Dominos Pizza case

The Irish Revenue guidance note follows the landmark decision of the Irish Supreme Court in October 2023, in The Revenue Commissioners -v- Karshan (Midlands) Limited t/a Dominos Pizza [2023] IESC 24 relating to delivery drivers engaged by Dominos Pizza. That decision, which was issued in the circumstances of a tax appeal, radically changed the way in which employment contracts should be analysed when determining whether an individual was properly characterised as employed or self-employed. The decision has implications for businesses that engage individuals to provide services on a personal basis, whether as independent contractors, consultants or on a freelance basis. 

Following the Supreme Court decision and the Revenue guidance note, each set of commercial arrangements where individuals provide personal services in Ireland, whether under a consultancy or independent contractor basis, will need to be analysed to determine if based on particular facts, there is an employment relationship.

The Supreme Court set out five key tests to be applied and the Revenue Commissioners guidance note now works through these tests, giving practical worked examples of how they will be applied by the Revenue in looking at particular scenarios. These include examples in the construction, IT and professional services sectors. In coming to the five key tests the Supreme Court extensively reviewed relevant Irish and UK case law. While, in the UK there is a concept of "worker" which is not reflected in Irish legislation many of the core concepts are similar. 

The Key Tests

The Supreme Court determined that it was not necessary that there be an ongoing mutual obligation to work together for there to be an employment relationship – essentially depending on the facts the Court took the view that an employment relationship could arise even if there was no ongoing commitment to give and perform work. 

The 5 tests that the Court set out – the first three of which act as a filter for the second two are:

(1) Does the contract involve the exchange of wage of other remuneration?  

In almost all scenarios where an individual is providing services there will be an agreed rate for the services, whether hourly, daily or linked to delivery of certain services. The nature of and arrangements for any payment made will be the first issue to be considered. 

(2) Has the worker agreed to provide their services to the employer personally? 

This test distinguishes between a case where, for example, a contractor provides services to a business personally, and a situation where the contractor may be entitled to engage others to provide the services on his or her own behalf. 

(3) Control

This was a fundamental issue for the Court. The judgment placed a strong emphasis on this question and the level of freedom the contractor had to determine the way in which work was done. The question of control is central also to the analysis to be carried out under the Platform Directive where the presence of control will be a triggering factor for determining status. 

Having applied the three tests as filters, the Court stated that it is necessary to consider the final two tests. If the first three tests are satisfied, then there should be a further interrogation of the facts and apply the further tests below.

If any of the three tests are answered negatively then there is no contract of employment. 

The final tests are:

(4) All the circumstances of the employment

The Court took the view that having applied the tests above then all the facts and circumstances of the relationship needed to be looked at.  This included:

(i) whether the individual is working for themselves or for an employer

(ii) interpretation of the contract – having regard to the circumstances in which it was concluded. Factors (no one of which is conclusive) could include: 

(A) respective bargaining power;

(B) what the contract states but also how the contract operates in practice as opposed to what it says;

(C) control is relevant to how the work is done – there may be cases where there is so much direction and control that it points to an employment relationship;

(D) the regularity on which services are provided – is regarded as relevant but not determinative; 

(E) whether an individual is under a duty to do work on a regular basis is relevant to the question of his or her independence and whether they are in business for themselves; and 

(F) integration - the Court regarded the question of whether an individual was integrated into an employer's business as being evidence of control and relevant to whether a person was part of an employer's business or stand alone from it. 

(5) The legislative context

Finally, it is necessary to consider the specific wording of any particular statutory regimes/legislation which are under consideration. This means that an individual may have different rights depending on the legislation under review. For example, a determination that for tax purposes an individual's earnings should be taxed under the PAYE system does not mean that such person automatically has rights under employment legislation. The applicability of that legislation, especially where it requires continuity of service, will have to be decided having regard to the terms of the legislation. 

Choice as to status and relevance to other laws

The Supreme Court made clear this was a finding of employment status for the purpose of the Taxes Consolidation Act 1997 only and was not a finding for any other purpose. The Revenue Commissioners guidance note also emphasises this and commits to engagement further with the relevant government departments with responsibility for employment and social welfare status. 

The Court said the judgment "does not and cannot bind any driver who may wish to contend that, in fact, they were not an employee for this or any other purpose". 

The meaning of this statement is unclear but it seems unlikely that it was intended to give a "carte blanche" to allow the meaning of the judgment to be avoided. For example, if a contract or written declaration stated that the contractor was not an employee that this would be a means (of itself) of getting around the decision.  

It is more likely that this is intended to mean that for any individual or party in respect of whom a tax assessment was raised that it would be open to them to argue that having regard to the factors above they were actually in business on their own account and had paid their tax. 

Conclusion

The implications of the Supreme Court case, as now interpreted by the Revenue Commissioner guidance note, are significant and will require businesses to proactively review their current commercial arrangements for self employed workers.