Supreme Court finds Dominos Delivery Drivers to be Employees

The Supreme Court published its long-awaited decision in The Revenue Commissions v Karshan (Midlands) Ltd t/a Dominos Pizza on 20 October 2023. This decision is of huge importance to employers and sets out a new method for establishing the existence of employment relationships, although the underlying historical tests remain valid.

 

Background

This case involved drivers who provided delivery services for Dominos Pizza. The Respondent, Karshan, contended that these drivers were engaged as independent contractors under contracts for services. The Appellant, the Revenue Commissioners, argued at all times that they were employees retained under contracts of service.

 

The dispute has a long history commencing with a Tax Appeals Commission decision which held that the drivers were employees. This was upheld by the High Court but overturned by the Court of Appeal. The Court of Appeal was of the view that there was no mutuality of obligation between the drivers and Karshan and as such, they were independent contractors.

 

While this case has its foundations in the Taxes Consolidation Act, it has a significant bearing on employment law as it sets out the test to be applied to the question of employment status.

 

Mutuality of Obligation

Central to the judgment was the concept of mutuality of obligation. In its arguments, Karshan presented mutuality of obligation as having the following four features:

 

1. The mutual commitments had to present some type of continuity (“continuity”)
2. They had to have a forward-looking element (“extending into the future”)
3. There had to be an obligation on the part of the employer to “provide” work
4. There had to be an obligation on the part of the employee to “perform” work

 

The SC noted that the decision of Edwards J in The Minister for Agriculture and Food v Barry and Ors appeared to be the first in which an Irish court used the term mutuality of obligation (although it had been raised before the EAT and LC before then). Following Barry, the requirement of mutuality of obligation became a necessary ingredient of any employment contract. Without mutuality of obligation, a contract of service could not exist.

 

However, the SC took the view that the mere fact that an individual does not owe any contractual obligation to an employer when they are not working, does not preclude a finding that the individual is an employee, at the times when he/she is working.

 

Ultimately, the SC rejected the contention that mutuality of obligation as described by Karshan must exist before an agreement can be characterised as a contract of employment. It held that this argument depended on layering a new pre-requisite onto the employer/employee relationship which is unsupported by authority and for which there is no principled justification.

 

The test

Following an extensive review of the various and varied tests which have been formulated around the elements of an employment relationship, the SC found that they all lead to two closely related conclusions:

 

1. Every case depends on the particular facts; and
2. It is necessary to assess all relevant features of a relationship, identifying those that are, and those that are not, consistent with an employment contract and to determine on the basis of the sum of those parts the correct characterisation.

 

The SC held that the following method should be used to determine whether a contract is one or service, or for services:

 

• Does the contract involve the exchange of wage or other remuneration for work?

 

• If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?

 

The Court noted that personal service is the essence of an employment agreement – but did state that some degree of limited substitution is permissible.

 

• If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?

 

The Court confirmed that while the meaning of control has evolved, this long-established feature remains central to the existence of an employment relationship.

 

The test of control in essence, assesses whether the decision maker is concerned to establish a right of control over what is to be done, at least generally the way in which it is to be done, the means to be employed in doing it, the time when and the place where it shall be done. The control test must take account of the nature of the employment and the control an employer would be reasonably expected to exert.

 

The above 3 questions are to be viewed as a filter in the form of preliminary questions which, if any one is answered negatively, means there can be no contract of employment. If all are answered affirmatively, the following two questions are then considered.

 

• If these requirements are met, the decision maker must then determine whether the terms of the contract between employer and worker interpreted in the light of the admissible factual matrix and having regard to the working arrangements between the parties as disclosed by the evidence, are consistent with a contract of employment or with some other form of contract having regard, in particular, to whether the arrangements point to the putative employee working for themselves or for the putative employer.

 

This involves an interrogation of all of the facts and circumstances to ascertain the true nature of the relationship and will be based on the various tests established in case law.

 

• Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

 

This involves a consideration of any legislative provisions in which it is intended that the terms “employee” or “contract of service” carry a different meaning.

 

Finding

In applying this test to the case before the Court, Murray J held that the drivers were employees of Karshan.

 

The SC did, however, state that the decision does not bind any driver who may wish to contend that they were not an employee. It also clarified that the question of whether the drivers have continuous service for the purposes of employment rights legislation could not be decided within the present case.

 

Conclusion

The key question addressed by the SC in this case related to the question of whether mutuality of obligation is an essential pre-condition for the existence of an employment contract. The SC rejected this and confirmed that mutuality of obligation, while relevant to the question of employment status, is one factor to be considered and not an essential pre-requisite for the existence of an employment contract.

 

The Supreme Court, in arriving at its decision, established a new 5 step test for establishing employment status and directed that this should be used in any future consideration of an individual’s employment status.

 

While the new 5 step test sets out the methodology to be followed in cases of this kind, the underlying tests and factors which have developed over time remain relevant. The Supreme Court confirmed that to ascertain the true nature of the relationship in each case, an interrogation of the facts and circumstances based on the various tests established in case law will be required.

 

Members are encouraged to contact their designated advisor, the Knowledge Centre or Ibec’s Employment Law Services Team for specialist advice should you have any questions regarding an individual’s employment status.

 

Nichola Harkin, Head of Employment Law Services, Ibec