Before the court are appeals by JJ Rhatigan & Co. against 14 SCOPE decisions that brick layers and labourers are contract of service employees. The result of these appeals will directly affect the fate of up to 75,000 construction workers, an Education Capital Programme which has an ear marked expenditure of 2 billion euro over five years, and State sanctioned PRSI evasion running to hundreds of millions of Euro.
No matter what evidence is presented in this court, the outcome has already been decided. It was decided 16 years ago by a cabal of industry barons and top civil servants from Revenue, Enterprise Trade & Employment, Finance, Social Welfare & IBEC.
To fully understand the levels of corruption at work in this quasi judicial charade, one must look back, back to where it all began.
In the early 1990s, the Revenue Commissioners engaged with a number of employers over their non-compliance with their tax and PRSI obligations. At the time, many workers in certain industries were paid cash in hand, also known as 'The Lump' or 'The Black Economy'. Although there was always a legal obligation on employers to make a return on any person who was paid more than 3,000 punt, these non-compliant companies argued that their compliance was 'put on hold' until the employment status of their workers for tax & PRSI purposes was concluded.
Despite dismissing this 'put on hold' fallacy, Revenue absolved these companies of all past non-compliance and engaged in protracted discussions with the same non-compliant companies with a view to establishing a 'tax deduction at source system' for workers in these traditionally non-compliant industries. The operation of industry wide 'tax deduction at source system' are entirely dependent on blanket self-employed classifications of all workers in these industries.
Even back then, the Revenue Commissioners knew that they could not make a blanket self-employment classification of all workers in any industry but their 'tax deduction at source system' desperately needed some legitimacy. To this end, a number of workers were hand picked in '93/'94 by employer representatives for Insurability of Employment decisions. On the face of it, these hand selected workers seemed to be broadly representative of workers in the industry and the SCOPE Section of the Department of Social Welfare assiduously adjudicated on the facts as presented following a thorough investigation.
Then came the bombshell for Revenue & non-compliant employers, SCOPE decided that the workers were not self-employed, they were employees. The proposed 'Tax Deduction at Source System' wasn't worth the paper it was written on. The financial implications for non-compliant employers were immense, stretching back many years.
Predictably, employer representatives appealed these decisions to the relatively new (at that time) Social Welfare Appeals Office. Surprisingly, the worker(s) involved also appealed the decision. There is contradictory evidence as to whether 2 or 3 workers were originally hand selected for a SCOPE decision but it is not in dispute that only 1 of these decisions actually came before the Social Welfare Appeals Office in 1995.
Scant details of this single case are contained in the Appeals Office Annual Report of the same year. The SCOPE decision was overturned by an Appeals Officer on the premise that the appellant worker's evidence 'did not conflict with the submission on behalf of the appellant firm'.
What is not contained in the Appeals Office Annual Report is that of the 3 original hand selected cases, 1 had emigrated and the other two had become directors of their own company in the same industry in the year long delay it took for the Appeal to be heard. Whether or not the Appeals Office knew at that time that no workers and only employers were represented in the Appeal has not been established. The Appeals Office has been fully aware of these facts since at least 2000.
As each case must be assessed on it's own merits, this decision should have had little if any impact on the insurability of employment status of other workers, but .......
Discussions between Revenue and non-compliant industry representatives were resurrected. In 1997 a 'Taxation at Source Scheme' was finalised by Revenue & Industry representatives. A Chief Inspector of Taxes, Revenue's architect of the scheme, wrote that he proposed to treat all workers in one occupation as self-employed for tax purposes.
The Tax Inspector did not claim that this was a legal decision, in fact, he went to very great lengths to explain that it was not - Written Quotes from the Inspector:
- The decision is not binding on Revenue
- This arrangement does not override the statutory rights of (workers)
- PAYE option is for tax purposes only
- This arrangement should not be taken as precedent in any other area of law
There is no basis for categorisations purely by occupation yet at that time, and still, Revenue pick and choose employment status based on occupation alone.
In 1998 a ruling was issued in a Supreme Court case, Henry Denny & Sons (Ireland) v Minister for Social Welfare . This case had begun as a SCOPE decision in 1992 and is one of the earliest, if not the earliest, insurability of employment Appeal heard by the Appeals Office. The Denny case is certainly the first (& probably only) SCOPE decision upheld by the Appeals Office where there was a pre-existing 'special arrangement' between Revenue and employers in that industry. The 'Special Arrangement' was an acceptance by the Inspector of Taxes, Tralee, that demonstration type workers where employed under a contract for service (self-employed). The SCOPE decision that the worker was an ordinary employee survived legal challenges all the way to the Supreme Court. It was the Minister for Social Welfare who defended these challenges and not the employee.
In July 2000, a worker wrote to the SCOPE Section and requested an insurability of employment decision. The worker explained in detail why he believed that he was not self-employed. The worker had been classified as self-employed by occupation alone under the taxation at source scheme designed and implemented by Revenue's Inspector of Taxes in 1997.
The worker also wrote to the Chairman of the Public Accounts Committee to ask for an investigation into the circumstances of blanket classification of workers as self-employed in that industry. This request was followed by a demonstration at Government Buildings of other workers in the industry demanding that they too be recognised as employees and not self-employed.
The PAC Chairman wrote to the Department of Social Welfare and the Revenue Commissioners asking why all workers in that industry were classified as self-employed by occupation alone.
On the 9th of August 2000, the Chairman of the Revenue Commissioners directed his private secretary to write to the PAC Chairman. In this letter it states:
- 'These are matters for the Departments of Social Community & Family Affairs and Enterprise Trade & employment respectively'
In September 2000, following a full and complete investigation, the SCOPE Section issued a decision that the worker was not self-employed but was instead an Employee.
It is at this juncture that the Social Welfare Appeals Office abandoned all pretence of independence from the Department of Social Welfare and indeed abandoned all pretence of acting in accordance with the law.
This SCOPE decision was promptly appealed to the Social Welfare Appeals Office by the employer. Significantly, the appellant employer refused point blank to provide grounds for appeal and the Appeals Office refused to insist on grounds of appeal from the appellant employer.
On the 2nd of October 2000, the Secretary General of the Department of Social Welfare wrote to the PAC Chairman. His reply had been prepared for signature by a senior social welfare civil servant who served as the Assistant Chief Appeals Officer of the Social Welfare Appeals Office until 2009. In his prepared reply, the Secretary General claimed:
- 'a number of representative Test Cases were selected in 1993/94 for detailed investigation and formal insurability decision under social welfare legislation'
- 'this process resulted in a decision by an Appeals Officer of the Social Welfare Appeals Office on 12 June 1995'
- 'the Appeal's Officer's decision has .... , since then, been generally accepted throughout the industry and also by the Office of The Revenue Commissioners for income tax purposes'
Both the Secretary General and the Assistant Chief Appeals Officer were fully aware that the single decision of an Appeals Officer in 2005 was not representative of workers as no worker was involved and operations which seem to be the same, may differ in the terms and conditions in any given case. Nor was it a 'Test Case' as each case must be assessed on it's own merits.
Though this single case was accepted by the Revenue Commissioners for income tax purposes, Revenue were at pains to point out that this arrangement should not be taken as precedent in any other area of law.
This 'Test Case' claim is like a mutating virus, it started out with SCOPE in 93/94 with no way were they test cases, it mutated in '95 with the Appeals Officer claiming that his decision 'was of wider significance to the trade'. Skip forward to '97 and the Inspector of Taxes claims it is 'a non binding decision that does not override the statutory rights of (workers)' and then suddenly in 2000 the Assistant Chief Appeals Officer outright claims that the single decision on a company director masquerading as an employee was a 'Test Case'.
The Secretary General also wrote that 'meetings with various interest groups will take place shortly'. It is an astonishing admission from the Secretary General that meetings with interest groups would take place whilst the SCOPE decision was under appeal to the Social Welfare Appeals Office. What is even more astonishing is that the Social Welfare representative at these meetings was the same person who prepared the Secretary General's reply to the PAC & who served as the Assistant Chief Appeals Officer until 2009. There can be no doubt that any claim that the Appeals Office is Independent of the Department of Social Welfare is without foundation.
The cover name for these meetings involving a cabal of industry barons and top civil servants from Revenue, Enterprise Trade & Employment, Finance, Social Welfare & IBEC, even whilst the Appeal of the SCOPE decision was sub judice, was 'The Employment Status Group'.
IBEC, Finance and Revenue insisted that where a worker has a disagreement over his/her employee status, the worker and not the Department of Social Welfare, must be forced to take their case to the High Court to seek a legal definition regardless of what evidence is presented by SCOPE or the worker.
The 'Employment Status Group' was formed to create circumstances where the Social Welfare Appeals Office process would be affected by comment from Revenue/IBEC/Enterprise Trade & Employment/Social Welfare and would be affected by pressures generated by such comment, to the detriment of the worker whose Scope decision was, at the time, under appeal in the Social Welfare Appeals Office. The impact of this group on decisions of the Social Welfare Appeals Office is still evident today as a worker who has a disagreement over his/her employment status, particularly if it clashes with a preexisting Revenue 'Tax deduction at source' system, is left with no choice but to take their case to the High Court to seek a fair hearing and a legal definition.
It is this 16 year old edict from IBEC, Revenue, Finance, Enterprise Trade & Employment and Social Welfare that has already determined the outcome of the upcoming appeal in the Gresham Hotel against 14 SCOPE decisions that 14 brick layers & labourers were employees and not self-employed. This despite previous blanket self-employed determination through Revenue's RCT taxation at source scheme. A scheme which is justified by Revenue using what the Social Welfare Appeals Office euphemistically calls 'Test Cases' which are not in fact nor in law 'Test Cases'. It is clear that the SCOPE Section does not at all accept that what the Social Welfare Appeals Office calls 'Test Cases' have any bearing on insurability of employment decisions.
On the 27th of September 2016, Mick Barry TD wrote to Minister for Social Protection to ask if the Minister would be defending the SCOPE decision with legal assistance in the Appeals Office.
Minister Varadkar's response is entirely incorrect. In the appeal hearing (2001) of the SCOPE decision (2000, referred to above), the Scope Section insisted on legal representation after being surprised (ambushed) by the appearance of extensive legal representation for the appellant company. This was duly supplied by the then social welfare Minister. Ms. Ciara Walsh, Solicitor, Chief State Solicitor's Office, & Mr. Mark Connaughton BL represented the Minister at the appeal hearing.
The Department of Social Protection does not want the Scope Section legally represented at an Appeal where it has been exposed that decisions are based on political edicts & not legal process. Previous written concerns from legal authorities on the conduct of the Appeals Office...
- 'It is clear therefore that there was no new material in the appeal which justifies changing (The Scope Deciding Officer's) findings and the legal authorities fully support the original decision made'
Had the legal authorities been fully aware of the actual level of corruption that occurred in the Appeals Office hearing of 2001, it is certain that their concerns would have been far greater.
In 2002, Mr. John Bruton TD wrote to the Secretary General of the Department of Social Welfare and informed him that there were concerns about the authenticity of a written report of an interview between a Social Welfare Inspector and the appellant company Manager, which was the key evidence relied upon by the Appeals Officer in his overturning of the Scope decision. (It is extensively quoted in his unabridged written decision).
The Secretary General did not reply. In June 2002. a reply came from same Assistant Chief Appeals Officer who was also the Department's representative in the Employment Status Group:
- 'The statements made in this regard by (the worker) in his letter to you are incorrect'
On the 14th of October 2002, in a Circuit Court hearing presided over by Judge Desmond Hogan, Counsel for the appellant company Manager objected to the use of the Social Welfare Inspector's written report because the Manager had never met or spoken to the Social Welfare Inspector. During questioning, the Social Welfare Inspector admitted that he had never met or spoken to the appellant company Manager named in his report.
On the 20th May 2003, Mr. John Bruton TD wrote directly to the Minister for Social Welfare and informed her of what had occurred in the Circuit Court.
On the 24th of June 2003, Ms Netta McGowan HEO, Correspondence, Social Welfare Appeals Office, wrote to Mr John Bruton TD and stated:
- 'The Appeals Officer has again examined the file papers in light of your latest letter but does not consider that any further new evidence has been presented that would warrant a revision of the Appeal's Officer's decision'
Ireland's most secretive, most powerful and most corrupt quasi-judicial court continues on regardless. No action was ever taken by either the Department of Social Welfare nor by the Revenue Commissioners and it is into this despicable den of iniquity that 14 construction workers are forced to go, under threat of fine, to have their employment rights pissed away.