Thursday, 30 May 2019

Questions (5)

Willie Penrose


5. Deputy Willie Penrose asked the Minister for Employment Affairs and Social Protection the status of her plans to quantify and measure incidences of, and trends in, bogus self-employment; her plans to table new legislation to address the issue; if the proposed new legislation will be published in advance of the Dáil's summer recess; if her Department and other Departments and State agencies plan to bring forward specific proposals to address the problem of bogus self-employment in the construction sector; and if she will make a statement on the matter. [22920/19]

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Oral answers (6 contributions) (Question to Employment)

Does the Minister agree with the Labour Party's view that, in order to deal with bogus self-employment, robust penalties in law are required in respect of bad employers who force workers into disguised self-employment arrangements when they are, to all intents and purposes, employed? This dodgy practice deprives workers of their rights and their appropriate social welfare payments and cheats the State out of tens of millions of euro in lost PRSI and income tax revenue each year, meaning less money for social welfare payments and our hospitals and schools.

Disguised employment, commonly known as bogus self-employment, occurs when businesses deliberately misclassify workers as being self-employed when they are de facto employees of the business concerned.  This is done largely to avoid payment of the employer portion of social insurance contributions and to limit the accrual of employment rights.

I share the Deputy's concerns that any attempts by employers to misclassify workers, no matter the number of employers concerned, must be properly policed and appropriate sanctions enforced.

There are already strong legislative provisions within the Social Welfare Consolidation Act 2005 prohibiting the practice of misclassifying employment.

Deliberate misclassification of employment status is a criminal offence subject to fines and-or imprisonment on conviction. Given the concerns expressed, I now wish to bring renewed focus to the enforcement of these provisions. Therefore, I am reallocating resources in my Department to increase the level of inspections. However, I do not intend that inspections should be limited to any sector. We would be missing the point if we did that. While the construction sector will feature, no market sector will fall outside the potential for inspection and enforced compliance.

Based on experience from inspections already completed and recognising that there is a particular challenge when dealing with large companies or companies with complex legal structures, I have also tasked the Department with establishing a focused team to tackle these complex cases and provide themselves with expert training to ensure that, in the context of the hidden cases, no wool is pulled over anyone's eyes. The first members of this team are being assigned to their new roles as we speak. I will recruit additional members later this year.

In addition to more rigorous policing of the existing law, I intend to introduce a number of new legislative measures to strengthen the requisite powers further. These measures include putting the newly revised guidance on determining employment status on a statutory footing and introducing measures to address the potential victimisation of workers who seek a determination on their employment status.

Additional information not given on the floor of the House

These latter provisions will likely mirror similar provisions I brought into law earlier this year via the Employment (Miscellaneous Provisions) Act 2018. I also intend to introduce provisions to apply interest charges to employer PRSI payments in cases where payments were underdeclared as a consequence of the incorrect classification of workers. Subject to legal advice on these matters, I intend to progress them through an appropriate legislative vehicle in the coming months. While the drafting of this legislation is complex, its timely introduction to the Oireachtas remains a priority.

The misclassification of workers as self-employed is an issue that has exercised those of us in the Labour Party and the wider trade union movement for a considerable period. It costs the State hundreds of millions of euro in lost PRSI revenue and workers are deprived of key rights and benefits, in particular the full range of social welfare benefits and employment rights under Irish and European law. It is rampant in the construction sector. Last autumn, the general secretary of Connect Trade Union, Mr. Paddy Kavanagh, said that research indicated that the State was losing millions of euro. He wanted the Government to stamp out this practice, which was also resulting in workers being deprived of key rights and safeguards.

The Minister is correct, in that this practice is also found in the media, IT, pharma and many other sectors. While we welcome the Minister's establishment of a stand-alone team to investigate bogus self-employment, will the legislation apply penalties? We want tax avoidance laws to clamp down on this practice, as proposed by our Seanad Bill in the name of Senator Nash. There is no good reason for an employer who deliberately misclassifies the status of an employee not to be considered a tax and PRSI cheat and have the same penalties applied to him or her as would be applied to other tax avoiders. That is the way to stamp this out.

The legislation on the victimisation of workers is important. In recent months, I have been approached directly by a number of people who were genuinely afraid that even if they won their cases, they would have no choice but to leave their organisations because they would be treated so badly. That is not acceptable and that culture needs to be stamped out. We will do that in law. Similar provisions that we introduced this year through the Employment (Miscellaneous Provisions) Act are working nicely and should be used to reflect this matter also.

The two issues that the Deputy has sought to have resolved do not fall within my remit, but under that of the Minister for Finance. I am sure he would be delighted to hear the Deputy concerning them. What I can do, however, is introduce legislation to address the issue of employers who misclassify deliberately. We must define what "deliberately" means as opposed to "unknowingly", "unwittingly" and all of those good legal terms that can be used to get one off the hook. Where payments are underdeclared, the case will not just be as it is, where those payments must be repaid starting from the date the worker started working with the company. Rather, we will introduce significant fines. I hope they will deter people from such actions.

The 2007 code of practice contained new criteria to help determine whether a worker was an employee or a self-employed contractor. Obviously, the code is inadequate now. That initiative has not served those workers well. This is why Senator Nash's Bill adopted an holistic approach. Surely the approach taken to address the issue should be across government, with the Department of Finance taking the opportunity to ensure the penalties imposed are proportionate to the offence, that being, forcing people into an area of work where they are deprived of significant benefits and rights. In whatever the Minister introduces, there should be a whole-of-government approach. That is why our Bill adopted an holistic approach to the determination and classification of employment status and would have put in law a clear set of rules that applied to all State bodies and were enforceable in courts and administrative tribunals. This is an opportunity for a whole-of government approach to rid us once and for all of this blight, which has bedevilled a number of industries and is spreading to others. I compliment the Minister on taking an objective view and forcing this issue onto the agenda.

That is exactly what we are doing. Since the Deputy might not be aware of it, I am not trying to be smart when I say we actually are taking a whole-of-government approach. The code of practice is being reviewed by an interdepartmental group comprising the Workplace Relations Commission, the Department of Finance, Revenue and my Department. We are also having conversations with ICTU and IBEC within the confines of the Labour Employer Economic Forum, LEEF. The code of practice will need to be renewed, given that the legislation was probably weak in some areas and, more importantly, in the light of the case law from cases that people have taken in the past few years. The new code of practice will have been devised and determined by all of the experts I referenced and, I believe, will be placed on a statutory footing later this year. I hope it will have an impact.