Bogus Self-Employment: Discussion (Resumed)

I welcome Professor Michael Doherty of Maynooth University. In a moment I will invite him to make an opening statement and when he has concluded I will afford members an opportunity to pose some questions.

I draw his attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I remind members and witnesses to turn off their mobile phones. Professor Doherty is very welcome to the meeting. I invite him to make his opening statement.

Professor Michael Doherty

My thanks to the committee for the opportunity to speak to it. My interest in this area is as the professor of law and head of the law department at Maynooth University. My area of research and teaching is employment and labour law. I am interested in the definition of the employment relationship, how we define in law employees and others who provide services. The questions, in law, of who is an employee and who is an employer, are extremely important. They open the gateway to a range of statutory protections, including minimum wage laws, unfair dismissal laws and working time laws, which are among the most important. The definition of someone as an employee also determines an individual's access to social security systems, unemployment insurance, sick pay and other matters, and has implications for taxation. In terms of commercial or company law, employees are often granted particular rights in the event that their employer becomes insolvent, which are not granted to non-employees.

An issue in which I have been interested recently relates to collective bargaining and is the interface between collective bargaining rights and competitive or anti-trust laws. The situation in the case of non-employees is that independent undertakings are generally forbidden from coming to mutual arrangements over basic terms such as minimum payments, as they would likely contravene competition laws. It is very difficult for non-employees to engage in effective collective bargaining.

In recent years, concern has been expressed that a strict divide between employees and independent contractors is not appropriate for contemporary employment relationships. We see that in the European Court of Justice has recently noted that the boundaries between the self-employed and employees are not as easy to determine in the fluid employment market, in which we currently exist, and it identified a category of workers which it called the "false self-employed", namely, service providers who are in a situation comparable to that of employees.

The difficulty of classifying people doing work into employees or self-employed is not new. The question of false or bogus self-employment has long been identified as a challenge in the construction sector, for example, in particular. However, it has gained more attention recently, domestically and worldwide, due to the growth of work in the so-called platform or gig economy. Web-based platforms are thriving and they function as online intermediaries between a client or end-user who require a service, and those who are providing the service, doing the work.

There is no comprehensive statutory definition of either employee or contract of employment in Ireland. Instead, it has been left largely to the courts to define these concepts, and for the scope section in the Department of Employment Affairs and Social Protection, in particular, to seek to classify workers for PRSI purposes. In doing so, the courts have identified factors such as control, integration into the business, mutuality of obligation, risk or investment, and other such categories.

Some jurisdictions have introduced a third category of employment status, between employed and self-employed. For example, in the UK it is referred to as a worker in legislation. Such workers are entitled to limited labour protection under the legislation. The argument for creating such categories is to offer some labour law coverage to workers who do not fit within the classic definition of an employee. In the widely known Uber litigation in the UK, for example, a group of Uber drivers successfully argued before the UK courts and tribunals that they had worker status under UK law, and therefore were covered by minimum wage and paid annual leave laws. The possibility has also been discussed of introducing a statutory presumption of employment status, whereby it is assumed an employment relationship exists until the party resisting the status has proven otherwise.

The European Union has proposed a new directive on predictable and transparent working conditions. I gather political agreement was reached on furthering it just this week. In the explanatory memorandum to the proposal, the European Commission notes that in 2016 a quarter of all employment contracts were for "non-standard forms of employment" and in the past ten years more than half of all new jobs were "non-standard". The Commission goes on to note that these trends have also led to instability and an increased lack of predictability in some working relationships, especially for workers in the most precarious situations. Inadequate legal frameworks can subject workers in non-standard employment to unclear or unfair practices and make it difficult to enforce their rights.

The proposed new EU directive sets out an EU-wide notion or definition of worker as a person who for a certain period of time performs services for and under the direction of another person in return for remuneration. It is important to note, however, that this definition would only apply in the context of the rights in the directive itself which focus on clearer and more complete information on the essential aspects of the work and some matters to do with uncertain work.

Under EU and Irish competition law, it is not possible for the self-employed to conclude collective agreements. The Competition (Amendment) Act 2017 provides that section 4 of the Competition Act 2002 which prohibits cartel action shall not apply to collective bargaining and agreements in respect of certain categories of worker. There are three such categories. First, the Act specifically applies to voice-over actors, session musicians and freelance journalists. Second, the Act introduces the concept of the "false self-employed" worker and, third, the concept of the "fully dependent self-employed worker". A trade union that represents a class of false self-employed, or fully dependent self-employed, workers may apply to the Minister to include the class of workers in question as falling within the scope of the Act in order to allow the union to bargain collectively and conclude collective agreements on behalf of the workers. This legislation represents an innovative attempt to extend collective bargaining rights to vulnerable workers who do not fit within the classic "employee" definition and sets out in law the principle that collective representation should not be automatically denied to those who cannot satisfy traditional tests of employee status. I also point to the importance in this area of a focus on collective standard setting and, in particular, sectoral standard setting. Sector or industry-wide standards reduce the incentive to undercut commercial rivals, providing a level playing field where competition is not on the basis of wage depreciation.

In Ireland the Industrial Relations (Amendment) Act 2015 introduced the concept of sectoral employment orders, SEOs. For example, the Sectoral Employment Order (Construction Sector) 2017 took effect from 19 October 2017 and provides mandatory terms and conditions in the construction sector generally which exceed statutory minimums such as the minimum wage. A very recent proposal made in the United Kingdom has been to draw up a "sectoral map". This would be done by governments but in consultation with employers and trade unions. The purpose is to identify relevant sectors and sub-sectors which would be set down in law and subject to SEO-like orders.

It seems to be particularly important that sectors in which trust, confidence and safety are key concerns be the subject of State regulation. Examples include domestic care services and passenger transport services. The advantage of sectoral minimum standards is that one-size-fits-all solutions are not applied and the flexibility of collectively bargained standards means that adjustments can be made in response to changing economic and social trends. It seems to be important that the State, particularly in the context of public procurement processes, monitor very carefully any sub-contracting relationship to ensure proper classification of all those working on State projects and, therefore, that proper tax and social security payments are being made. In that regard, obligations might be placed on principal contractors to ensure compliance by sub-contractors, in particular with PRSI obligations.

The issue of employment status is one with which Legislatures across the world are grappling. Achieving a balance in regulation between ensuring decent work, protecting business flexibility and ensuring appropriate contributions are made to the State is a difficult but vital and necessary task.

I thank Professor Doherty. I am taken by his statement that there is no comprehensive statutory definition of either "employee" or "contract of employment". Does he consider this to be a weakness that should be addressed or does he believe the matter is too complex such that we will never get the wording right? He more or less finished on that point, which concerns the definition. Are there examples of jurisdictions where the definitions are more robust than they might be in this jurisdiction?

Professor Michael Doherty

One of the interesting aspects of the focus on the gig economy and platform work is that these issues which have been around for a long time have recently been subject to considerable attention. What strikes people like me and my colleagues in the United Kingdom who come from the common law tradition where there is a tendency to let the courts decide on these matters is that jurisdictions where the definitions are set down more in law are finding it equally as difficult to address them effectively. I should not be taken as saying there is an easy answer to having a comprehensive statutory definition in law. Perhaps a particular weakness in the Irish code might be inconsistency in approach. We have different definitions of "employee" in different Acts. There is a slightly wider definition in the minimum wage legislation by comparison with that in the unfair dismissals legislation. One of the weaknesses of our code is that we have not consolidated it as we might have done. When we introduced new employment rights, often as a result of EU legislation, they were bolted onto the existing framework. The short answer to the Chairman's question is that I do not believe there is a robust statutory definition of "employee" anywhere that would act as a panacea or silver bullet, but we should certainly pay attention to being consistent in the definitions included in various Acts.

I welcome Professor Doherty and thank him very much for his very interesting presentation.

Significant consequences flow from the category an individual falls into, be he or she an employee or self-employed. Professor Doherty mentioned the usual cases. I thank him for drawing attention to the anti-competitive scenario, where, if somebody is classed as self-employed, he or she is not entitled to bargain collectively.

On the point raised by the Chairman, my approach was to bring forward legislation to penalise arrangements under which people were more or less coerced into stating they were self-employed when clearly they were employees. The approach I took was to set out the various criteria that would point towards a person being an employee and the various criteria that would point toward a person being self-employed and let the WRC or the court, on appeal, to decide the facts in each individual case. With reference to what Professor Doherty said about the definitions and the difficulty in interpreting the definitions of "employee", the approach I have outlined is as good as any. No matter what the definition is, or how comprehensive it is, it will still result in a case by case approach. As the professor said, it can vary from one type of business to another.

I would like to hear Professor Doherty's views on the UK approach of creating a third category of "worker". He said there was an advantage in that it extended certain limited protections to employees in precarious employment. There is also a disadvantage in the sense that, under Irish law, where there is no third category, an employee might be classified in respect of all of the protections provided, whereas if there were another category of "worker", it might mean that some of the protections afforded to an individual so classified would be removed.

Professor Michael Doherty

I agree with the Deputy's latter comments, in particular. The definition laid down in the National Minimum Wage Act, for example, strangely approximates to the UK definition of "worker". I am not aware of it ever having been subject to litigation. I am not aware of any decision on it by the WRC or previous tribunals. The wording, however, is very similar to the definition of "worker" in the United Kingdom.

Leaving that aside, I believe the Deputy is right that in the Uber case in the United Kingdom, had the option been open to the UK courts and tribunals to regard the drivers in question as employees, they might well have done so. That is the weakness of a third category. I will be sanctioned and censured by my colleagues for saying this, but I am a professor of employment law who always seeks to avoid legal solutions to employment relations problems, where possible. Introducing a third category would probably just introduce more complexity and litigation, but I understand the rationale.

One can see that, where it is all or nothing, it might be attractive to tell a person they do not get employee status but could fit into the other status to avail of some protections. The introduction of this category in the UK, however, has not led to any particularly favourable outcomes. I am not sure that the third approach is one I would recommend.

Professor Doherty's opening statement was very insightful and gave a different perspective from that given by witnesses from trade unions and from congress. They estimated a loss of PRSI and tax in the construction sector alone of up to €240 million per year. Professor Doherty talked about the massive growth of the gig economy. I am not sure if he has done specific work on this area but this topic has not really come before me until now. We hear about construction, the media sector and airline pilots but this has not appeared on my radar. It would be very helpful if Professor Doherty could expand on this a little.

Professor Doherty said that creating a third category would add to complexity and cause confusion. I was going to ask him if it should be looked at but it seems, from his answer to Deputy O'Dea's question, that he thinks not. I am interested in public procurement processes because I have some experience of dealing with people forced into bogus self-employment when working on public projects, such as for housing or schools. One of the unions that came before us said it had represented a number of workers who were employed on projects involving Carillion to construct schools, which got into serious difficulty and ultimately went bust. They took a successful case on behalf of plumbers who had been forced into bogus self-employment. I have come across people who worked on school and housing projects where the main developers got into serious financial difficulty and there were restrictions on the workers in terms of redundancy or access to social welfare because of their bogus self-employment.

Professor Doherty said the State should carefully monitor any subcontracting relationships. Will he expand on that? ICTU gave its perspective as to what should happen in such cases and it would be interesting to know if he has similar views. It is rife in the sector and contractors get contracts for fixed prices and then engage people in bogus self-employment, meaning pay and conditions suffer. What would Professor Doherty recommend as part of a monitoring process?

Professor Michael Doherty

The Deputy's third question raises an interesting point. Academics are always looking for something new and, at labour law conferences all around Europe at the moment, people are talking about the platform, or the gig, economy, but this represents a very small proportion of European economies, though it is increasing. Its importance is that it has put the spotlight on situations where people provide services under some sort of third party direction but not in a way that conforms to a traditional employment relationship, which is common in sectors such as media and aviation etc. In some countries, though not in Ireland as yet, platforms are used in the provision of very traditional services, one of the fastest growing of which is home care services. Care providers are linked via a platform to somebody who requires care. In such cases, and in other sectors, we need to be very careful about how we regulate the conditions of the people who provide the services. Unfortunately, we have seen and heard quite disturbing things about the care sector in this State and, given that there is no employer in these cases, we need appropriate safeguards, both for the people who do the work and those who receive the service.

Most of us probably think of food delivery when we think of gig or platform work. It is not very prevalent but it has spread to a lot of other sectors in other countries and we would be unwise to ignore this. This issue is not new. We need to decide where the responsibility lies for ensuring proper conditions for workers, and for ensuring redress where people receive a service which is not up to standard in some way.

As I said to Deputy O'Dea, I do not think a third category is useful but we might consider a broader definition of what we consider a worker to be, which was addressed by the EU in a specific context. It would cover somebody providing a service, personally and for payment but not necessarily under the control of an employer, as we would traditionally understand it. It does not necessarily include a requirement for mutuality of obligation, which is where things get problematic here. If a company employs somebody to deliver something for 20 hours in a particular week and that person is not required to do it but has no other source of income, one has to ask if there is a genuine mutuality of obligation in the deal. Can the person doing the delivery really say he does not want to do the job, bearing in mind that he may not be asked again if he does not accept it? We need to think a bit more broadly about what we consider the obligations of employers to be in some areas, such as wages and holidays etc.

The Deputy also raised the issue of public procurement. This is something on which I have done a little bit of research. In 2012 or 2013, I did some research into State contracts at a time when the only thing happening in construction was State contracts. It was very clear that there was a perfect storm for contracting authorities, particularly local authorities, in which the requirement was to get things done as quickly and cheaply as possible. If that meant accepting the lowest bid, however questionable it might have looked, so be it.

Trust was placed in contractors to fulfil obligations but it did not happen in many cases, especially in the case of workers from other member states who came here to do work prior to 2012 but in similar circumstances. While matters have improved in that sense and there is much more construction work going on now, I am still not sure that there is critical or sustained scrutiny of the awarding or the performance of public contracts. Outside this room there is a storm going on about a particular public project. Since 2016, ironically, workers who come here from other EU member states to do construction work have some protection. These are what we call Post-it workers who come to provide a service for a brief period of time and then return to their own countries, typically, construction workers from France who build something and then return to France. They have protection in that the main contractor in that relationship can be liable for any shortfall of remuneration for subcontractors but that applies only to those workers and not to workers employed by domestic employers.

I have read the submissions of Congress and so on. I would be broadly in favour of some sort of chain liability for subcontracting, particularly in the construction sector and in State contracts. It is arguable that outside of State contracts it is a little more difficult to prove, monitor and so on but certainly within the context of public procurement, there should be liability for main contractors for things that happen down the chain. It is done elsewhere. It is not a revolutionary concept. It is something we probably need to put on a statutory footing because it has been part of State contracts. However, I am not aware of any contractual cases being taken by the State against main contractors who have not fulfilled their obligations.

A few of the points I wanted to make have been covered. I thank Professor Doherty for coming before the committee. I refer to points 9 and 10 of his submission. In terms of the Competition (Amendment) Act 2017, Professor Doherty said that this legislation represents an innovative attempt to extend collective bargaining rights to vulnerable workers. Can he give us any examples of unions doing that and the workers who were covered by it?

I do not believe there is any reference to it here but I refer to the scope section, the social welfare appeals office, SWAO, the High Court and the Labour Court. Many cases are upheld by the scope section as regards a worker being an employee. They then go to the SWAO and are not upheld and then to the High Court. It is a very long process. That leads on to the point about the public procurement process. One particular company, Giant Capital, 40% of whose clients are in the public sector, refused to implement a Labour Court recommendation relating to redundancy. Two weeks ago, Irish Archaeological Consultancy refused to attend the Labour Relations Commission, LRC, in respect of workers. What can we do in public procurement processes to insert in the contract that companies have to recognise the State industrial relations machinery? If they do not, will penalties apply? Would it be the case that they would not get a public contract in the future? There is no point in having the State machinery if under public procurement, companies are not obliged to even recognise it when it is where workers can go to get vindication of their employee states.

Professor Michael Doherty

I thank the Deputy. I will deal with the competition aspect first. I am sure the committee members will be aware of the history of this but for a long time the issue related to the three particular categories of voice-over actors, session musicians and freelance journalists. For many years, throughout social partnership, etc., this issue was raised continuously. It was raised with the troika during the programme period; I am trying to avoid saying "bailout". It is a long-running issue. The legislative response has dealt with the issue for those specific categories of workers, which is entirely appropriate.

My interest, as is the Deputy's in terms of her question, is who else might benefit from this. The honest answer right now is that I am not aware of any other group on behalf of which the unions have made an application under this legislation. In terms of my view on it, I have spoken at a few events about its relevance for this platform or gig work because it seems to be a potential way such workers could at least have the benefit of collective bargaining. It could be applied in a broad range of scenarios where the employment status is not as clear-cut as a standard employment relationship. For example, it could apply for care workers who provide services in domestic homes and are not employed by a hospital, a care giving company or something like that. It has many potential applications. One of the limitations of the Act is the provision whereby in order for the Minister to accept an application, he or she has to ensure there is no cost to the State. I have been a bit cynical about that because what is the point of collective bargaining if it does not have a cost? It has to have a cost to somebody.

Some weeks ago, the European Committee of Social Rights noted that an overly restrictive interpretation of that by the Irish Legislature would run the risk of being in violation of the European Social Charter. The European Committee of Social Rights was of the view that prior to the introduction of this Act, Ireland was in breach of its obligations under the social charter. Some of the members felt that this remedied it but only if it is applied in a proportionate way and not in a very restrictive way. Some felt that we were still in breach. The short answer is that there are no other workers of whom I am aware currently but the potential exists. I would like to see a proposal being put to the Minister to see the parameters of this and what will be expected.

In terms of the second question, and Congress may have made references to this in its submission, the division of competence between scope and the social welfare side of the house on one hand and the WRC and the employment rights on the other hand is probably not ideal because people with very different backgrounds are making different decisions and are looking at different aspects. Revenue and social welfare officials will have a particular interest. WRC inspectors will have a slightly different one.

I have just read a fantastic PhD thesis, which I hope will be disseminated, that will be of real interest to this committee. It is on the application of day-to-day social welfare entitlements for both EU and non-EU citizens coming here. Much of it is around the appeals mechanism, the difficulties people have moving from one level to the other and the effective impossibility of a High Court hearing for the vast majority of applicants. One way of addressing that might be to move all of these functions under one roof. The WRC would probably be preferable. The people in social protection have very specific expertise but this probably calls for a broader approach than just looking at the issue of PRSI and related matters.

The problem with legislative solutions is that they are individual solutions and they depend on the ability, willingness and capacity of an individual, who is often vulnerable, by definition, to take difficult, complex and time-consuming litigation. Even before the tribunals, the vast majority of the time the employer will have legal representation and there is no legal aid for tribunals of this nature. That is why I always look for the possibility of collective or sectoral solutions, which can be through old-fashioned collective bargaining, where people join unions and the union bargains on their behalf, or via State-set sectoral standards.

To segue into public procurement, I might take the second part of the question because it follows on from what I have said. It is utterly unacceptable for organisations which have been awarded State contracts not to engage with the State dispute resolution machinery.

Sorry to interrupt, but could that specific aspect be a condition of the contract?

Professor Michael Doherty

Yes, I believe so. Unfortunately, I will give a slightly lawyerly answer. Public procurement law is notoriously complex and subject to quite strict European rules. For example, a suggestion was that State contracts could contain living-wage provisions and that, therefore, the living wage would be paid rather than the statutory minimum wage. That is legally problematic, although it would need to be tested. Another suggestion, which would require a contractor to ensure that everyone working on the project was a member of a trade union, could also be argued to be legally problematic, although it may not be. I cannot see any problem, however, with a legally binding condition that the contractor must engage with the State disciplinary machinery. I am sure it could be challenged but it would be a robust provision.

I thank Professor Doherty for his presentation of such interesting topics, some of which have been raised by other members. When we debated the question of the definition, it has become clear, as the professor noted, that it is about not simply the definition but also who decides or interprets the definition. In general, the default interpretation seems to favour the employer in how it chooses to categorise those whom it employs or those who work for them. It is probably one of the fundamental issues that, initially, the employer holds the power. Challenging that interpretation requires a process of scope, through the courts or through difficult individual solutions.

I was interested in the Uber category. My information may be out of date but, as I understand it, Belgium has defined Uber drivers as employees in a more classic sense, that is, not as the in-between category that exists in the UK. It defines employees as persons who for remuneration undertake to work for another person under the latter's authority and has applied the definition with the associated supports and so on. It is good to see. A battle of interpretation is taking place everywhere and that is another interesting frame in that regard.

There are a few interesting aspects. While it is true that the platform or gig economy is not as widespread, the professor is right that we need to take action. Between 2016 and 2019, we have moved from there being one quarter of employees in non-standard employment to one half. We saw how quickly zero-hour contracts spread. I am often convinced that good practice tends to stay in pilot stage for ever while bad practice moves like wildfire.

I am interested in what the professor said about how we might expand that sectoral-type approach, which would be useful. There are two or three aspects on which the professor might elaborate, including the idea of collective bargaining as a sectoral standard. An unusual aspect of it is discriminatory practice. My colleague Senator Ruane is bringing forward legislation on spent convictions. One of the issues that arise is that those with spent convictions can find it impossible to get insurance. When one is self-employed or falsely categorised as self-employed, there are entire sectors in which virtually the only work one can get is self-employment. There are categories of people, however, who can find it difficult to become self-employed. It is interesting that there may be a discriminatory dimension to the matter.

Professor Doherty noted that there are particular areas of trust, confidence and safety, one of which was domestic work and home care. The regulation of home care is an issue that has been pending for ever, and we know it is one of the major areas of growth that most needs regulation early because it would be vulnerable to challenge in the future, for example, under corporate courts if we moved towards investor court dispute mechanisms. We need to get the regulations right and have them clearly and well established.

I have a concern about chain liability. As I have indicated to the union, I can see one positive aspect of it, where the liability extends and where the liability can be pushed down to a subcontractor who can dissolve in a moment and reappear, which, as we know, some companies do as they need to. I am concerned that we need it to be extended to the platform or gig economy where multiple individuals who may happen to have ordered food become categorised as the top-level responsibility, and all the companies deflect responsibility. In certain areas I can see it being good but I am worried about it being atomised at the end to the point where it becomes almost impossible for an employee to identify the person who is ultimately responsible. For those who access services in this platform, it is hard for them to know where they can get justice.

I am interested in public procurement and am bringing forward legislation on the matter in April. I would love to chat with the professor about it because it is fascinating. One of the concerns I have about it is the price and where we embed. I fully agree with the professor in respect of that engagement with practices. The legislation is in line with the EU directive's obligation to abide by existing laws because it applies to everybody equally and so on, and existing legal practices and labour resolution practices should be included in that regard. Is the professor satisfied that it is fundamentally better to seek the best price-quality ratio rather than the lowest cost? Is the best place for us to embed these measures within the quality criteria or within exclusions where certain companies are excluded from application? I am considering both in my legislation.

Professor Michael Doherty

I will run through the questions in sequence as well as I can but I ask the Senator to follow up if I miss anything. I am aware that Deputy Joan Collins also raised the issue of penalties, which I will address presently. On the definition of self-employment, if one talked to employers and employer representatives, I think one would find that if entering the Workplace Relations Commission system, the default status is almost always that of employee.

I have heard this view expressed very strongly. Tribunals would almost always default to the position that the person is an employee and it is for the employer to prove otherwise. This is perfectly appropriate, but before we get to that point, which the Senator referred to, when it is up to the declaration of status for social insurance purposes or tax purposes, it is self-declaration. Therefore the presumption is usually the other way and it only becomes possible for the person who may not genuinely be self-employed to argue the toss once they have instigated a complaint. I am sure that is where often most of the situations fall down, for very obvious reasons. This is not my area of expertise, but I am not sure how declarations of status are made with regard to social insurance and tax. At the outset part of this needs unpacking.

My interest in the sectoral standards is always about trying to get us out of this definition and the categorisation of everything very precisely, which is not possible in this area. The scope section and the Department have produced a very good checklist to determine if a person is or is not an employee. It needs to be updated, but individual situations may allow a person to tick four boxes here and four there, while the answer depends on the deciding officer on the day. It is very important in sectors such as domestic care and others. I do not believe it is justifiable for the State not to take a very close look at the situation in general in false self-employment and especially in certain sectors that present particular vulnerabilities or potential problems.

I understand that chain liability is not a panacea by any means. Again, it can often get bogged down in litigation. As has been said, it can be the shifting or deflecting of blame or responsibility to different parties. I am keen for the concept as applied to the construction sector. I would not be as sure, and would be a little more tentative, outside of that. The construction sector presents very particular issues, as Deputy Brady referred to. The sector is, by definition, a subcontracting industry. That is what happens. For the possibility of deflecting responsibility there, I do not see it as much as a problem there as in other sectors, especially if there is ultimately a machinery to enforce the obligations appropriately in the context of public contracts.

A slightly strange situation comes up in the aforementioned thesis I referenced with regard to social security. Sometimes citizens from other EU member states who move to Ireland have greater rights that derive from EU law than people who never leave the country, including in the context of chain liability. We must ask if those situations should not be equalised.

On the public procurement piece, any penalties that can be imposed for breaches of obligations would have to be proportionate. That is for sure. I am very much in favour of some sort of pan-European register that allows for a period of suspension for contractors who are found to be in breach of obligations under public contracts. It could not be forever but perhaps it could be proportionate to the level of offence. I am concerned that sometimes when this issue is discussed post-technical breaches are not counted. I have heard lobbying and submissions from some sectors that say a company would not be disqualified for a technical breach such as not having records on site and so on. To me this is not a technical breach: there is a breach or there is not a breach. I would be strongly in favour of such a register.

On the direct question of price quality issue, in my experience while public contracts do not just consider the lowest cost, there is a big reluctance, which in some sense is understandable, for procurers to err on the side of safety and go for lowest cost. Even though some of the clauses in public contracts have conditions relating to quality, the default option is price. There is a real fear of litigation among public procurers that if they do not award the contract to the cheapest offer, they will end up in the courts.

They have scope under the European directives to place whatever ratio of price to quality they wish.

Professor Michael Doherty

Absolutely. They do, and sometimes we see that in the tender criteria, but I do not always see it being followed through in the award. The Scottish Executive, for example, has inserted living wage clauses into public contracts. There is a real question that this is not in conformity with EU law, but they have done it anyway. To my knowledge the measure has yet to be challenged. There is a timidity in how Ireland awards State contracts. It is understandable, but to change it I am not so sure it is the law that needs to change. It is very much the practice and culture of the awarding of State contracts that needs to change. This would probably need to come from a fairly senior level.

I thank the Chairman and I apologise in advance because I must leave to put a question to the Minister for Finance, Deputy Donohoe, about some of these matters we are talking about here. I may have to run as soon as I see my number coming up. I listened to some of the presentation by Professor Doherty earlier on the monitor. My apologies I was not in the committee for it.

I have been following this over the past year. I did not know much about it but since then I have learnt quite a lot about how it applies to the film industry. I do not know if Professor Doherty has looked at this much but there is a big dispute going on in the film industry, to put it mildly, about this whole area. It relates to who are the employers and who are the employees. The witness may or may not be aware of the structure of the Irish film industry, which is financed by tax relief. The tax relief has to be put through a special purpose vehicle, SPV, or designated activity companies, DAC, that are set up for the purposes of the specific movie. Those tax reliefs are given to standing production companies, but the production company does not make the film. The SPV is the agency that makes the film and people are employed by the SPV. Standing behind the SPV, however, is the real producer company that is not time limited to the production.

What many film workers are raging about is that this structure means they have no rights because there is, in effect, no employer. The workers will go further and say that if they ask for rights, or the application of the fixed-term contract legislation, or for the working time directive, they will never be asked back again. They feel strongly pressured to declare as self-employed or if they attempt to assert their rights if they manage to get a PAYE contract. I am curious as to what Professor Doherty thinks of all this.

There have been some rulings from the Workplace Relations Commission where workers have taken cases. Workers in those cases, for example, have said that the producer company behind the production is the employer. They argue that the SPV might have a different identity for every production, but standing behind that SPV is a producer company that constantly draws down this tax relief, and the worker has worked for these people on multiple occasions.

That producer company is saying that these workers are not its employees and have nothing to do with it and that, therefore, it has no obligations to them. It seems to say that fixed term contract legislation does not apply to it. I am trying to get the bottom of that. I will ask the Minister for Finance, Deputy Donohoe, about this issue. Given that the Irish film industry is financed overwhelmingly by public money, this seems to be an unacceptable situation. What does Professor Doherty think about that? In his understanding, does fixed term contract legislation apply to people in the film industry? I understand there are only a few derogations from that legislation and film is not one of them. Other than those derogations, the legislation applies.

I accept that there are some grey areas, but there is a control test, as set out in the code of practice for determining self-employment status for individuals. Surely teams from Revenue and the Department of Employment Affairs and Social Protection could be sent in to companies to find out who their employees are and establish the boxes those employees tick. Are they coming in from 9 o'clock to 5 o'clock? Is somebody else telling them what to do? Do they get lunch breaks if someone else tells them they have to have them? It could be established fairly quickly whether they were employees or employers, and who the employer is. I would be interested in any thoughts or insights into that area that Professor Doherty could provide.

The issue of penalties may have arisen earlier. There have to be penalties. What is Professor Doherty's understanding of the application of penalties? I do not see that there are any for those who breach this legislation.

Deputy Boyd Barrett asked a question about on-site inspections. The Department made figures available to us for inspections that were jointly carried out with Revenue. However, the committee was concerned that the figures did not show what we expected them to show. The number is low in terms of what was deemed to be bogus self-employment. We had a concern-----

Were those figures broken down by sector as they went into-----

Yes. If it is any help, I will arrange for a copy of the letter from the Department to be sent to the Deputy.

I would be very grateful for that.

It gave some information on the issue Deputy Boyd Barrett raised, which he may find helpful.

Professor Michael Doherty

Fixed term worker legislation - to go back to where we started - applies to employees, and the suggestion is that it is quite difficult for some people who work to prove that they are employees under the existing test. Oftentimes this arises because of complicated relationships. I am not overly familiar with the film industry in particular, but the situation as described by Deputy Boyd Barrett seems clear enough. It may be the case that in some instances we should not obsess so much about who is an employee and actually look at the obligations of employers. In the case of an individual providing a service, there may be more than one employer that owes that person some obligations. In the example the Deputy has given, if someone is on set, the obligations to maintain health and safety may be on the person controlling that set, whoever that might be, but the obligations to pay the person may be on somebody else altogether. That might introduce more complexity to the situation.

Coming back to my sectoral view, trying to put basic standards in place for people working in film production, which apply across the sector, takes many of these problems away. It makes it clear that a person working on a set is entitled to X, Y and Z and that someone has to be responsible for providing that. The person responsible has to be from an organisation or entity of substance rather than form. The committee has discussed these managed services companies before. They are entities of form rather than entities of substance. The code is good, and it looks at substance to some extent, but a clear statement that we should disregard form in favour of substance is something that might be useful in terms of any legislation that is set down. Sectoral conditions could include a defined rate of pay for a sector and the entity that gives that rate is, in substance, the person who is performing the function of an employer in relation to pay. That is a slightly more complicated formulation, but it is logical, makes sense and takes us away from minute discussions about who is an employee and whether equipment was provided. If one is doing work in a particular sector, one should be entitled to a certain standard, and we should not have to go beyond the fact that he or she is entitled to that standard.

In terms of penalties, was the Deputy talking about general breaches of the legislation?

Professor Michael Doherty

A proposed amendment to the Criminal Justice (Miscellaneous Provisions) Act was mentioned. By and large, I am not in favour of criminal sanctions for this kind of thing because I do not believe they work. In its submission to the committee the Department mentioned that, under the Social Welfare Act, there are potential penalties, fines and convictions on indictment. I do not know whether the committee has the figures on how many prosecutions go ahead but I suspect they are very few in number. Outside of the specific area of health and safety, very few criminal prosecutions are taken on employment rights because they are hard to prove. The sanction for public contracts is along the lines we have described. People are not given contracts again and the State litigates against contractual awardees who do not fulfil their functions. The remedies for individuals include compensation, allowing that remuneration owed is backdated.

There is a slight problem with the issue of who the employer is and the obligations that employer has to the employee, and sectoral concerns. I am not saying it should not be a part of the mix, but I believe that it is in the interests of the public, especially where public money is used, that the public gets the maximum amount back for its investment, whether via film tax relief or public funding. Even in the private sector it is important to get the maximum tax revenue possible from employment. People should not be allowed to miscategorise themselves. There is a problem with employers trying to miscategorise people, but people can also miscategorise themselves in order to gain a tax benefit. That is problematic, and should be addressed by providing fairly objective criteria for defining employees. Someone cannot just decide that he or she fancies being an entrepreneur when that is not the case. By declaring oneself an entrepreneur one effectively undercuts somebody who wants PAYE direct employment doing exactly the same job. I believe that approach is prevalent in a number of sectors, particularly where younger people are engaged who do not worry about pension contributions and all of that stuff and are happy to freelance. They may regret taking that approach in 20 years' time. In the meantime, they are undercutting people who have worked in an industry for years and have been fighting for pension entitlements and that kind of thing. Does Professor Doherty understand my point?

Professor Michael Doherty

I do.

I would have assumed that if someone goes to a place of work, whether a film set or a construction site, and finds out that 60% of the people in that place of work are entrepreneurs, he or she would think that something was wrong.

While it might be credible to have 10% or 20% of people in a particular workplace acting as entrepreneurs, it is not credible that 60% or 70% of them, as the case may be, would be.

Professor Michael Doherty

I understand, but I am sure the problem of genuine self-misclassification, to use that term, is real. It is probably less of a concern than being coerced into misclassification. I take the example of freelance journalism for which there is a minimum schedule of rates and holiday entitlements that employers will provide or a minimum sick pay scheme to which everyone must contribute. It alleviates the problem to some extent. It is a form of the State coercing people into making contributions. I do not necessarily think that is a problem.

There is also an issue in public procurement.

A number of people have indicated that they want to ask supplementary questions. I will take them and then refer to Professor Doherty.

Professor Doherty referred to Deputy Boyd Barrett's description of the film industry and how it works in substance and form. We have a long way to go here. Recently, I have come across a local facility in Limerick which was funded by the Department of Education and Skills and run by a local board. When the local board decided to close the facility, people were let go without redundancy or other employment rights. However, the Department insisted that all responsibility lay with the local board, which was, of course, worthless to the employees. We saw that on a larger scale in a Dáil motion we passed last year on community employment supervisors. The Department insisted that a Labour Court recommendation that supervisors should get pensions was a matter for the local community employment boards. I am interested in the film industry and hope people get sorted out, but the State is the main offender in this regard.

The loss to the State is not simply about the individual's experience. Sectoral orders are a way to ensure that whatever way he or she is categorised, the person can access the basic provision. However, there is a loss to the State. We know this from the radically different PRSI contributions that are coming through from those who are self-employed and those who are not.

I refer again to the issue of public procurement. There is also an issue for the State as an employer. There are a number of areas, including early child care workers and other areas like that, where the State could do much better. Is the scope going to be within the criteria in the design of requests for tenders and not necessarily within clauses, which has largely been the focus? I had always thought of it in reverse and I know that comes up against the European directives, which require that a tenderer should not have a number of people in need of FIS as that is, in effect, the State having to subsidise a bad employer rather employing a good one. There are problems when one hits that as it is a payment linked to Ireland. However, one could require that a certain number of workers would be employees, whether in Ireland or elsewhere. Would a requirement that they be categorised as employees fit within the European procurement framework? It is reasonable if the most economically advantageous tender is the overarching goal. Certainly, it fits within that.

Professor Doherty referred to freelance journalists and to holidays and set pay. However, the classification will matter more in future than it does today when the likes of auto-enrolment pensions come in and the employer will make a contribution. It goes back to the first part of our discussion where we asked what was the definition. It is more than a matter of existing entitlements. It will become a future contributions scheme from an auto-enrolment perspective.

Professor Michael Doherty

Deputy O'Dea is correct. When I teach employment law to undergraduates and talk about fixed-term contracts, I say it is the State section of the course because all of the cases are about the State resisting classifications. The Deputy is absolutely correct that there is an obligation on the State as an employer to be the model of best practice. We have not always seen that, unfortunately.

On public procurement, more could definitely be done at tender stage. It tends to be a little generic. While the most economically advantageous tender, MEAT, criteria are applied, we simply expect tenderers to be in compliance with the law. That is pretty much it. There is definitely scope to be a bit more specific on the criteria used. A criterion requiring that a certain percentage of persons on a project would have to be employees would have to be related to the subject matter of the contract. Why would a particular contract need employees rather than other categories of worker?

If one wants a continuum of employment or delivery.

Professor Michael Doherty

Precisely. It would be an interesting idea and I am thinking of it as I speak. While it is certainly something that could be done, one would have to be careful about how the specific criteria were framed and there would have to be a reason for it beyond the notion that it is a good thing. I do not want to come across as suggesting that entrepreneurs being self-employed is in some ways a bad thing, because it is not.

What about sectoral orders and the compatibility of what used to be JLCs with the labour machinery of the State. While that is the labour machinery rather than a set of laws, is it something we can cement around an expectation of due diligence on the part of the State as a funder of projects and with regard to the way in which its resources are used?

Professor Michael Doherty

I think so. I would be strongly in favour of that as it goes back to the point that the State should be a good employer and should also ensure that the contracts it provides are subject to the machinery of the State. On the Chairman's last point, it will become more significant. We all saw the case involving a journalist who has been writing for an Irish newspaper for nearly 30 years and who has now been told he is freelance due to the technicality of a law in another member state. The definitional point is, therefore, important. We are always looking for ways to extract ourselves to the greatest extent possible from finite arguments about definitional criteria. A slightly broader definition of "employee" than currently exists would be useful and the definition the EU is going to propose in certain areas would be useful but it would be good to focus on means by which to avoid getting down to definitional criteria.

However, if we can focus on a means by which we do not have to get down into the definitional criteria, for example, in the area of social insurance or pensions, we can have a look at the entire system and say perhaps contributions should be equalised in some way or at least brought closer together to reduce the incentive for misclassification. It is definitely a package of measures that is required. My final view on it is that I do not like to focus too much on statutory definitions of employees if it is just about access to a range of other rights. The committee might want to think about how they should be granted in and of themselves without considering the definitional issue.

I thank Professor Doherty both for his opening statement and contributions during the meeting which were very helpful and informative.

The joint committee adjourned at 11.40 a.m. until 10 a.m. on Thursday, 28 February 2019.