2021)</strong></h2><p>This alteration ends free movement and will apply to current EU citizens that want to work in the UK. The system includes requirements for applicants to speak English and to have a job offer from an ‘approved sponsor’ at an ‘appropriate skill level’, among others. You can find out more in the <a href="https://www.gov.uk/government/publications/the-uks-points-based-immigration-system-policy-statement/the-uks-points-based-immigration-system-policy-statement">Government’s policy statement</a>.</p><h2 style="white-space:pre-wrap;"><strong>IR35 rules (April 2021)</strong></h2><p>IR35 refers to a piece of UK tax legislation which aims to reduce tax avoidance through the use of limited companies. This relates to situations where an employer engages with a contractor through the contractor’s own limited company (intermediary), but the reality of the situation is akin to engaging directly with an employee.&nbsp;</p><p>The reforms to IR35 mean that medium to large businesses engaging a contractor through their own intermediary, for instance a personal service company, will be liable for determining if the contractor would have been an employee had they been directly engaged. If you are also the fee-payer, you will be liable to deduct and pay tax and employers’ NICs on the payments made to the intermediary.</p><h1 style="white-space:pre-wrap;"><strong><em>Radius Law Vlogs</em></strong></h1><p>Finally, make sure to check out the incredibly helpful Radius Law Commercial Bulletins in association with LexisNexis UK! These short videos help to breakdown important legal issues in an easy-to-digest style. Find them here: <a href="https://radiuslaw.co.uk/blog/">Radius Law Vlogs</a>.</p><p>F-LEX hosts Virtual Lunches every Wednesday between 12:30pm - 1:15pm. Make sure to sign up below to increase your legal network and gain legal insights from the experts!</p>

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The Flex Legal blog

IR35: what you need to know

3 Employment Law Issues You Should Be Aware Of