Regina Doherty (Meath East, Fine Gael) | Oireachtas source

It is always a pleasure to come to the House and I welcome this opportunity to discuss the issue of false and bogus self-employment. I have read carefully the text of the Bill tabled by Senator Nash and others and I genuinely appreciate the intention behind it. False self-employment arises where an employer wrongly treats a worker as an independent contractor to avoid tax and social insurance contributions and other rights which attach to employment.

If I may, I will discuss briefly the main features of the Bill. The Bill aims to define in law the employment relationship and relevant tests of employment and apply this employment status to every enactment unless the enactment has a contrary intention. It also seeks to give a definition of false self-employment. While there are a number of definitions, it seeks to firm up one definition and thereby have potentially only one definition. It also provides that disputes as to whether an employment relationship exists be referred to the director general of the Workplace Relations Commission. It empowers the Revenue Commissioners to determine that arrangements calculated to misrepresent any work or service as being executed under a contract for services, rather than a contract of service, is a tax avoidance transaction and that PRSI in such cases will be treated as tax for that purpose.

The Government will support measures that bring genuine protection for vulnerable workers. It is not clear, however, precisely how this Bill will provide any additional protections for workers or improve the current legal basis for determining employment status. It would be appropriate, therefore, to have further scrutiny of the legislation in an appropriate forum, possibly a committee.

The Bill appears to describe much of what is already covered in existing legislation and case law. It draws substantially on the current code of practice for determining employment and self-employment, without proposing any real additional safeguards or supports for workers. The existing key tests to properly define employment status have developed from a significant body of case law. The question of whether an individual is engaged under a contract of service or a contract for services is a question of fact and general law. Regardless of how the parties may describe themselves, all the possible factors that bear on the relationship between the parties, including written, oral and implied details, must be examined and given their proper weight and a judgment must be made on their overall effect. The courts have been clear that the reality of the employment relationship in all its aspects has to be considered. In this light, I have some concerns that attempting to enshrine a list of tests in legislation could have the effect of producing a checklist, rather than considering the full working relationship.

While the Bill describes much of what is already covered in existing legislation and case law, it does not appear to include the most significant employment test, which is known as the mutuality of obligations test. Based on current case law, for any contract of employment to exist the employer must be obliged to provide work and pay and the employee must be obliged to accept that work and pay. The courts have pointed to this as being an essential element of an employment contract.

The Government recently published a report under the title, The Use of Intermediary-type Structures and Self-employment Arrangements: Implications for Social Insurance and Tax Revenues, which is a bit of a mouthful. The report, which was brought to Cabinet some weeks ago, followed a lengthy public consultation which received submissions from interested parties, including employers, trade unions, professional bodies and, most important, individuals. The report set out a number of proposals, including exploring further legislative options to treat nominally self-employed workers who are dependent on a single employer as PRSI class A contributors, with the employer PRSI contribution paid by the company that uses the employee's services.

Section 5 of the Bill addresses the same issue on employment via intermediaries. The Bill does not seem to recognise that by no means all forms of intermediary employment are false self-employment. The working group that considered this issue purposely avoided the requirement that an individual would have to be deemed to be an employee. It advocated instead that where the characteristics of an employment relationship exist, the end user would be required to operate PAYE - income tax, PRSI and USC deductions - even though the individual may be self-employed. This is a fundamental difference in approach which would allow for the retention of the flexibility available under existing contract arrangements, while providing additional protections to self-employed contractors who are economically dependent on a single employer through a single contract.

The Bill's relationship with existing legislation, including social welfare, employment and competition legislation, will need careful consideration and clarification. It is important to ensure the provisions do not have unintended consequences or impact negatively on some cohorts, such as the genuinely self-employed, although I do not believe that to be the Senator's intention. A range of legislation, including the Employment Equality Act, the Safety, Health and Welfare at Work Act and the Unfair Dismissals Act, contains specific definitions of the term "employee" within the context of that legislation. Further scrutiny will be needed of the full range of legislation that could be affected by the Bill, which should not be passed in isolation. The Bill makes no reference to the role of the Department of Employment Affairs and Social Protection’s scope division which plays the lead role in this area and appears to direct all disputes to the Workplace Relations Commission. I do not think that is a good thing to do and ask Members to reflect on this when we discuss the Bill further on Committee Stage. I do not say this simply out of loyalty to the Department. I am concerned that it could be seen as reducing the rights of a worker to avail of existing remedies. In particular, I am aware that the Workplace Relations Act 2015 provides that complaints must be made within a set period of the employment rights contravention - normally six months. In contrast, there is no time limit for the making of applications to the Department’s scope section. Applications are often made much later, when a worker discovers the true impact of his or her employment and PRSI status, as Senator Alice-Mary Higgins noted.

While we are agreed that there is false, or bogus, self-employment, it is important to ask if there is a significant problem to be addressed. Some think the number of cases is in the hundreds of thousands, but I believe it is significant, even if the number affected is only 15,000 or 25,000. I am not dismissing the number, but I do not think it is as large as some contend. The existing mechanisms for dealing with false self-employment, including the Workplace Relations Commission and the Department's scope section, do not encounter significant levels of it. This may suggest its prevalence of is overstated or that not many people are aware of the scope division, something I hope to remedy this year. Data from the CSO quarterly national household survey record 312,000 individuals as being self-employed in 2017, which accounts for 15% of total employment. The difficulty with the level being overstated in Ireland is that it is consistent with the average level across the European Union. Either the problem is EU-wide or perhaps it is not as big as some people think.

The great majority of insurability decisions are made on foot of a request from the employed person, rather than the employer. The decisions mainly involve company directors and public sector employees and cover partnership cases and family employments. The number of cases involving false self-employment is very small. I am willing to concede that this may be because many people do not know about the scope division in the Department. In 2016 there were 138 decisions to change PRSI class to class A, the common class for employment. They included director and family employment cases, as well as public service employees and workers who were changing from being self-employed to employed. The latter category included only a small number of false self-employment cases. The small number of cases may point, as I said, to a lack of knowledge or what I believe is a real fear of retribution among workers for using State mechanisms.