Mr Johnson-Caswell was a self-employed IFA engaged with MJB Limited who acted as Mr Johnson-Caswell’s principal. Mr Johnson-Caswell had a contract with MJB stating that he was self-employed, and that he was required to comply with the directions, instructions, and training requirements of MJB, the Principal. In accordance with FSA rules, MJB were responsible for ensuring Mr Johnson-Caswell complied with the relevant regulatory requirements.
When his contract was terminated, Mr Johnson-Caswell brought a number of claims including unfair dismissal – a claim only available to employees.
The question for the tribunal was whether or not Mr Johnson-Caswell was in fact an employee. The tribunal found that, because MJB were responsible for ensuring compliance with the relevant regulatory requirements, they had “control” over Mr Johnson-Caswell which in turn meant that in law he was an employee, despite the fact that MJB had no control over how he worked, and that he was remunerated via commission and not salary. As a result of the tribunal’s finding that he was an employee, Mr Johnson-Caswell was able to pursue his claim for unfair dismissal.
The FSA is yet to comment on the tribunal’s judgment.
The tribunal’s decision is not binding on other tribunals, and it is likely that MJB will appeal to the Employment Appeal Tribunal. However, it is a worrying expansion of employment law that could open the floodgates for purportedly self-employed IFAs bringing numerous claims in the employment tribunal, including unfair dismissal, sick and holiday pay. There may be further consequences with HMRC if they also see the IFA as an employee rather than genuinely self-employed as the “employer” would then have failed to account for PAYE and will have to pay the tax and NI on the “salary” to HMRC.
For many principals, this added potential liability may be too much to bear. In light of the Tribunal decision it would be prudent for all principals to review their self-employed IFA contracts to minimise the risk of the IFA being deemed an employee. Bevans are offering a fixed fee contract review for £300 plus VAT (this offer is available until 1 December 2011).