Author: Meg Dunphy, HR Policy & Engagement Manager, CIPD
There have been two important cases in recent weeks that highlight the entitlements of employees.
We have seen the first case to compare whether an employer’s sick pay scheme in the round meets the statutory requirements.
The second case is a long running case about Domino's Pizza delivery drivers, in which the Supreme Court delivered an important ruling that provides a five-factor test to properly assess the employment status of a contractor.
Statutory Sick Pay:
On 25th September 2023, the Workplace Relations Commission (WRC) made its first decision under the Sick Leave Act in the case of Katerina Leszczynska v Musgrave Operating Partners. The claimant, a shop assistant, argued she was entitled to Statutory Sick Pay (SSP) for three days of illness, while the employer contended their sick pay scheme was more favourable, as it allowed for full pay from day four of sick leave up to eight weeks.
The Sick Leave Act 2022 in Ireland, effective since 01 January, 2023, grants employees statutory sick pay for the first time. Employees with 13 weeks of continuous service are entitled to up to three days of SSP, paid by the employer at 70% of the employee's pay, capped at €110 per day. The Act allows employers to have sick pay provisions equal to or more favourable than SSP, substituting them for SSP.
The WRC considered specific criteria outlined in the Act under section 9 to determine if there was an exemption from SSP obligations, such as the period of service required, the number of days absent before sick leave is payable, the length and amount of sick leave payable, and the reference period of the sick pay scheme. In this case, the decision favoured the employer, as the WRC found their scheme, despite a longer service requirement and non-payment for the first three days of absence, provided more overall benefits than SSP.
This case is the first WRC evaluation of a company sick pay scheme under the Act. Employers are advised to continually assess their schemes' favourability, as the SSP entitlement is set to gradually increase up to ten days in 2026. In fact, statutory entitlement will be 5 days as of 01 January 2024.
Further litigation is expected to clarify the weight assigned to each criterion and the extent to which a company scheme must be more favourable to be exempt from SSP obligations. For more information from us check out our fact sheet on Absence Management.
We’ve long been awaiting the decision in ‘The Revenue Commissioners v. Karshan (Midlands) Ltd. t/a Domino’s Pizza’ case.
On Friday 20 October 2023, the Supreme Court ruled that Domino's Pizza delivery drivers should be classified as employees for the purpose of tax, not contractors. The case involved drivers engaged by Karshan (Domino's Pizza) under contracts in 2010/11. It clarified drivers had to be treated as employees under the Taxes Consolidation Act 1997.
To give some background the dispute originated when Karshan (Domino's Pizza) claimed their delivery drivers were self-employed under contracts for services, supported by drivers' acknowledgments in signed documents. The Irish Revenue Commissioners insisted on treating the drivers as employees, subject to PAYE and relevant employment taxes. The Tax Appeals Commission (TAC) initially sided with Revenue, a decision upheld by the High Court. However, the Court of Appeal overturned it in June 2022, categorising the drivers as independent contractors. Revenue then appealed this decision to the Supreme Court.
Throughout the legal proceedings, the core principles distinguishing an employee from a contractor were scrutinised. The notion of "mutuality of obligation" defining the extent to which an employer is obligated to provide work and a worker is obligated to perform it, took centre stage in legal arguments. However, the Supreme Court dismissed the idea that this is a prerequisite for establishing an employment contract, considering it a source of unnecessary confusion. Instead, a five-factor test was established to determine employment status:
- Does the contract involve the exchange of wage or other remuneration for work?
- If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?
- If so, does the employer exercise sufficient control over the employee to render the agreement one that is capable of being an employment agreement?
The first three questions act as an initial screening to determine if questions 4 and 5 warrant further consideration.
If these three requirements are met, the factual matrix and working arrangements must be considered.
- Is there anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing?
The ruling may affect many gig economy workers. It is the responsibility of businesses to ensure the accurate deduction of applicable taxes from their employees' compensation, encompassing both salary disbursements and any notional pay, and to promptly remit these funds to Revenue as per Schedule E (PAYE).
Revenue have released a published statement urging businesses to review worker classifications for tax compliance. We would encourage all organisations to review and rectify their reported statuses to be in line with the guidelines from Revenue.
We will keep you updated on developments from these and other upcoming cases!