Many marketing services agencies, and indeed many brand owners, use the services of freelancers, but are they unwittingly creating an employer/employee relationship?
Recently, the courts have returned to a frequentlye returned to a frequently contentious subject: just who, or what, is an employee?
Many marketing services companies benefit from the varied and eclectic skills brought to them by freelancers. These are individuals who posses a particular set of skills which are in demand at the time they approach the agency. Commonly, an agency sees an opportunity and hires the freelancer. The freelancer continues to account for his or her own tax and is not put on the agency's payroll. Neither the agency nor the freelancer (at least not at this stage), regards the relationship as one of "employment" in legal terms. Pause to consider the reality. That freelancer probably works exclusively for the agency. He or she contributes his or her skills but uses the agency's premises; carries all the work out personally; does not bear much financial risk if she does not perform properly; must work according to rules and regulations set down by the agency.
Doesn't this look like (horrors) an employment relationship? The courts, in a couple of recent decisions, have reiterated that one of the key issues in determining whether a relationship is that of employment or not is control. This is key: the fact that a "freelancer" invoices the agency for his or her services and accounts for his or her own tax does not lead to the automatic conclusion that he or she is not an employee. Why does this matter? It's a question of legal rights. Employees have certain statutory rights. For instance, they have the right not to be unfairly dismissed. Additionally, they may have the right to maternity rights, to parental leave, to statutory redundancy payments, statutory sick pay, and to a statutory redundancy payment.
This could spell trouble for agencies. For instance, a freelancer who has worked for the agency for a couple of years announces that she is pregnant, and demands her maternity rights. Refusing an employee (if she is one) those rights will result in a potentially very damaging claim for sex discrimination, at the very least.
However, a further point must be taken into account before anybody is tempted to review their arrangements with freelancers with a view to excluding them from acquiring any rights. Many employment rights are contingent upon an individual being classified as a "worker" rather than an "employee". A "worker" tends mean anyone providing a service and tends to exclude only those who are in business upon their own account and where the other party is their client or customer. Many freelancers, in fact, will be "workers" for the purposes of the relevant legislation.
"Workers" have rights under a whole range of employment legislation such as the Working Time Regulations 1998, rights to the national minimum wage and so on. All "workers" benefit from protection from discrimination on grounds of race, sex or disability.
In summary, it is possible that, depending on how their working arrangements are structured, many freelancers engaged by marketing service agencies could in fact claim to be "employees" and so additional rights. It may be time to start thinking about it.
