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Court of Appeal Finds Pizza Delivery Drivers to be Self-Employed Independent Contractors

In Karshan (Midlands) Limited Trading as Domino’s Pizza v The Revenue Commissioners1 the appellant appealed the High Court’s decision that pizza delivery drivers working for the Domino’s Pizza franchise were employees. The Court of Appeal overturned the High Court’s decision in a two-to-one majority judgment on 31st May 2022, finding that the delivery drivers were self-employed independent contractors and not employees.

Facts: The background to this case involved a decision by the Revenue Commissioners (“Revenue”) that the appellant’s pizza delivery drivers should be treated as employees for PAYE purposes. The appellant’s position was that its delivery drivers were independent contractors who were responsible for their own tax affairs. The Tax Appeal Commissioner (“Commissioner”) agreed with Revenue and the High Court upheld the Commissioner’s decision in full.

The delivery drivers in this case each signed a written “umbrella” contract with the appellant which clearly described them as independent contractors. The drivers would fill out an availability sheet approximately one week before a roster was drawn up indicating their availability for work. Store managers would draw up rosters based on those availability sheets. The High Court agreed with the Commissioner that the overarching contract was supplemented by “discrete individual contracts” which arose once a driver was rostered for one or more shifts of work and that mutuality of obligation existed in these individual contracts.

Issues: The main issue considered by the Court of Appeal was the question of mutuality of obligation. The principle of mutuality of obligation refers to an employer’s obligation to provide work to an employee and an employee’s corresponding obligation to carry out work for his/her employer. It is well established that mutuality of obligation is an essential feature of an employment relationship and that, in its absence, a contractual relationship cannot be a contract of service (i.e. it cannot be a contract of employment) and it is not necessary for the courts to consider the relationship further. It is only in cases where mutuality of obligation is present that it is necessary for the courts to consider further tests in determining an individual’s employment status.

The Commissioner and the High Court placed significant reliance on the UK decision of the Upper Tribunal in Weight Watchers (UK) Limited & Others in finding that there was mutuality of obligation in the discrete individual contracts between the appellant and its delivery drivers. In so deciding they found that the drivers were required to do the following when cancelling a shift:

Decision: The Court of Appeal disagreed. Costello J., delivering the main judgment, held that the Commissioner “erred in law in her assessment of and her conclusion that mutuality of obligation existed in the multiple individual contracts in the case and that the trial judge erred in law when he failed to identify this error.” She found that the Commissioner misconstrued the contract between the appellant and the drivers and erred in finding that there was mutuality of obligation between the parties, primarily because she misapplied Weight Watchers to the case “without fully appreciating or giving due weight to the differences between the facts in the two cases and also because she misinterpreted the written agreement.”

Costello J. found as follows:

“She approached the clauses by saying that they did not set out expressly the circumstances in which a driver is not at liberty to turn up for a shift, without actually considering whether he was in fact obliged ‘to turn up for a shift’ at all. If there was no such obligation, then the clause would not address the circumstances in which a driver could fail to turn up for work, so to say it did not address this point does not answer the question. The central question remained whether the driver was obliged to perform work.”

“there is no implied term that if he is simply unavailable for whatever reason and fails to turn up, that he will breach his contract…The clause only requires the driver to notify the appellant if he will be unavailable to undertake a previously agreed delivery, it does not require him to undertake the delivery absent a good reason for not doing so.”

Costello J. concluded that there was no mutuality of obligation “for the relevant period of the multiple individual contracts” and that there was no mutuality of obligation in the overarching agreement either. “It follows that, as a matter of law, the agreements cannot have been contracts of service and the drivers were therefore not employees.”

Takeaway: This case highlights the essential requirement for mutuality of obligation to exist in a contract of employment. It also emphasises the importance of ensuring that contracts for services make it clear that there is no obligation on independent contractors to carry out any work, and that the arrangement operates accordingly in practice. Similarly, it ought to be clear that there is no obligation on a business to provide any work to its independent contractors and businesses ought to be able to demonstrate that this was in fact the case. The implications of an individual being found to be an employee rather than an independent contractor are significant not only from an employment law perspective, but also from a Revenue perspective. While there are a number of tests for employment status, mutuality of obligation operates as an important filter and this case reiterates that, where mutuality of obligation is absent, a court or other adjudication body is not required (and indeed ought not) to consider any further tests for employment status.

Links:

https://www.bailii.org/ie/cases/IECA/2022/2022IECA124CostelloJ.html

https://www.bailii.org/ie/cases/IECA/2022/2022IECA124HaughtonJ.html

https://www.bailii.org/ie/cases/IECA/2022/2022IECA124WhelanJ.html

Authors – Jenny Wakely and Anne O’Connell

14th June 2022

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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