Courier cries foul as landmark decision is reversed

EXCLUSIVE


A recent case taken by a motorbike courier has raised serious questions about taxation in the courier industry, which could have implications for a range of workers denied their rights because they are treated by their employers as contractors. MICHAEL PIERSE investigates.


Courier Martin McMahon, whose story has been featured previously in An Phoblacht, last year won his case for consideration as an employee rather than as a contractor. The landmark insurability decision made by Scope, a section of the Department of Social Welfare, meant that he could not be sacked on the spot, would be insured against injury by the company he worked for, and would be entitled to all the occupational rights any normal employee would expect.

McMahon now says his solicitors are ``gobsmacked'' by the decision of the Chief Appeals Officer in the Department of Social Welfare to overrule the previous decision and re-classify him as a contractor. He told An Phoblacht he is now hoping for an investigation into the circumstances of the case.

Not a contractor

     
This case has potentially huge implications for the Dublin Exchequer, major companies who benefit from contract work, and a number of affluent contractors
Workers, like McMahon, who are registered by the state as contractors, live in a veritable limbo. They are obliged to comply with the same rules as any normal employee, sometimes more rigorously because of their lack of employment security, but they are not insurable in the same way as normal employees, nor are they unionised.

Contractors are much more susceptible to threats from their employers also, because they can be sacked without recourse to the Labour Court or normal employee rights legislation.

As a courier working for Securicor Omega Express Ltd, McMahon had been categorised for tax and social insurance purposes as a contractor - rather than as an employee. This meant that he was liable to be sacked at any time, was subject entirely to the control of his employers, regardless of labour laws and, in the event of him being unable to work, he would be denied the normal financial supports available to employees who are ill.

For couriers, who can expect to be out of work due to injury at some time or another, the absence of any liability on the part of their employers means that they are left without any income when injured or sick. While Securicor Omega had total control over his livelihood, McMahon says, his job security was akin to that of a tightrope walker with no safety net.

However, all this was set to change, he believed, when he won a landmark case against his employers in September of last year. Scope, the section of the 26-County Social Welfare Department that deals with insurability, found in favour of McMahon's argument that, because he was subject to all the same restrictions that normal employees face, he was entitled also to be treated as a normal employee. Along with some other couriers pursuing legal action for the same recognition, he had some cause to celebrate.

However, Securicor Omega Express sought an appeal, which was eventually heard in April. McMahon turned up with his union representative for the original scheduled appeal date in January to find that the company had brought a full legal team (he had not been informed that this level of representation would be required), necessitating a postponement.


The case

McMahon's case, and that of other couriers who had hoped to follow his lead, is really quite simple. Couriers working for the company, he says, are under the `direct control' of the base controller, ``who directs how, when and where my work is to be carried out''.

They are prohibited from engaging their own helpers. They are not allowed to subcontract their work, and the base controller decides who will carry out their work in the event of their absence. Helpers or sub-contractors are normally engaged at the discretion of a contractor himself/herself.

Owning one's own vehicle has ``nothing to do with being self-employed'', McMahon says. Salespeople and postal workers also use their own vehicles.

The fact that he did not receive a weekly or monthly wage when couriering, does not classify him as a contractor either, he says. Bricklayers, he cites, are often treated the same way - `paid by the brick', or `piece work'.

McMahon, along with many others, was also barred by the company from offering his services to other companies - a condition that no contractor would expect. He had to work from 9am - 6pm, without exception, while his lunch break, the time of which was decided by the base controller, could last no longer than 30 minutes.

In effect, he claims, Securicor are `employing' couriers, without having to give them employee rights. He accuses the Dublin government, or at least their representatives in the Revenue Commissioners and the Department of Social Welfare, of being complicit in this.

McMahon's methodical study of the legal background to his case (he's left countless documents piled on this journalist's desk), left Scope in no doubt as to his status as an employee.

The Scope Deciding Officer, Fintan Farrelly, stated last September that McMahon was, under Section 247 of the Social Welfare Act (1993), an employee of Securicor Omega Express. This would have left the legal floodgates open for hundreds of other couriers, and many other so-called `contractors', who looked on McMahon's case as their `test case'. They would have the choice to take legal action to secure their status as employees. IT professionals and the like, who make a fortune from contract work, stood to be taxed under PAYE regulations by the Revenue. For huge companies like Securicor Omega Express and wealthy individual contractors, the financial implications would be huge.


Securicor fight back

Faced with the possibility of massive financial losses, Securicor Omega Express Ltd stepped up a gear.

Immediately after his receipt of Scope's insurability decision, McMahon claims, his earnings from the company dropped by half. Securicor Omega Express ``exercise such control over what I earn that I can no longer afford to work for them'', he told An Phoblacht at the time. But he also claims that it was not just bad feeling, but outright harassment, that led to his decision to leave. His allegations of incidents of harassment will be the next port of call for his legal team, he says.

Immediately after the Scope decision, Securicor Omega Express decided to appeal. After the initial hearing in January was reconvened three months later, on 23 April, he was fairly confident that his insurability decision was secure, or at least that there would be a settlement outside of court.

After two months of deliberation by the Chief Appeals Officer at the Social Welfare Department, and almost a year after his original legal application last July, McMahon received a one-page statement this month explaining that the Scope decision had been overturned. He and his legal team were shocked.

``There was no elaboration - it was extremely vague,'' McMahon says. ``But that's the way it was designed to be. They were saying `if you want to beat us, you have to pay to beat us'.''


A can of worms

This case has potentially huge implications for the Dublin Exchequer, major companies who benefit from contract work, and a number of affluent contractors.

Some IT professionals make a fortune from the loose taxation laws in Ireland. So much so, that some British professionals have moved over here to avoid the more stringent laws in Britain. The downside of business for IT `contractors', who strike out on their own there, is that the British taxman has already taken a hard line in relation to their tax payments. There have been soundings in the 26 Counties that the Revenue Commissioners may dismiss contractual arrangements, such as those of IT professionals, as tax avoidance smokescreens and rule that contractors should be taxed under PAYE as employees for the companies for which they work.

Securicor Omega Express stands to lose out financially should it be considered as employing, rather than contracting couriers, not only through tax payments, but also in the form of insurance for workers. Motorcycle insurance for couriers is extremely high.

In a letter received by An Phoblacht and written in December last year, Fergus Whelan, Industrial Officer at the Irish Congress of Trade Unions, asked the Secretary of the Hidden Economy Group, John Shine, to make allegations of tax evasion a priority issue on the group's agenda.

Whelan wrote: ``The number and scale of operation of courier firms has expanded enormously in recent years. While it is clear that some of these firms are operating fully within the formal economy, there is growing evidence that this is not the case in relation to many of them. Serious allegations of tax evasion and non-compliance with PRSI have been made to Congress about many firms in this sector.''

Whelan also recommended that both the Revenue Commissioners and the Department of Social Welfare brief the Hidden Economy Group - set up to investigate tax evasion allegations - on their understanding of the operation of the courier sector in the Dublin area.


How did Securicor Omega win the day?

The real question is, however, how Securicor Omega Express have thus far managed to retain the contractor status of their employees and how have they overturned the Scope decision, which seemed so set in stone.

McMahon is suspicious of `networking' between senior civil servants and the business community and believes the Chief Appeals Officer's decision amounts to a secret tax amnesty.

Yet another revelation that has emerged is quite explosive. Though McMahon's case is undoubtedly one of landmark proportions, it is not the test case on which a precedent on the status of couriers was set.

In 1993/'94, apparently in an attempt to resolve the matter of whether couriers were contractors or employees, the Department of Social Welfare selected a number of test cases. Three cases were selected, those of Alan Summers, Vincent Dodd and Gerard Whelan. Martin McMahon alleges that at least two of the three cases were not selected by the Department of Social and Family Affairs alone, but in conjunction with the courier companies.

More significantly than this, however, is the fact that Whelan was registered as a director of Rhode Holdings Limited on 13 December 1993 and Dodd was appointed as a director of the same company on 7 January 1994, raising serious allegations of a conflict of interest, at the very least. How could two directors of a courier firm be deemed fit to represent the average courier employee in a test case? The test case was lost, and a precedent was set.


Where to now?

McMahon is left with very few options. He is going to try to lobby politicians and journalists and is also hoping for an investigation into the issue. He has sent a copy of his case file to the chairman of the Revenue Commission and Dublin Minister for Finance, Charlie McCreevy. His solicitors are compiling a report for the 26-County Department of Social Welfare, petitioning them for support. A senior official with the department of Enterprise Trade and Employement says that his major concern is for the occupational safety of couriers. ``They are certainly vulnerable,'' he says.