Hair Raising Status Ruling

Another status case, which is likely to be referred to in future IR35 enquiries, has just concluded.

The Hospital Medical Group Ltd engaged Dr Westwood, a GP, to carry out hair restoration on their clients, on Saturday mornings, at their Birmingham premises. The doctor took a claim of unlawful deductions, accrued holiday pay and age discrimination to the Employment Tribunal (ET).

Although the ET found that Dr Westwood was not an employee but rather “clearly in business on his own account” and engaged as a self-employed independent contractor, they considered him to be a “limb” worker because the clients belonged to Hospital Medical Group and the doctor was paid a percentage of an agreed rate which the client paid to Hospital Medical Group. The doctor did not offer his services universally and the work was distinct from that as a GP and that of giving advice on transgender issues at the Albany clinic. He was recruited by Hospital Medical Group to work as an integral part of its operations. Dr Westwood had no right to delegate the work and his personal service was therefore a requirement of the contract.

Hospital Medical Group appealed the decision to the Employment Appeal Tribunal (EAT).

Unlike employment status for tax purposes which seeks only to discern between employment and self-employment, the Employment Rights Act 1996 provides for a third category, that of 'worker'. Section 230(3) of the act states that a “worker means an individual who has entered into or works under:
 

• a contract of employment; or
• any other contract, whether expressed or implied (and if it is express) whether oral, or in writing, 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;

and any reference to a worker's contract shall be construed accordingly.”

The relevant terms and conditions of Dr Westwood's conditions of service were laid out in a written contract entitled ' Surgeons Contract for Services and Training' (the Agreement) and included the following:

1. The Agreement was for a fixed term of three years commencing on 1st November 2007 subject to early termination and a three month notice period on either side.
2. Equipment or instruments provided by Hospital Medical Group were to be used on their clients only and no one else.
3. Dr Westwood was required to obey all lawful and reasonable directions of Hospital Medical Group.
4. The doctor agreed not to provide his services to any UK competitor and entered into a twelve month post-termination restrictive covenant.
5. The doctor was an independent contractor responsible for his own PI insurance.
6. No payment was to be made to the doctor if he was unable to work through sickness.
7. Responsibility for payment of tax and NIC lay with the doctor as an independent contractor.
8. Hospital Medical Group would review Dr Westwood's performance on an annual basis.
9. Dr Westwood was responsible for his own expenses.
10. Doctor’s fees = 18% of the price paid by each patient to Hospital Medical Group.

The EAT dismissed Hospital Medical Groups appeal and agreed with the ET's findings that Dr Westwood was a worker.