Labour Bill to ban Bogus Self Employment passes second stage in the Seanad

Ged Nash TD
28 February 2018

Speech by Labour Senator Ged Nash on the second stage passage of the Labour Party’s Protection of Employment (Measures to Counter False Self Employment) Bill 2018.

Seanad Éireann, February 28th

Employment policy is at the heart of public policy. There are, of course, core issues to do with pay. How do we get real growth in take home pay? How do we best ensure that wage growth is consistent with sustainable economic growth and international competitiveness?

But employment policy is about much more than pay. Whether you are talking about joint labour committees – which can be traced back to 1909 legislation – or about the more recent statutory remedies where there is no collective bargaining, our State has always been anxious to promote harmonious industrial relations, to avoid industrial unrest and to protect the rights of those who are not organised to protect themselves.

Our public policy has opposed the risks of an enterprise level free-for-all, with the potential for scattered, local strikes and disputes. We have always preferred to offer frameworks for workers who seek to improve their terms and conditions.

That is why I introduced in 2015 the revised framework for establishing minimum rates of pay and other terms and conditions in specified sectors of employment.

It is also why I revised the National Minimum Wage Act, to set up an independent Commission that would make solid, evidence-based recommendations to Government and that would establish a realistic floor of entitlements for workers in poorly organised sectors – predominantly women.

But employment policy is faced now with a more direct threat. You can legislate for sectoral orders, for collective bargaining, for minimum wages, and so on. But what if the employer claims that his workforce are not his employees at all?

What if he argues that he has a workforce of self-employed, independent contractors?

And, from the Government’s viewpoint, what are we to do when the employers who assert this reduce our tax revenues, increase the welfare spend and so reduce the space for additional investment in essential public services?

Any discussion on employment policy must take account of changes in our labour force. Atypical employment is growing. It is not always easy to establish the status of self-employed individuals as genuine undertakings, on the one hand, or disguised employees, on the other.

The reality is that unscrupulous employers can take advantage of this confusion, and it is to the detriment of all of us.

We need to refine our thinking about the continued drive towards self-employment. We should not examine the phenomenon through rose – or even blue – tinted spectacles.

We are told that self-employment is a free choice, an opportunity to respond flexibly and profitably to the need for restructuring, to reduce the direct and indirect costs of labour and to apply resources more flexibly.

And it is true that many of the self-employed are skilled professionals or craftspeople who work for multiple customers, using their own tools and deploying their talents and entrepreneurial abilities.

Self-employment can offer those who are genuinely autonomous and self-sufficient entrepreneurs an opportunity to make full use of their capabilities and it can contribute to an increase in the quality of work, as well as innovation in the organisation of work.

And we need room also for small scale ‘hybrid entrepreneurs’, people who combine independent work with a part-time job or a pension, and for stay at home parents, who use self-employment as an opportunity to plan their working time around care for small children.

However, there is another, growing reality. Among the self-employed there are also low-skilled individuals who work essentially as day labourers, for a single employer. They are sometimes called ‘dependent independent contractors’.

Self-employment can be imposed on the vulnerable, the low paid and those with little social protection. This cohort deserves our attention and our intervention.

Of course the trade unions see self-employment as undermining their negotiating position and taking work away from permanent employees – which is why the arrangement is so popular with some employers.

And the State – particularly the Welfare State – ends up paying the bill when employers discover so-called independent contracting as a way of escaping from social insurance.

Where businesses use a self-employment fig leaf to evade their obligations as employers, then we must be vigilant and we must counteract what is in fact a downright fraud on the Exchequer.

A judgment from the Court of Justice of the European Union called into question the long-standing argument under competition law that each self-employed individual is a separate business undertaking and that it is unlawful for them to agree between themselves to fix prices for their services.

The Court of Justice referred to a cohort of the “false self-employed” and it held that they were entitled to join trade unions, to negotiate and to bargain collectively.

We built on that judgment in the Competition (Amendment) Act, which I introduced into the Seanad last year and which, thankfully, the Government accepted.

That Act, for the first time in Irish statute law, set out a test for establishing false self-employment. But it did so only in the relatively narrow confines of trade union membership rights.

What I am proposing today, essentially, is that we build on that legislation and that we apply the false self-employment test across the board in our employment protection laws.

Self-employment is something we all know when we see it, but it can be hard to define. There is no single test. But essentially the question is whether you are in business on your own account.

So, the matters to be taken into account in deciding if you are truly in business on your own account include if you do not decide independently your own conduct in the market but are entirely dependent on your principal; if you do not bear any of the financial or commercial risks arising out of your principal’s activity; and if you merely operate as an auxiliary within the principal’s undertaking.

The Revenue Commissioners and the Scope section of the Department of Social Protection apply these common law rules at present.

The Scope section makes statutory decisions on the insurability of employment under the Social Welfare Acts. But, it told the Sunday Business Post last week, it has no figures recording the number of cases involving bogus self-employment.

What we need to be clear about is that the question of whether an individual is engaged under either a contract of service or a contract for services is a question of law, regardless of how the parties choose to describe themselves.

There can be no question of opting into or out of our employment protection laws.

Bogus self-employment in the construction industry in particular increased at an alarming rate in the last decade. The very real consequences – as so many workers discovered during the crash – is that workers suffer the loss of employment protections and social insurance cover. Meanwhile, the construction sector saw an erosion of standards that made it less sustainable and made recovery more difficult.

And the State and citizens, I repeat, were deprived of substantial revenue in the form of lost PRSI contributions, taxes foregone and public money lost to unscrupulous contractors engaged in de facto fraud.

This phenomenon of false or bogus self-employment is an insidious one. The growth of the ‘gig’ economy is increasingly leading to the casualisation of work, and to workers being offered no choice but to accept self-employed status.

Incidentally, I would not take as much comfort as Government representatives have done from the recent ESRI study on this. The study was based on questions asked in the Quarterly Household Survey, which involved workers being asked to ‘self-declare’ whether they were employees or self-employed. That is not an adequate way of gathering the information we need.

And it also seems clear from reading its report that the interdepartmental working group which had been examining bogus self-employment since July 2015 had riding instructions to adapt to the phenomenon rather than to counteract it.

Our Bill would, I believe, provide a holistic approach to the determination and classification of employment status. I t would establish a set of clear rules in law.
The Bill defines in section 2 what an employment relation is, and makes it clear that an employment relationship may exist in cases where –

the individual is an employee also of other persons,
the individual is also, in respect of other work being done by him or her, self-employed,
the individual works as an outworker or teleworker,
the individual does part-time work, temporary work, seasonal work or occasional work,
the remuneration of the individual is calculated by reference to the amount of work actually done,
the hours of work or remuneration of the individual are otherwise uncertain.

The exception to this general rule is where someone is genuinely in business on their own account, and is providing a contracted service to a customer or client.

The Bill in section 3 will confirm that employment status is a ‘status relationship’ defined in law, and is not purely the subject of a personal agreement.

In other words, you cannot ‘contract out’ of employment law.
The use of so-called personal services companies to shield bogus self-employment or disguise what is an employment relationship is tackled in section 5.
My Bill in section 6 would apply our tax avoidance laws to bogus self-employment, so that an employer who decides to deliberately misclassify the status of an employee would be considered to be a tax and PRSI cheat and to have the same penalties applied to them as is the case for other tax defaulters.

The Bill provides a mechanism for the resolution by the Workplace Relations Commission of disputes as to whether a work contract gives rise to an employment relationship.

In this Bill, we are proposing, at long last, to define and regulate a phenomenon that Ireland has been grappling with for almost half a century.

I want to make it clear that I am not standing here as representative of a party or a movement of Luddites. As I’ve said, we all know about the growth of atypical employment. There is no turning back the clock. We must adapt and get used to more flexible ways of working.

But that does not mean we must recognise quite spurious claims that some people are not really employees at all, that they are really independent contractors or self-employed ‘entrepreneurs’.

And what we do oppose is that we have a growing number of people in precarious, non-standard employment. Employment that is not just poorly paid but is also insecure because it is completely unprotected.

The basic inequality of bargaining power between employers and workers forces these workers into poor rates of pay combined with low and uncertain hours, little structured training and limited career progression.

So much for the hype around the ‘gig’ economy.

I accept that employers in some sectors need a level of flexibility in order to operate their business. But flexible work is one thing. Insecure work is quite another. Not knowing from one week to the next what hours you might be working, what your pay packet will contain, what days you will need childcare or even when you can plan a family get-together.

The casualisation of labour creates abusive relationships that result in lower job and income security and lower job satisfaction. It results also in workers becoming trapped in a succession of short-term, low quality jobs with inadequate social protection.

My and my party’s priorities are all about making sure the benefits of growth are fairly shared. We have no interest in ‘jobs at any price’ or the spread of casual labour at the lowest wages. We reject the false promises of an economic recovery that is fuelled by a ruthless race to the bottom.

We need to counter the common misconception – as common now in the newsroom and the lecture hall as on the construction site – that parties are free to choose whether to provide services as employees or self-employed, and that they can design their contracts accordingly.

We need to reassert that the test of employment status is a matter of law, and is not determined by the label attached to the relationship by the parties.

Needless to say, it is not my purpose to bring individuals who are genuinely self-employed into the employee framework.

In its early months the current Dáil unanimously accepted a Labour Party motion on workers’ rights. The motion outlined a programme of work to tackle abusive terms and conditions of employment – low pay, insecure hours, enforced and bogus self-employment.

Passing this Bill will give practical reality to that motion. It will be a practical and urgent step to tackle bogus self-employment and to bring frankly perverse abuses to an end. It will be the biggest single improvement to employment law since we joined the EEC back in 1972.

Of course, in conclusion, we are all aware of the need to balance decent terms and conditions with sustainable terms and conditions. We all want employers to be able to continue to create quality jobs. But the bottom line is that work should always pay.

We cannot preside over an economic recovery which involves a ruthless race to the bottom and the sacrifice of hard won economic and social rights.

As our economic recovery beds down and as unemployment continues to fall, the benefits of that recovery must be shared, by way of improved pay and better working conditions, particularly for low-paid workers in precarious employment.

Because the reality is we are all winners when it comes to moving people into decent, secure, well-paid jobs.

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