In Paul Lingard v Randridge International Ltd (In Examinership) (ADJ-00053934), the Workplace Relations Commission (“WRC”) found that a contractor satisfied the test for an employee set out by the Supreme Court in Revenue Commissioners v Karshan Midlands (Ltd t/a Domino’s Pizza) [2023] IESC 24. Although the contractual relationship was between two limited companies, the WRC looked behind this arrangement and found that there was a “contract of services”, i.e. an employment relationship.
Facts:
The Complainant was engaged as a contractor with the Respondent, operating as a Construction/ Civil Works Manager for the Respondent between 14 July 2020 and 25 April 2024. It is common case that the working relationship had been uneventful for some time prior to the termination of the relationship between parties. The Complainant submitted a complaint to the WRC under the Payment of Wages Act 1991 due to the non-payment of monies owed to him by the Respondent.
The Respondent argued that the Payment of Wages complaint was not justiciable. It was submitted that the Complainant was not an employee as defined by section 1 of the Payment of Wages Act 1991 and distinguished between a “contract of services” (employer-employee relationship) and a “contract for services” (self-employed contractor to main company). The Respondent highlighted clause 17 of the contract between the parties, which stated “The Sub-contractor as an independent limited sub-contractor is not entitled to rights under employment law”. The Respondent contended that this was not an employment contract but a commercial business contract between the Respondent and a limited company owed by a self-employed contractor, PSL (Aberdeen) Ltd (“PSL”) of which the Complainant was the sole director.
The Complainant stated that he understood upon entering this contract, he was not an employee of the Respondent. He stated that he was familiar with a sub-contractor to main contractor business arrangement and worked using this business model for some time. However, as the relationship between the parties had been uneventful for a number of years and because of the outstanding payments owed to him, the Complainant had reconsidered the relationship with the Respondent and had submitted a Payment of Wages complaint to the WRC to seek clarification on the relationship between him and the Respondent. He further submitted that aside from his Personal Tax filings, his working relationship with the Respondent had been “effectively identical” to that of an employment relationship.
Decision:
The Adjudicator, Michael McEntee, considered the five-step test established by the Supreme Court in Karshan to assess whether a working relationship constitutes a contract of services or a contract for services. Overall, the Adjudicator considered the key point for consideration in Karshan that was applicable to the present facts was whether:
“…the terms of the contract between the employer and worker interpreted in light of the admissible factual matrix and having regard to the working arrangements between the parties as disclosed by evidence, consistent with a contract of employment, or with some other form of contract having regard, in particular, to whether the arrangements point to the putative employee working for themselves or for the putative employer.”
In assessing whether the day-to-day work arrangements were consistent with a contract of employment, the Adjudicator highlighted the following points:
The Adjudicator noted that at first glance, it appeared that the contractual relationship was an uneventful contract for services between PSL and the Respondent. However considering the day-to-day relationship between the parties and the principles set out in Karshan, the Adjudicator was satisfied that the relationship was a contract of service. The complaint before the WRC was therefore justiciable and the Complainant was awarded €8,500 which was due in outstanding invoices but was now referred to as ‘salary’.
Takeaway for Employers:
This case demonstrates that an employment relationship may arise between a company and a contractor even where there is a contract between two limited companies. It is interesting to note post-Karshan that the WRC are increasingly looking behind the corporate veil of a company to examine the employment status of workers.
This decision follows PR Company v Hotel Resort (ADJ-00046181, ADJ-00047024, ADJ-00045524, ADJ00047375) from late 2024, in which the WRC took a similar approach to determining an independent contractor’s employment status by looking behind a company and examining the relationship between parties. Although several unusual circumstances arose in that case, it is noteworthy that a similar approach was adopted by the WRC in the present case. A link to our article on that decision can be accessed here.
It is also worth highlighting that this exercise was conducted in another decision by the WRC this month in A Worker v A Company (ADJ-00052528). Whilst the substantive complaint concerned an alleged discriminatory dismissal, a preliminary issue of the Complainant’s employment status was addressed by examining the day-to-day work arrangements between the parties with particular focus on remuneration, the right of substitution and the Respondent’s exercise of control. Despite the fact the Complainant operated his own business, and the Respondent submitted that the relationship had been a commercial/agency arrangement, the Complainant was found to be an employee in light of evidence of the working relationship and the substantive complaint proceeded for adjudication.
This decision comes after recent publication of the Government’s Code of Practice on Determining Employment Status which provides a framework for establishing employment status to The Department of Social Protection, the Revenue Commissioners and the WRC. Of particular note in light of the present case, the Code provides guidance on determining employment status in circumstances where there are intermediary companies between the worker and the end-user of the worker’s services. The Code considers arrangements where there is intermediary “Personal Service Companies” which are limited companies of which the worker is typically the sole director, or “Managed Service Companies” which are companies that have a number of worker shareholders and are facilitated by a third-party who organises the legal and administrative affairs of that company. The Code establishes that notwithstanding the existence of these intermediary companies, the five-step framework derived from Karshan should be applied to determine a worker’s employment status. However, each case will be determined on its own unique circumstances. Our analysis of the Code of Practice can be accessed here.
Employers should be mindful that contractor relationships are being closely examined by the WRC and while a relationship may appear on its face to be a commercial relationship between companies, the factual matrix could be such that an employment relationship exists. This is bolstered by the guidance in the new Code of Practice, which clarifies the approach(es) the WRC can adopt when establishing whether an individual is an employee. Employers should familiarise themselves with the Code and consider their engagement with contract workers carefully to ensure that they understand how that relationship may be categorised and understand the rights and obligations that could arise.
Links –
https://www.workplacerelations.ie/en/cases/2025/february/adj-00053934.html
https://www.workplacerelations.ie/en/cases/2024/november/adj-00047375.html
https://www.workplacerelations.ie/en/cases/2025/february/adj-00052528.html
Authors – Lia Berkery & Anne O’Connell
14th March 2025
Anne O’Connell Solicitors
19-22 Lower Baggot Street
Dublin 2.
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