Disguise it, it is still an elephant'
Bob Dowdall, Chief Inspector of Taxes, March 2001
Legitimate employers pay a further 10% PRSI contribution per employee. Employers misclassifying employees as self-employed pay no PRSI, nothing, zilch, zero!
The downside for the misclassified employee is immense with no entitlement to Jobseeker's Benefit, Illness Benefit, Health & Safety Benefit, Invalidity Benefit, State Pension (Transition), Treatment Benefit, Occupational Injuries Benefit & Carers Benefit.
The upside for the misclassifying employer is likewise immense with a reduction in labour costs in the ballpark of 20%.
Employers misclassify employees as self-employed to evade PRSI.
THE KANGAROO COURT
FLAC (Free Legal Advice Centre)
These days the Appeals Office is in a whole other stratosphere. Now it's not only social welfare legislation and regulations that these civil servants are adjudicating on, European Union law and international human rights obligations have also been absorbed into this ever growing fiefdom.
The Social Welfare Appeals Office, is a quasi-judicial body, an administrative body which exercises powers and functions similar to a judge. Despite its role as adjudicator over disputed decisions of the Department, the Appeals Office is not an independent statutory body. It is an office of the Department of Social Protection, and Appeals Officers are employees of that department.
Appellants in 'Insurability of Employment' appeals of SCOPE decisions are rarely Mr. or Ms. Average Citizen, they are high roller companies with millions to lose if SCOPE decisions for their workers are upheld by the Social Welfare Appeals Office. These Companies come to the Appeals Office armed to the teeth. Senior Counsel, Junior Counsel, Solicitors, Legal Representatives and Industry Representatives regularly accompany these high roller appellants.
The poor schmuck worker, who was found to be an employee and not self-employed by SCOPE (Also a legally binding decision by the way) is forced into the Appeals Office like a lamb to the slaughter. The worker is downgraded to a 'notice party', has no entitlement to legal representation and is threatened by the Appeals Office with a €1,500 fine for non-appearance.
Before the Social Welfare Appeals Office are 14 men, bricklayers and general operatives in the construction industry, all of whom sought 'Insurability of Employment' decisions from The Scope Section of the Department of Social Protection. The SCOPE Section of the Department of Social Protection made a legally enforceable decision that all of the men were misclassified as self-employed by JJ Rhatigan & Co. and that they were, in fact and law, all employees. JJ Rhaitigan & Co. have appealed the SCOPE decision to the Social Welfare Appeals Office.
The misclassification of construction industry workers has been the subject of debate and investigation many times before. Sixteen years ago, the then Chairman of the Public Accounts Committee, Mr. Jim Mitchell TD conducted an investigation into the employment status of workers in the construction industry. The employment status of over 60,000 workers was examined and 1 in 5 of those examined were found by the PAC to be misclassified as self-employed.
The following year, the Office of Comptroller and Auditor General ordered a repeat of the investigation which once again resulted in 1 in 5 of those examined being found to be misclassified as self-employed.
Although the misclassification of workers in the construction industry has historically received the majority of official attention, the relevant Legal Principles & Court Judgments apply to all workers, not just the construction industry. There is no evidence that rates of misclassification are less in other industries.
Approximately 330,000 people in the Irish workforce are classified as self-employed.
The 'Relative Contract Tax' or 'RCT' is the mechanism used by Employers and Revenue to classify workers as self-employed in construction, forestry and meat processing operations. Other industries use similar mechanisms such as the 'General Medical Services Contract' to classify their employees as self-employed.
Back in the 1990s, one of these 'other industry mechanism' cases came before the Scope Section for examination and adjudication. In this instance, Revenue and Employers had agreed a system of tax collection based on the premise that all workers in that particular occupation were self-employed. Scope adjudicated that the worker was an employee and not self-employed despite the agreement between employers and Revenue. This decision was appealed to the Appeals Office by the employee and the employer. The Appeals Office upheld the SCOPE decision. This case was further appealed to the Higher Courts and became the Irish Supreme Court case of Henry Denny & Sons Ltd. T/A Kerry Foods v The Minister for Social Welfare - the fundamental test as to whether a person who has been engaged to perform certain work performs it “as a person in business on their own account”.
The Scope Decision was so strong that it survived challenges all the way to the Supreme Court and proved that it is not simply a matter of calling a job “employment” or “ self-employment”.
Employers & Revenue fought back under the auspices of the 'Employment Status Group'. The following is an extract from a CWU report:
The Employee Status Forum has been established to deal with the paragraph under Employment Status in the Programme for Prosperity and Fairness. This paragraph is written into the PPF in Framework 1 for Living Standards and Working Place Environment.
The participants on the side of the Irish Congress of Trade Unions are Tom Wall (ICTU Assistant General Secretary), Chris Hudson (Organising Officer CWU), Eoin Ronayne (Regional Secretary, National Union of Journalists) and Kevin Mulligan and Tommy Devlin (Dublin Motor Drivers Branch and Organising Committee CWU).
The other representatives are as follows - Department of Finance-Colm Sweeney , Revenue-Bob Dowdell, Social Community and Family Affairs-Vincent Long.
Progress so Far
The Forum has met on approximately four occasions, initially the Congress side was led by Patrica Donovan, Deputy Secretary General. Patrica has now taken up a position with the International Labour Organisation. The main task was to get all those represented around the table to engage in a constructive look at the whole issue of employment status and to progress toward some criteria which will resolve the issue. This was a difficult task as generally the view of IBEC, Finance and Revenue was that the status quo should remain. The status quo is where a worker has a disagreement over his/her employee status they can take their case to the High Court and seek a legal definition.
Far from maintaining the status quo, the notion that a worker should be forced to take their case to the High Court to seek a legal definition is the opposite of what happened in the Denny case where it was the Department who defended the SCOPE decision in both High and Supreme Courts.
It was just the 'out' the Department needed. Fighting 'Insurability of Employment' cases one after the other against high roller appellants prepared to go all the way to the Supreme Court was something the Department did not want to do with what they saw as 'Job Creators'.
Now when a high roller appellant turns up at the Appeals Office fully locked and loaded with high falutin legal teams, the Appeals Office invariably reverses the SCOPE Decision or seeks to reset the parameters of whatever industry mechanism has failed the Scope examination in what the Appeal Office euphemistically calls 'Test Cases'.
These 'Test Cases' are kept secret. They don't exist on any searchable database of decisions anywhere. They are not open to scrutiny nor are they available to workers even though they have a bearing on their individual cases. 'Test Cases' are not based on established facts, they are based on assumptions that categorize purely by occupation. Each case is not assessed on its own merits in accordance with the general precedents of Irish law.
Workers, like the 14 construction workers, are sometimes asked by the Appeals Office to be 'Test Cases', other times the label of 'Test Case' is forced upon the worker without consent or knowledge. The idea behind the use of 'Test Cases' is that both the employer and the employee agree to the worker being classified as self-employed. It's an 'Everybody's Happy' scenario favoured by Revenue and Social Welfare even though courts are reluctant to weigh so heavily on the parties’ own descriptions of the relationship due to unequal bargaining powers. It is the “realities of the relationship” that determine insurability of employment not wishful descriptions.
14 men from one site, all supposedly self-employed under the RCT system were all found to be employees from the moment they walked on site. The SCOPE decision exposes that the RCT system is masking high rates of misclassification in the construction industry. The Department of Social Protection and Revenue have a standing army of Inspectors tasked with seeking out social welfare fraud including PRSI evasion. Their activities on random joint task force traffic stops are regularly reported in media. Surely the investigative resources of the Department and Revenue could be more effectively targeted with Scope Decisions on sites like the one where these men worked. 14 misclassified men would quickly become 14,000 or 140,000, an insurmountable number to be overturned in a secret and unaccountable Appeals Office.