A Upper Tier Tax Tribunal recently upheld a First Tier Tax Tribunal's ruling that temporary workers supplied by Talentcore Ltd t/a “Team Spirits” to work at airport duty-free shops during the period 6th April 1998 – 5th April 2007 were not employees of the agency.
Talentcore was engaged in the supply of individuals to major cosmetic companies for counter and promotional work at airport duty-free shops run by World Duty Free.
It has a database of around 100 individuals who are referred to as “consultants”. Consultants were also provided to assist in the normal operation of duty-free shops. Approximately 70% of Talentcore's work is to find consultants for promotional work by selling the product being promoted, and the remainder to fill vacancies for counter work in normal duty-free shopping areas.
No written contracts existed between Talentcore and either the cosmetics companies, World Duty Free or the consultants.
Prospective consultants were interviewed, at which the dress code was explained to the interviewee. The dress code was set out in a document called 'Members code of practice', which also emphasised punctuality and appearance. A copy of this document was very rarely given to a worker.
Whilst the cosmetics company provided some training about a new product and might set sales targets, Talentcore did not provide any training although they might give advice.
Little supervision or control was exercised over the consultants whilst they were working. There was no control over sales techniques as counter staff working for the cosmetics company would be managing the counter rather than supervising the promotion. For consultants not involved with the promotions, they would be working alongside staff of World Duty Free and would be subject to the same control as other staff. World Duty Free, as operator of the duty-free shops was in a position to give directions to the consultants.
Talentcore would telephone consultants offering shift work on particular days. If such work was accepted then a contract was formed.
Consultants who were unable or unwilling to fulfil an agreed shift were expected to inform the agency and, if possible, find a replacement. Where substitutes were arranged at the last minute without informing Talentcore, the consultant would pay the substitute.
To be an employee of an agency, s.134 ICTA 1988, stipulates three requirements, the main one being that a worker is under an obligation to render their personal service and be subjected to or the right to be subjected to supervision, direction or control as to the manner in which they render their services.
The First Tier Tax Tribunal had originally concluded that the consultants were not employees because there was an absence of personal service and where workers have a “full right” of substitution then they were not employees under agency contract rules. If there was no requirement for a consultant to attend, provided a replacement was provided, then there was no contract of service.
HMRC argued that the right to substitute was “expressly limited to absolute emergencies” and relied upon passages in Talentcore's 'Code of Practice'. These, however, were not contractual provisions but rather an aide memoire for the agency when interviewing and most consultants were not even given a copy.
The Revenue also sought to argue that even if the contract did not obligate a consultant to do the work personally, when they actually did the work then they assumed that obligation. The judge however dismissed this as the legislative definition of an agency contract is based upon its terms, which are entered into before the assignment begins and is not displaced by a new and different contract once the work begins.
For too long now, there appears to have existed a myth within the recruitment industry that it has not been possible for agencies to supply self-employed workers because they would only be caught by the agency workers legislation and therefore be classified as employees. This latest ruling should help dispel that myth.
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