Self employed legal case | wrong way for the salon owner

Gorman v Terence Paul

In summary

In this case, it was ruled that a hairdresser was an employee, and not self-employed as thought by the Salon.

The crux of the decision came down to the the level of control asserted by the salon.

The detail

Genuinely self-employed stylists are those who conduct work for a salon, or run their own business within a salon, and critically in HMRC’s eyes: have full control over how they conduct it.

In this case a hairdresser was engaged by a salon to conduct work in their premises. Her contract
outlined that she was a self-employed, but the organisation exercised a great deal of control over her working day.

After working for the salon for six years, the hairdresser argued that she had been denied a number of rights as she had been falsely labelled self-employed.

She also wanted to pursue numerous claims against the salon, including wrongful dismissal and sex discrimination.

In order to hear her claims, the court first needed to consider if the claimant could be considered an employee, and not self-employed. The hairdresser’s main argument rested on the degree of control the salon had over her:

• she had to work fixed hours from Monday to
  Saturday,
• had no control over pricing,
• had to conform to their standards of dress,
• had to use their products exclusively, and
• also needed their permission to take time off.

Despite this, she was not paid any holiday pay and had to pay 67% of her takings to the
salon.

The salon countered by stating that all hairdressers engaged by them did have control over the hours they worked; that hairdressers could decide what treatments they provided, as well as choose when they took holidays.

However, the court sided with the hairdresser, finding that the degree of control exercised over her by the salon meant that she was, in reality, an employee – and that the ‘self-employed’ contract was meaningless.

What does this remind us?

Get a decent contract in place (use the NHBF or a solicitor).

A self employed person is exactly that.

Ensure what happens in real life portrays what the contract says.

In the end, it might not be HMRC that get you, but a disgruntled stylist; so protect yourself!

Implications:

If HMRC deem one of your self employed stylists as actually ’employed’ despite what you might think, this has a number of ramifications:

i. Under payroll law

You may find you owe PAYE, NIC, and Pension to HMRC, backdated from when the person started. Plus penalties and interest.

You may find you owe some or all of: holiday pay, SMP, and SSP to the stylist – again backdated.

ii. Under VAT law

If you are VAT registered, you may find you owe the VAT which should have been charged on the self employed stylist’s income. If you’re not registered, their income may be enough to take you over the VAT threshold, and you may owe VAT on this.

Further reading:

HMRC CEST Tool | make sure your salon or barbershop check is up to date

IR35 & OPW | What salon owners should know

Can your salon take payments from your self-employed renters’ clients?

• Posted on October 12th, 2020 in Law