Umbrella workers on separate assignments were not continuously employed

Background

In the case of MyPay Limited v HMRC, MyPay operated as an umbrella company supplying workers to end-user organisations through recruitment agencies. The workers undertook assignments across a range of sectors, including healthcare, engineering and the wider public sector.

The workers were engaged by MyPay and entered into written statements setting out the terms of their employment. They then secured individual assignments through recruitment agencies, with the agency contracting with MyPay for the worker's services.

A dispute arose over travel expense payments made by MyPay to workers travelling from home to their assignment locations. The tax treatment of those payments depended in part on whether the workers were employed continuously by MyPay or whether each assignment constituted a separate employment.

Tribunal decision

The First-tier Tribunal concluded that the workers were not employed under a single continuous contract covering periods between assignments. Instead, each assignment gave rise to a separate period of employment.

The key issue was whether sufficient mutuality of obligation existed during gaps between assignments. The Tribunal found that it did not.

Although MyPay undertook to try to find work for workers, it was not obliged to provide work and workers were not obliged to accept it. If a worker was not on assignment, they could not require MyPay to provide work or wages. Equally, MyPay could not require them to perform work.

The Tribunal also considered a contractual provision requiring MyPay to offer a minimum number of hours each year. However, it found that the obligation to "offer" work did not create a corresponding obligation on the worker to accept it and therefore did not establish the necessary mutual commitments.

As a result, the Tribunal held that there was no overarching contract of employment extending beyond the individual assignments.

Learning points for employers

Although this was a tax case, the Tribunal's detailed discussion of mutuality of obligation is likely to attract attention from those dealing with employment status issues more generally. The decision reinforces the principle that a continuous employment relationship requires genuine ongoing obligations on both sides. Provisions requiring an organisation merely to offer work, or to make reasonable efforts to find work, may not be sufficient if workers remain free to decline assignments and there is no entitlement to pay between engagements.

Organisations using umbrella arrangements, casual workers, bank staff or other assignment-based models should ensure that their contractual documentation accurately reflects the reality of the relationship and understand that the existence of employment during individual assignments does not necessarily establish a continuous employment relationship between assignments.

For more information or advice, please get in touch with Eleanor Searle in our Employment team.