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Joint Committee on Employment Affairs and Social Protection debate -
Thursday, 5 Dec 2019

Bogus Self-Employment: Discussion (Resumed)

I welcome Mr. Tim Duggan, assistant secretary, Department of Employment Affairs and Social Protection, who is accompanied Ms Clare Dowling. I also welcome Ms Joan Gordon, chief appeals officer, accompanied by Mr. Brian Duff.

I will invite our guests to make their opening statements shortly following which members will then have an opportunity to ask a number of questions.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the Chairman 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 nor 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 members to the effect that they should not comment on, criticise or make charges against a person outside the Houses, or an official either by name or in such a way as to make him or her identifiable. Once again, colleagues, I ask that mobile phones might be turned to flight mode or turned off, please.

I call Mr. Duggan to make his opening statement.

Mr. Tim Duggan

I thank the Chairman and the committee for the invitation to appear today.

The scope section of the Department makes decisions or determinations on respect of a range of PRSI-related matters for which our deciding officers have a number of powers and functions under the Social Welfare Consolidation Act 2005, as amended. One of the determinations our deciding officers can make is on a person’s employment status. We can decide whether a worker, or former worker, is or was an employee or is or was self-employed. From that decision flows the appropriate categorisation for PRSI purposes. The most common is class A for an employee and class S for a self-employed person.

Cases that involve decisions on employment status may arise from requests from employers, employees, employer representative groups, employee representative groups, the Department's own social welfare inspectors, departmental officials working in central social welfare scheme areas, or even, on occasion, from the Revenue Commissioners.

Of the cases scope section deals with each year, those involving the employment status of workers constitute a small proportion. For example, of the 1,000 or so decisions made by the section so far this year, approximately 5% related to employment status.

When a request for a determination on employment status is received, the scope officials will do some checks to see if there are any prior, relevant records. Then the relevant parties will be contacted. The case is typically referred to one of the Department’s social welfare inspectors in the relevant geographical region who will conduct further in-depth and, usually, in-person checks. When the relevant factual information or evidence is returned, our deciding officers then make a determination based on the law.

In every case, the decision is an individual one and in every case, the decision may be appealed to the social welfare appeals office. As the chief appeals officer may outline, there are further avenues of recourse after that. I assure the committee that no individual worker who seeks a decision from scope section is turned away and that there are no group decision but only individual decisions. Each case turns on its own facts and the law is applied without fear or favour to those facts.

Our deciding officers are guided by their own statutory powers and the case law that has evolved in the courts over many decades. An important guide for them is the code of practice for determining employment or self-employment status of individuals, which was originally developed in the early 2000s and has been amended since. It is being updated again by an interdepartmental working group comprising our Department, the Revenue, and the Workplace Relations Commission, WRC. The new guidance on determining employment status, as it will be called, does not create new law; it only reflects the up-to-date position as it has emerged in the courts and in legislation. It sets out the key tests or factors that have been found by the courts to determine whether a person is employed or self-employed. In this regard, the courts have found that the determination as to the appropriate insurability classification must be arrived at by looking at what a person does, the way in which it is done and the terms and conditions under which the person is engaged, be they written, verbal or implied. It is also clear from the relevant case law that no one factor may be taken as determinative of either state. A next-to-final draft of the updated guidance is ready to go to the social partners for their observations. The Minister, Deputy Doherty, has highlighted how she intends to put this revised guidance on a statutory footing next year once it is completed.

We are acutely aware of the allegedly increasing prevalence of false self-employment in the economy. However, the numbers relating to this are, frankly, not compelling. Figures from the CSO show that the number of self-employed workers as a proportion of all workers in Ireland has remained largely stable for more than 20 years. In fact, the most recent figures from the labour force survey show a slight drop in the number of self-employed persons, as well as a slight decrease in the number of self-employed people with no paid employees. These self-employed people with no paid employees are the most obvious candidates for the false self-employment label. However, we know this figure is not increasing, as some have suggested.

Nevertheless, regardless of these facts and figures, it is the case that concrete examples of false self-employment have been found and it does exist. Additionally, in the view of the Department, it is a worthwhile and important enterprise to reduce the number of persons who are incorrectly or fraudulently categorised as being self-employed when they are, in fact, operating as employees. The Department takes this very seriously. As a consequence, we are engaged in an intensive nationwide inspection and compliance campaign to better understand the prevalence of this issue, to identify sectors where it may be a particular problem, and to tackle and reduce any instances of it.

In that regard, we have first increased resources in the scope section. Second, we have set up a new inspection unit called the employment status inspection unit, which is dedicated to inspecting employer PRSI and the classification of workers. Third, our inspectors nationwide are conducting employer inspections at an increasing rate, some of which are done jointly with Revenue and the WRC. Fourth, legislative provisions are being developed to encourage workers to apply to scope section for clarity about their employment status. These are anti-victimisation measures that will allow workers to make a complaint to the WRC if they are victimised by employers because they sought a determination from scope section. Fifth, the Minister is seeking to introduce a specific new criminal offence of the deliberate and knowing misclassification of a worker as being self-employed, which will carry appropriate penalties.

While it is unlikely to be possible ever to eradicate false self-employment, the Department is committed to minimising its potential and to detecting and dealing with it wherever it does occur. This is critically important because it has a twofold benefit. First, it reduces leakage on the Social Insurance Fund, which pays for a wide range of social protection schemes. Second, it gives workers access to our robust employment rights legislation. I hope the steps I have set out demonstrate the Department’s determination in this regard. Ms Dowling and I will endeavour to answer any questions that members may have.

I thank Mr. Duggan and invite Ms Gordon to make her opening statement.

Ms Joan Gordon

I thank the Chairman and the committee for the opportunity to address them today. By way of background, the appeals office was established in 1990, is headed by a chief appeals officer and has its own appeals officers who are independent in their decision-making. The role of the office is to determine appeals against decisions of deciding officers. The legislation governing the appeals process is contained in the Social Welfare Consolidation Act 2005 and regulations made thereunder.

While the legislation provides that a decision of an appeals officer is final and conclusive, a number of routes for review and revision including references and appeals to the courts are also provided for in the legislation. All decisions of appeals officers and revised decisions of the chief appeals officer are subject to judicial review and the Ombudsman can examine complaints about everyday administrative activities carried out by the office. The appeals process is quasi-judicial with appeals officers being required to decide all appeals on a de novo basis. While the issues that are dealt with on appeal are based on the provisions of the 2005 Act and the regulations, the office is not a court but must observe the principles of natural justice and fair procedures. Appeals may be disposed of by way of summary decision or by means of an oral hearing. It is a matter for the appeals officer to decide if a case can properly be determined without an oral hearing. Decisions of appeals officers are made on the facts pertaining to the individual case. While the decisions do not create precedents, the office strives to achieve consistency in its decision making.

Turning to the specific issue of determining the status of a worker for social insurance purposes, section 300(2) of the 2005 Act gives statutory power to deciding officers of the Department to determine questions relating to the insurability of employment for social insurance purposes. All such decisions can be appealed under the provisions of section 311 of the 2005 Act. Appeals relating to employment status cover a range of issues including directors of companies, family employments, partnerships and public sector employments. The number of cases involving the determination as to whether a person was employed under a contract of service or a contract for services is relatively small. No legislative provision provides for appeals officers to make decisions on the employment status of groups or classes of workers who are engaged or operate on the same terms and conditions. However, it is also the case that the legislation does not preclude such an approach.

I have occasionally, and usually where a number of workers engaged by the same employer are concerned and have individually submitted an appeal, been asked to make decisions on a sample number of cases. I have agreed to this approach in limited circumstances and only with the agreement of both the employer and the workers concerned. However, I emphasise that each worker is entitled to an individual decision on their appeal. The approach can be an efficient way of dealing with issues that are common in appeal cases and where there are a number of workers attached to an appeal. However, the approach cannot compromise the integrity of the appeal process or deny an interested party the opportunity of having any evidence particular to their appeal being considered by an appeals officer. I can also advise that this approach has not been adopted during my time as chief appeals officer since 2015, in the case of an appeal where the classification of a worker as an employee or a self-employed person is the issue under appeal. However, I am aware that an appeals officer proposed this approach in a case where a number of workers engaged by a specific employer was concerned. The parties to that appeal were not happy to proceed on that basis and the appeals officer proceeded to determine the appeals in each individual case.

I have outlined that all appeals are determined on a case-by-case basis and on the particular facts of each appeal. While appeal decisions do not themselves create precedents, the office endeavours to be consistent in its decision-making and strives to ensure that the same conclusion is reached in cases that are based on the same or similar factual circumstances. In the case of appeals on the insurability of employment, consistency is achieved by applying the precedents emerging from the case law of the courts and by reference to the code of practice for determining employment and self-employment status of individuals. The office does not categorise cases as "bogus self-employment" or "false self-employment" and the office is only concerned with determining if a worker is correctly classified as an employee or a self-employed person. It is also the case that appeals officers cannot be concerned about the implications arising from their decisions, and the Supreme Court has said that appeals officers are required to be "free and unrestricted in discharging their functions".

Where an appeal against the decision of a deciding officer on a worker's status is received, notification of that appeal and the grounds of appeal are provided to the other interested parties. Those interested parties are invariably the worker, the company or companies that engaged the worker and the scope section of the Department. All parties are afforded full opportunity to make submissions on the appeal contentions, and if an oral hearing is convened all parties are notified and requested to attend. The appeal decision is issued to all these interested parties. Any party to the appeal including the appellant, and in addition to recourse to the courts or the Ombudsman's office, can invoke the provisions of the 2005 Act providing for revision of the appeals officer’s decision based on new facts or evidence and-or error of fact or law.

Turning to some statistics, the Department processes approximately 2 million new claims each year, with approximately 85% successful. By comparison, 19,000 appeals had been made to the social welfare appeals office to the end of October this year. The figure in 2018 for the full year was 18,854. Of this number in 2019, 57 relate to appeals against decisions made by deciding officers in the scope section of the Department covering a range of issues - 26 of these 57 appeals relate specifically to the question of whether a person was employed under a contract of service or a contract for services. A total of 41 appeals were determined by the office between 1 January 2018 and the end of October 2019 relating to the question of whether a person was employed under a contract of service or a contract for services. Mr. Duff and I will be pleased to take any questions that members may have.

I thank Ms Gordon. Mr. Duggan said the Department has engaged in an intensive nationwide inspection and compliance campaign and that it has this year increased resources in scope section and set up a new unit called the employment status inspection unit. That is all positive and to be welcomed. I would like him to give the committee an understanding of the numbers of people involved. How many staff are assigned to either the new unit or the scope section? How many cases have been determined this year compared to last year? Since the Department has increased resources, what are we seeing?

Mr. Tim Duggan

The scope section had five deciding officers at the beginning of the year and it now has eight, so that is almost double. The new employment status investigation unit, which did not exist at all at the beginning of the year, has four inspectors right now. We are hoping to increase that to six before the end of the year. I have management board approval to extend it to 12 and perhaps 15 if the demand warrant that over the next while. There is quite a bit of work in setting it up because we need to train people in quite a complicated area of law. It takes a while to get somebody from being assigned to being productive in a unit like that but we are working on that. We are also leveraging the 350 social welfare inspectors who are deployed nationwide as part of this effort. Quite a lot of training and refamiliarisation with this area of law has been done during the year. More attention is being paid by social welfare inspectors on the ground to employer and PRSI inspections specifically.

It is fair to acknowledge that, over the course of the economic recession, social welfare inspection was concentrated on scheme-related issues rather than on this matter. We are now trying to restore balance. There were just over 2,000 employer investigations in 2018. Up to the end of October of this year, 2,745 were completed. Almost 1,000 others are under way. A few more will probably be initiated between October and the end of December. It will not quite be a doubling of the number of inspections but it will be close enough when we do the final figures after the end of the year.

What is the Department finding in these investigations with regard to people whose employment has been miscategorised?

Mr. Tim Duggan

As I said in my opening statement, the numbers are not big. We have dealt with 60 cases specifically related to individuals' employment status this year. Of those 60 cases, 40 were determined to be employees and 20 to be self-employed, so there was a 2:1 split. As the chief appeals officer has said, 26 of these cases have gone to appeal. One of the features of this area of law is that decisions are often appealed, which is not the case in most other scheme areas of the Department.

I apologise to colleagues but I have one final question. Of those 60 cases, how many resulted from the Department's investigations and inspections and how many resulted from people contacting the scope section?

Ms Clare Dowling

It is very much a mixed bag. We get referrals from various sources, for example, Revenue, our inspectors, including our new inspectors, employers, employees and representative groups on both sides. It is fairly evenly split. Employees seeking determinations as to their status may have a slight lead in terms of numbers referring.

Would it be fair to assume that 30 of those 60 cases arose from employees approaching the scope section with an issue?

Ms Clare Dowling

No. I do not have an exact figure but I can try to interrogate the-----

The witnesses know where we are coming from. The Department has increased resources and has been proactive. We support and acknowledge that but we are trying to determine what it has yielded. How many of those 60 cases were discovered by the Department's inspectors or through the Department's efforts as opposed to being highlighted by individuals who came forward to complain about their status?

Mr. Tim Duggan

We will interrogate the data and send the committee a note.

Mr. Duggan knows what we are trying to get at.

Mr. Tim Duggan

Yes. We will send a note breaking down that figure. It tends to be split across four or five different sources of referral.

I ask the Department just to give us an idea. We would like to see where things are going following the establishment of the new unit, the allocation of additional staff to the scope section and so forth. I fully understand that the new unit was only set up during the summer and that training takes time but we should track what has happened year on year. It would give us a good idea of the situation. I fully accept that this is the first year of the unit and that it will not have a full year of operations completed but we need to monitor outcomes.

I welcome all the representatives to the committee. With the permission of the Chair, I will ask a number of questions and engage in a dialogue. That would be more productive. I am interested in establishing the quantum of cases and determinations that are overturned by the social welfare appeals office. A deciding officer makes a determination as to insurability. Will the witnesses comment on the quantum and proportion of cases that are overturned and the balance of outcomes in the first instance?

Ms Joan Gordon

For clarification, is the Senator referring specifically to the area of contracted services? I note that he is. I will provide a breakdown of cases completed in 2019 so far. I also have figures for 2018.

That would be useful for comparative purposes.

Ms Joan Gordon

Over the two-year period, 29 appeals were brought by companies and 12 by workers. That is the breakdown of 41 appeals brought. In the period from January 2019 to October 2019, 19 decisions were determined by appeals officers. Some 14 of these appeals were brought by companies and five by workers. In 16 of these cases the deciding officer of the Department had determined that the employment status was class A. I will use the terms "class A" and "class S" for ease of reference. In three cases the decision was that the employment status was class S. In all 14 cases appealed by companies, the deciding officer had determined that the employment status was class A. The appeals officer determined that eight cases came under class A and six under class S. In the five cases appealed by workers, the deciding officer determined that the employment status was class A in two cases and class S in three cases. The appeals officer determined that class A applied in three cases and that class S applied in two cases. In that latter example, the appeals officer had changed the two class A decisions to class S and the three class S decisions to class A.

In 2018, a total of 22 decisions were determined by appeals officers, of which 15 were appeals brought by companies and seven by workers. In 18 of these cases the deciding officer had determined that the employment status was class A and in four cases the decision was that the employment status was class S. In all 15 cases appealed by companies, the deciding officer determined that the employment status was class A. The appeals officer determined class A in 11 cases and class S in four. In the seven cases appealed by workers, the deciding officer determined that the employment status was class A in three cases and class S in four cases. The appeals officer determined that class A applied in four cases and class S applied in three cases. Therefore, the appeals officer changed one decision from class S to class A and upheld the deciding officers' decisions in the six other cases.

Whether these appeals are successful or unsuccessful depends on whether one takes the perspective of the company or the worker but over the period from 2018 to 2019, companies were successful in ten out of 29 appeals brought by them, which is approximately one third. Workers were successful in six of the 12 appeals they brought in the same period.

It would be very useful for members of the committee to get a copy of that breakdown to help us in our consideration. It would be useful for comparative purposes. Are there any particular economic categories and sectors in which the Department would find a high proportion of appeals? Is there a particularly high proportion in construction or among couriers or IT workers or is it a mixed bag?

Ms Joan Gordon

It is a mixed bag. I have a list of the sectors covered. The appeals mainly refer to one particular person. Of the figures I just provided, one appeal had four people attached and another had three. I am aware of a case prior to 2018 to which 16 workers in a specific category were attached.

In which sector did those 16 workers work?

Ms Joan Gordon

Construction. The sectors involved in appeals, which largely tend to be one-person appeals, include media, journalism, construction, IT consultancy, project management, lecturing, catering, research and development, bookkeeping, retail, driving, car repairs and maintenance, aviation, and tourism services. That is not an exhaustive list. Many of these cases are single-person appeals. We do not have many appeals to which a number or workers are attached in any particular sector. With regard to earlier years, we do not have appeal-specific files. The file belongs to the Department and is returned once the appeal is determined.

It is quite difficult to obtain the data without having all the files returned to us and reading them again from scratch to see what was at issue. We will endeavour to provide statistics for a few more years.

It would be good practice to keep that data. Is that something that the Department is prepared to do?

Ms Joan Gordon

Yes. Absolutely.

With much of the increased activity in the Department, along with that of the new unit which will be established, maintaining the data produced every year and highlighting the trends would be useful exercises.

Ms Joan Gordon

That is our intention. Our management system for files is quite old and limited in terms of how we can categorise. We are actually modernising. A project is under way to build from the business object model implementation, BOMi, platform in the Department. In that context, we do hope to be able to have better codification.

At a previous hearing, Mr. Martin McMahon, referred to the presence of what were described as test cases, which, it has been claimed, have been used to determine the employment status en masse of those who work in courier services. We know that is a matter of contention for the Department. The Department has consistently expressed the view that no such test cases or precedential cases exist. Both Ms Gordon and Mr. Duggan have claimed that every case is considered on its merits, with no reference to a series of cases considered in 1995. Instead, everything is considered on a de novo basis. However, the Department also endeavours to be consistent in terms of the determinations it makes, as well as those decisions made in the appeals process.

Ms Gordon will be aware that evidence was presented to the then Chairman of the Committee of Public Accounts, the late Jim Mitchell, in 2000 when the Comptroller and Auditor General was examining the phenomenon of false self-employment and the consequences for the Exchequer. A senior official in the then Department of Social, Community and Family Affairs made a reference to test cases. Ms Gordon is unequivocal that no such test cases or precedential cases exist for couriers. That is at odds with what Mr. Martin McMahon, who has considerable experience on the front line of this sector, has told this committee.

I made the request that representatives from the Department appear before the committee today in order that we might look under the bonnet in respect of this issue and to understand how it works. We need to address these issues. A serious claim has been made and the Department appears to be challenging that. I want to give Ms Gordon the opportunity to reflect on that and to put on record her perspective and that of the Department on this. This is a view that has been out there for a considerable time. It is a serious issue. A view was expressed at a previous meeting that clearly the social welfare appeals office, under the Department of Employment Affairs and Social Protection, cannot make law. I draw Ms Gordon’s attention to the case involving John Grace Fried Chicken Ltd., which gave rise to the destruction of the then joint labour committee system. The courts were clear that there is one lawmaking body in the Republic, namely, the Houses of the Oireachtas.

An allegation has been made that, in essence, the social welfare appeals office is making law and using precedential cases to inform the consideration of cases are brought to its attention. I want to give Ms Gordon the opportunity to address this a serious allegation. It is important that she does so. With the Chair's permission, I will ask Mr. Duggan some broad questions on the process.

We will let Ms Gordon address that specific issue first.

Ms Joan Gordon

I am happy to clarify and set out my understanding of this matter. The Senator will appreciate that I cannot speak about individual cases for reasons of confidentiality and data protection. What I can say, however, is that our office does not use test cases. In the particular case referred to, I was not even aware that this case existed and had to go to find it. From the research I did for this meeting, it is my understanding that the precedential case referred to dates back to 1995 and an appeals officer’s decision sometime in June of that year. We do not use this or any other case for decisions.

If I may interject, a former Secretary General of the Department, in correspondence to the Committee of Public Accounts in 2000, referred to test cases.

Ms Joan Gordon

I was going to comment on that. I did not have this particular letter but I made it my business to find it. It is the case that the then Secretary General of the Department, in correspondence with the then Chairman of the Committee of Public Accounts, in October 2000 referred to a number of representative test cases which were selected in 1993 and 1994 for investigation and formal decision. I assume that was a decision by deciding officers and one or two made their way to the appeals process. That process resulted in a decision by an appeals officer in June 1995. The latter decided, I presume among other things, that a worker in a particular sector was self-employed if he or she provided his or her own vehicle and equipment, was responsible for expenses, including taxes, insurance and maintenance, while payment was made on the basis of rate per job. The Secretary General at the time also outlined that the appeals officer's decision to establish the criteria was generally accepted to be the employment status of workers in that sector. However, the Secretary General also referred to subsequent discussions with trade union representatives on the insurability of workers in that sector in the context of the Programme for Prosperity and Fairness. It is my understanding that the outcome of these discussions was the establishment of the employment status group which developed the code of practice for determining employment and self-employment which was drawn up in 2001.

That code was prepared, on a tripartite basis, by the group set up under the Programme for Prosperity and Fairness in response to concerns that some individuals were categorised as self-employed when the indicators were that employee status might be more appropriate. The objective of the code was to eliminate misconceptions and provide clarity. The code postdated the 1995 decision. Our decisions in the appeals office on the insurability of workers are made by reference to the code and the abundance of legal principles emerging from the case law of the courts. They are not made with reference to that test case or any other test case. Obviously, we strive to be consistent. However, consistency is achieved in this area by reference to using the code and principles emerging from the court. What I have set out is my understanding. I cannot obviously speak for the Department. We do not use the secret precedential cases or this specific 1995 decision.

This applied to workers in the courier sector. If a courier has a concern about their insurability and their employment status, they can take the case the normal way for determination. If they are unsatisfied with that, they can appeal to the Social Welfare Appeals Office. This is treated on a de novo basis and the matters are considered on their own merits, as well as the application of case law and experience. Is Ms Gordon categorically stating for the record that no precedential test cases are used to inform these decisions?

Ms Joan Gordon

That is what I am stating categorically. Should anybody in any sector appeal a decision, that decision is absolutely based on the facts of the relevant case. Sometimes cases may be similar. However, when one starts applying the principles and taking evidence, they can be different. That is why it is important that each case is determined on the facts pertaining. In this particular instance, all decisions are made by reference to the code and to the case law of the courts.

I have been actively seeking to address some of the concerns I, the trade union movement and individual workers have about false self-employment.

I am certainly well acquainted with the figures and trends over the past 15 to 20 years. They were very helpfully produced in the report on social welfare, PRSI and tax implications. That report was published in early 2018 if my memory serves me. Mr. Duggan is on record as saying the figures around self-employment remain broadly similar over an extended period. We all know those who are at risk and those who would attract our attention in terms of false self-employment status or miscategorisation of their status are those who are self-employed with no employees. I absolutely understand that. I understand and appreciate that the figures from the CSO are stable but I do not think there should ever be an acceptable number of people who are falsely self-employed. By their actions and because they are encouraged or in some cases forced to be self-employed, there is a fraud being perpetrated against the State. Workers are being deprived of the benefits they would otherwise be entitled to and they are also being deprived of their rights as workers. Just because numbers appear to be stable does not mean that we do not act. I am pleased that action is taking place but I will not be satisfied until we see some clear legislative action. As the system has essentially acknowledged, the code of practice that is in place at the moment is not fit for purpose and has not kept pace with developments in recent years. I do not believe the system will change or workers and the State will be protected until such time as we include in future legislation the updated statutory code. I will be interested when the time is right to establish precisely what that wants to do. I understand that the Minister may be interested in drawing some provisions from legislation I published myself which was unfortunately defeated on Committee Stage in the Seanad. She may be introducing some elements of that into proposed legislation. For the life of me I find it difficult to ascertain how with the best will in the world we can protect those who take cases to the scope section against victimisation from their employer. It is very difficult to protect somebody who is self-employed from victimisation because they do not have the status of an employee. I have had these discussions with people in the sector and would appreciate if Mr. Duggan could elaborate on precisely how the Department is going to do that. My understanding is that when an individual takes a case to the scope section in terms of their insurability or determination of their status, the presumption is that they are self-employed until otherwise determined. It is very difficult to protect somebody's interests or protect them against victimisation if they are not an employee from the perspective of the Department. That would be an important feature of the process going forward.

Mr. Tim Duggan

I wholeheartedly agree with the Senator that there is no such thing as an acceptable number of people who are falsely self-employed. I specifically referred to that in my opening statement by saying that regardless of what the figures are showing us, we are going after this. It is important. I am not sure I fully agree with the Senator that the code of practice is not fit for purpose. We are updating it to make sure it is as modern and as up-to-date as possible in reflecting the case law that has emerged since it was last done in 2007, and to ensure that it incorporates significant advances that have been made through that case law in the intervening dozen or so years. For instance, mutuality of obligation has become the critical determining factor as a result of that case law. Consequently, the new guidance will reflect that largely.

That should actually be inserted into our primary law. That is my view. We may differ on that and we will have that debate on the floor of the Seanad or the Dáil when the proposed legislation is presented.

The Senator should give Mr. Duggan the opportunity to conclude.

Mr. Tim Duggan

Indeed, but it will set out very clearly for employers and employees how this is a key, critical issue and they have to pay attention to it. When that new guidance is put on a statutory footing, it will be done on the basis that deciding officers will have to have regard to it. It will be very clear to all employers and employees that when deciding officers in the scope section are examining cases that are referred to them, they will be doing it in the context of that guidance and consequently to ignore that guidance and what is specifically sets out would not be prudent. The Senator is right that there is a difficulty about defining an employee when somebody is categorised as self-employed. We are currently teasing through precisely how we will frame that anti-victimisation legislation with the Office of the Attorney General. It will have to incorporate something around when an individual or a worker is engaged with the scope section in seeking a determination of their status. That is still being worked out. Once we have it worked out it will be obvious how we think we can address that specific issue. It is not easy, I accept that, but we are definitively going to try to do that.

I would like to pick up on a few of the discussion points. I would have a small disagreement with Senator Nash. The Department has not actually been consistent because we do have that statement of 2000 from the Secretary General at the time. I am interested to hear about the change in policy that Mr. Duggan is telling us came about in 2001. The fact is that we have extensive correspondence from the then Secretary General in which it is very clear that they are using test cases. He refers to them as test cases. He sets in place three specific measures, namely, providing one's own vehicle and equipment, responsibility for all expenses, and payment made on the basis of rate per job plus mileage allowance. It is a very specific group ruling. Mr. Duggan is telling us that in 2001, a different approach came into place. I am curious about what was done in terms of redressing the concerns of those who had been impacted.

Many of the cases and concerns we have been discussing go back into the 1990s. While we were offered figures from 2018 and 2019, it would be very useful if we could get figures going back as far as possible. This is not recently arising. In 2018 and 2019 there was already considerable public scrutiny on the area. We have in 2001 this change in policy where these new guidelines came in. I would be interested in what happened in terms of redressing concerns around the inappropriate use of test cases in the years prior to that. I am also seeing a kind of contradiction in the presentations. We have had this very heartfelt reassurance that every case is looked at individually and so on but Ms Gordon also said:

There is no legislative provision which provides for appeals officers to make decisions on [...] groups or classes of workers who are engaged or operate on the same terms and conditions. However, it is also the case that the legislation does not preclude such an approach.

My understanding is that the legislation does preclude such an approach. We have the Denny case and other cases. We have been hearing that every case is dealt with individually. I am just curious about the contradiction within Ms Gordon's own presentation where she suggests the legislation would allow the office to look at the employment status of groups or classes of workers. I note that she mentioned that during her time as chief appeals officer in 2015, the classification of a worker as an employee or self-employed has not been the approach adopted. However, as I know and as Ms Gordon mentioned, an appeals officer proposed this approach.

Ms Gordon is referring to the 2016 case where a group case was proposed by an appeals officer. It has quite recently been the practice. I understand that in that case the employees objected.

Time, Senator.

I will ask a related question and come back with a separate one.

If the Senator wishes for Ms Gordon to respond -----

A last related question ties in with the legal question and the question of cases. We have had many references to case law and case precedent. In 1992, we moved from a situation where someone appealing a scope section decision would take it to the courts whereas now it is appealed to the appeals office. Does that deprive us of some good case law in this area? It was an area where we were developing case law where people would be tested and suddenly it went to a somewhat more opaque process where decisions were located in the appeals office in the Department.

Ms Joan Gordon

On test cases and what changed, I wish to be clear that I will speak on my understanding. I cannot speak for the Department. I have only gleaned these documents in the past two or three weeks. I do not know what happened in 1993 and 1994 on the test cases. It may have been done in consultation with trade union representatives but I cannot be certain about that as I was not there then.

From the letter that the Secretary General wrote to the Committee on Public Accounts, it seems that the outcome of the later discussions some time between 1995 and 2000 was the establishment of the employment status group under the Programme for Prosperity and Fairness, PPF, and that the product of that was the code. It reflects the three very small factors that were highlighted. If one reads the code it has more factors and indicators. These would feature in the code in some way or another. I am open to correction, but from what I can see, the change was the establishment of the group in 2001, which itself drew up the code on a tripartite basis. It was originally drawn up in 2001 under PPF. I cannot be any clearer than that as I do not know.

On groups, there is no specific provision in the legislation that says one cannot. I would not propose it but I was asked, not in the area of contract law or contract for services, where there were some 40 workers involved. It was the exact same issue. The only issue that was to be determined on appeal was the same in all cases. The approach was that is would be something of a waste of time to hear all 40 when it related to that issue. I would only do that with the agreement of the workers and the companies concerned. If, however, any person or worker said that they did not want their appeal to be done in that way and that he or she wanted his or her appeal to be done separately, he or she would certainly have the appeal determined individually.

The case that the Senator referred to was a 2016 case involving 16 workers. When it is the exact same appeal contention across 20 or 30 people, it can be an efficient way of dealing with the issue. I must stress, however, that each individual is entitled to an individual decision and can still invoke all the other provisions in the Act in terms of review under section 317 in light of new facts or evidence or review by me under section 318 in error of fact or law. The other avenues of redress are not closed to the person.

Ms Gordon mentioned that there is no legislation that says that one cannot, but there is a legal decision that says one cannot. Ms Gordon has told us that the decisions are being made based on the principles and the legal decisions that are coming down through the courts. Does this point to the appropriate place for decisions on appeals being the courts if the appeals office is not aware of cases in the 1990s and is not aware of key legal decisions such as the Denny decision, which effects it?

Ms Joan Gordon

We are aware of all the principles emerging from the courts. I have a chapter in my 2015 annual report which sets out the key principles from the courts. I agree that the courts have said that the circumstances in the individual case must be looked at, but there can be cases where the circumstances are actually the same or very similar. If there are different circumstances involving two or three people, then each will get an appeal hearing.

It seems that with such a low volume of cases moving through, it would be appropriate to getting them right in each case.

Ms Joan Gordon

That happens in the majority of cases. I am only aware of one case where there were 16 workers with the same issue and they were unhappy. I am not sure that I understood the question about what changed in 1992.

Previously an appeal of a decision made by the scope unit would go to the High Court whereas the decision in 1992 meant that it would instead move to an appeals office located within the Department. Are we losing quality High Court decisions on that basis because instead of being played out in a transparent way in the courts, they are taking place in the appeals office?

Ms Joan Gordon

I am not aware of specific appeals going directly to the courts. The office was set up in 1990 and appeals officers were given statutory functions, although I cannot remember the Act. Each person can still appeal an appeals officer's decision or the revised decision of the chief appeals officer to the High Court on a question of law. Some of our cases have ended up in the High Court or the Supreme Court, for example, Denny, Barry and Neenan. There is a plethora of case law. However, I am not aware of ones where the scope unit decision went directly to the courts.

I will return to the changes in 2001 and what steps might have been taken to redress the problems in the 1990s. First I turn to Mr. Duggan and refer to the principles on which decisions are being made. He mentioned the principle of mutual obligation. There is a lot of clarity around how the scope unit makes decisions and there is transparency. Mr. Duggan suggested the figures were not compelling but there was very interesting testimony from within the Department on why so few cases are being put forward. The scope unit specifically noted that when it did an appeal, it would get eight queries a day with very few turning into cases because, it said, of fear of repercussions. That is the reality identified in a presentation to this committee as one the scope unit's key findings. I quote "evidence that people want anonymity and fear repercussions" as a key obstacle to this issue being tackled. When we say it is not compelling, it is if we have workers in a climate of fear in Ireland who cannot take cases forward.

Mr. Duggan mentioned mutuality of obligation as something he was considering introducing. In November 2018, however, more than a year ago, mutuality of obligation was already a principle on which the scope unit was making its decisions. Is it the case that the appeals office is considering bringing in mutuality of obligation? The suggestion seems to be that it might be in the new code, based on some new case law.

Mr. Tim Duggan

I will address the last point first. It is not that we are considering bringing it in, it is that mutuality of obligation has been determined by the courts to be the primary determining factor in employment status. I said that we were updating that guidance to ensure that that is covered comprehensively. In the previous version that was issued in 2007 it was not. That does not mean that scope section and the appeals office have not been operating on the basis of the case law that has been handed down over the past decades. They have. Mutuality of obligation has been a feature for some considerable time in the determination of employment status by scope deciding officers and by appeals officers. I was referring to an updating of the guidance to ensure that it was covered comprehensively.

Mr. Duggan mentioned on the guidance issue that the code may be put on a statutory basis next year. Will that statutory basis also address the corporate structures such as, for example, the aviation industry? We heard very strong testimony in the course of the hearings of this committee of the use of what were effectively false company structures to hide the fact of people being self-employed. In correspondence, Revenue have also identified this as an area where legislative action would be required to address this. At the moment, there is no capacity in any code for investigating any such company or corporate structures. Is that something Mr. Duggan anticipates will be addressed at the time when a new code will be put on a statutory basis?

Mr. Tim Duggan

The new guidance will have a section in it dealing with the use of intermediary arrangements, which includes personal service companies and managed service companies. There will also be a section dealing with the identifying of an employer for PRSI purposes in such contexts.

As to follow-up in cases where people are found to be mis-classified - we are aware that there were inspections by Revenue in the construction and other sectors - what steps have been taken by the Department in reclaiming PRSI, either itself or in co-operation with Revenue, to ensure that we have proper compliance? Such widespread practices are a huge loss to the State.

As an example of that, I want to correct Ms Gordon's suggestion that it was perhaps the unions who pushed for those test cases at the time. We can definitely clarify. It was part of the 2000 correspondence to the Committee of Public Accounts at that time where representatives of the couriers industry - not of one company but the industry - were in correspondence and engagement with Revenue, which has confirmed that. It would certainly seem that this was an industry-led push for categorisation because they were engaged in the same process with Revenue.

Does Mr. Duggan wish to refer back to the first point the Senator raised on the follow-up on the misclassification?

Mr. Tim Duggan

When a determination is made of employee rather than self-employed status, the social welfare inspector involved calculates the PRSI arrears that are due and issues a notice to the employer to discharge that liability which is followed up.

Is it followed up retrospectively?

Just one moment, please, Senator. On this adjustment, are the contributions then put back on to the employee's record?

Mr. Tim Duggan

Yes, they are, absolutely. The contribution record of the employee is updated.

It is amended as well.

Can Mr Duggan give the committee any sense of what may have been recovered in a quantum of moneys in the past number of years as a trend for the years 2017 to 2018, if available? If this information is not available, could it be forwarded to the committee later?

If the Department does not have it to hand, it can be forwarded.

Mr. Tim Duggan

From employer investigations to date this year, the savings up to the end of October are just shy of €1.9 million.

In savings, does Mr Duggan mean money-----

Mr. Tim Duggan

I mean the calculation of PRSI that has not been paid as result of the misclassification together with some other things as well. In some cases it may be that PRSI was not paid at all, was miscalculated, or that some elements of it were miscalculated. It is a combination.

Is Senator Higgins finished?

I will follow up on a question with Ms Gordon and then ask a wider question.

On those cases that were taking place between the test cases of 1993-1994 and the decision to move to a different approach in 2001, were steps taken in cases and decisions that may have been made - it seems that decisions clearly were made judging from the account of the Secretary General of 2000 - on the basis of test cases during that period, which would have been reviewed if it was then determined that the use of test cases was inappropriate, in order to redress the problems between 1995 and 2000?

Separately, what would Ms Gordon say are the five or six key principles that she is applying in a review or an appeal of a decision? Scope is very clear in the principles that it applies and what it bases its decisions upon.

Ms Joan Gordon

I have put this note together for myself on the 1993-1994 cases, but some of this is within the Department's domain, so I do not really know.

Mr. Duggan can answer if he wishes.

Ms Joan Gordon

Reading the chronology of events, there was clearly a decision or an agreement made that a number of cases in a particular sector would be determined based on sample or test cases. At least one if not more made their way to the appeals system. Subsequently, the employment status group was set up under the programme for prosperity and fairness where the development of the code probably overtook or superseded anything that had happened before that. In reviewing those decisions, a person can request a review of an appeal officer's decision under section 317 of the Social Welfare Act in the light of new facts or evidence, or under section 318 a person can write to the chief appeals officer and ask for a review if the person considers that an error of fact or law has occurred.

If somebody has already exhausted those options within the period with the Department, can the person re-use sections 317 and 318?

Ms Joan Gordon

There are no time limits on these sections so the use of these sections can be requested at any time. A caveat would be that if a chief appeals office had done a review at that time, that would be the end of the process.

Does Ms Gordon not think that steps might perhaps need to be taken if there was a concern in law that was held across the Department, given that it was the view of the Secretary General at the highest level between 1995 and 2001 that those who may have exhausted the decision process at the time but later, even through the work of the employment status, have been determined to be correct in their concern? One can see that the review processes under sections 317 and 318 might need to be opened again for people during that period of time.

I thank the Senator. Does Mr. Duggan wish to comment on this?

Mr. Tim Duggan

The following might help to clarify matters. There is something of a misunderstanding of test cases. We do not use that phrase any more. Essentially these were sample cases at the time when a particular sector was being looked at and efforts were made to try to streamline the process to get greater administrative efficiency in the making of decisions for people. That does not change any of the things that we said about principles. All decisions are individual. Anybody at any time can seek a review or an appeal of such a decision, and can use the various mechanisms that the chief appeals officer has set out for that appeal, namely, sections 317 and 318. They can subsequently move on to the courts, if they so wish. There is no precedential value at all to the sample cases that were examined in the 1990s, in the sense that anyone look for their case to be dealt with individually.

What happened in 2001 was not a change of policy, because the policy was exactly what I have just said, all along. What happened from 2001 on was that a greater rigour was put into how people would know about these things. The working group's negotiations resulted ultimately in the first version of the code of practice, which subsequently was revised following further consideration in 2007 and is now being further revised, as we speak, because of developments in the case law since 2007.

I am sorry but that does contradict the statement. Mr. Duggan has been consistent with the narrative previously but that is inconsistent. The Secretary General said in October 2000 that some couriers consider that they are self-employed while others regard themselves as employees. In order to resolve the matter, a number of representative test cases were selected in 1993 and 1994 for detailed investigation and a formal insurability decision under social welfare legislation. The process resulted in the decision that a courier was self-employed if he provided his own vehicle and equipment, was responsible for all expenses, including tax and insurance, and payment was made based on a rate per hour. That is clearly not individual decision-making; it is literally saying there are different kinds of cases and different opinions. We want to resolve the fact of there being different opinions and different individual cases and here is how we have decided to resolve it through these test cases. It is great to move on but let us not retrospectively recreate the process.

Mr. Tim Duggan

That is not inconsistent with what I said at all.

Mr. Tim Duggan

These were sample cases that were taken to deal with a specific issue at that specific time. They do not have precedential value for any other cases, even cases in the same set of circumstances. For instance, if a courier were to approach the scope section tomorrow morning to seek a determination of their employment status, it would be considered de novo, from the very beginning, to use the chief appeals officer's term. The particular circumstances of that person's working environment would be the consideration in conjunction with the guidance and the case law that has emerged.

That is true now, but I am talking about the period between-----

Mr. Tim Duggan

It was true then as well.

Senator Higgins has made that point.

I know, but I am not satisfied with the answer.

Senator Higgins might not be satisfied with the answer but she got the answer. She does not have to be happy with it.

I have clearly described the test cases. Could Ms Gordon respond to the question on the key principles?

Ms Joan Gordon

I understand the question is what principles I would use in determining the contract of or contract for services.

Ms Joan Gordon

I can do no better than repeat what the courts have said. They found that the determination as to the appropriate insurability classification must be arrived at by looking at what a person actually does, the way in which it is done and the terms and conditions under which the person is engaged, be they written, verbal or implied. It is clear from the relevant case law that there is no one factor which may be taken as determinate of either a contract of or a contract for services, but I understand the neutrality of obligation test has been given precedence in some recent jurisprudence. Reflecting the precedence from the court, the code of practice places an emphasis also on the need to look at the job as a whole, including the working conditions and the reality of the working relationship when considering the nature of the employment relationship. The existing code states that the overriding test will always be whether the person performing the work does so as a person in business on their own account.

I was asked for five, but the four main tests for establishing the difference between a contract of service and a contract for services that have evolved from the case law of the courts can be summarised as being the following. The first is the control test, that is, is the person under the control of another person who directs as to how, when and where the work is to be carried out? The second is the integration test, that is, has the worker become part and parcel of the organisation? The third is the test of mutuality of obligation, that is, is there a mutual obligation between the parties to provide and accept the work offered? The fourth test is the test of economic reality. This test in my view probably incorporates all of the above to establish whether the worker is in business on his or her own account.

They are very similar criteria to the scope unit's.

Ms Joan Gordon

They are the same. There is a high degree of judgment in these cases. The courts have seen in these cases, inevitably, there will be elements of contract of and contract for services. Sometimes it can be finely balanced and there is a high degree of judgment to be made in determining whether it is contract of or a contract for services. The same criteria-----

There is such a degree of change in the decisions. There is quite a high degree in terms of successful appeals in this area. That is why I am surprised that it is exactly the same criteria.

I do not wish to ask for the individual sector but we have looked at two areas and Ms Gordon mentioned one of them. I refer to aviation and the courier industry. They are two areas in which there has been a sectoral concern. Have there been determinations of persons being found to be employees through both the scope process and the appeals process in each of those industries?

Ms Joan Gordon

I have not seen any cases in the courier sector. I do not necessarily see all of the cases as we get 20,000 appeals registered each year, but I am not aware of any in recent years. I hazard a guess that there are not any decisions in that sector. There is one case ongoing in the aviation sector but it is not finalised.

This is my final question. It is on the role of the courts. Does Ms Gordon see a key role for the courts? One of the proposals that was put to the committee is that there may, potentially, be a better role for the courts. What does Ms Gordon think of that as an alternative route?

Ms Joan Gordon

The courts have been highly complimentary of the appeals process and have said routinely that decision-makers both in the Department and in the appeals office are probably the experts in this area and they have been reluctant to disturb the findings of fact of either decision makers. There are routes within the current legislation where a person can appeal on a point of law to the High Court. There is provision under section 306 whereby I can refer a question to the High Court but I have not found that to be necessary to use. Above any other area, both deciding officers and appeals officers are so much guided by precedents that have come from the courts. There is probably no other area in the social welfare code that has such an abundance of case law surrounding it, so it is probably not necessary to refer to the courts. I would probably expect that the court would send a case back to me, as it has sometimes done, and say the case should be resubmitted to an appeals officer to make the decision.

My last question is to Mr. Duggan. Reference was made to the fear among persons who may be bogus self-employed. What steps is the Department taking to address the issue of fear in the sector and the identified concern of the scope section?

Mr Duggan already addressed the issue.

Fear is the specific issue.

Mr. Tim Duggan

First, I mentioned in my opening statement how we are endeavouring to develop new legislation to provide for people to take cases to the WRC, where they feel they are being victimised. We intend to progress that. There are some small difficulties with it, as the Senator highlighted earlier, but we are seeking to address them. That is definitively on the roadmap to progress that early in the new year. We hope that will be immensely helpful for anyone who is in fear of making a request for a determination to the scope section.

We have also done some communications exercises in the past and we intend to repeat those. We will specifically be highlighting that particular aspect and trying to give people assurance that they will be protected through these new legislative measures that we intend to bring in. We hope the combination of the two of those will help people to feel more assured that they will be protected in the event that they seek a determination.

Before we conclude, does any of our witnesses want to make any final remarks or comments? No, they are happy enough. As an observation, I noticed that the original presentation to this committee was in November of last year. It is interesting that the presentation today has moved forward more positively. The Department has increased the staff of the scope section. It has established a new unit and is talking about introducing legislation to protect people who take cases to the Workplace Relations Commission and so on. It is a different presentation to the one we received a year ago and there have been positive steps forward. It would be remiss of the committee not to acknowledge that. There are issues which we have heard raised today but, in my view, very clear steps have been taken to improve this and to address a problem the Department sometimes was reluctant to address or of which it perhaps did not see the scale. I know we might disagree on that but I acknowledge that the Department has taken positive steps. I thank our witnesses, Ms Dowling, Mr. Duggan, Ms Gordon and Mr. Duff for their presentation and for the direct and forthright manner in which they answered questions.

The joint committee adjourned at 12.41 p.m. sine die.