Unite, the UK’s largest union, has secure the final victory in a long running legal dispute which has created a legal precedent concerning the use of ‘sham contracts’ by payroll companies, umbrella companies and employment agencies. 

Last month (May 2018) pipe fitter Russ Blakely received a settlement £2,500 for unfair deductions and holiday from employment agency On-Site Recruitment Solutions Ltd. 

The case began in January 2016 when Mr Blakely applied for work at Broadmoor Hospital in Berkshire. The main contractor was Keir and the mechanical contractor was Fascel. However Mr Blakely was recruited via On-Site. 

Payroll/Umbrella scam 

On-Site then informed him that in order to be paid he needed to contact payroll/umbrella company, Heritage Solutions City Limited. He was charged £18 (management deductions) a week to be paid in this manner. He also had employer’s national insurance contributions deducted from his pay. 

When in March 2016 he was asked to ‘sign a contract of services’ he was informed he was neither an employee nor a worker but was self-employed. This meant that he was not entitled to even basic employment rights including holiday pay. Mr Blakely refused to sign the contract and when he took holiday in May 2016 he was not asked to return. 

With the support of Unite Legal Services he took an employment tribunal case for unfair deduction of wages (for the management fee and employer’s national insurance) and also claimed for unpaid holiday pay. The case was initially heard at the Reading employment tribunal which, wrongly ruled against Mr Blakely in the mistaken belief he was self-employed. 

Unite Strategic Cases Unit 

With the support of Unite’s Strategic Cases Unit, the case was appealed to the Employment Appeals Tribunal (EAT), which heard the case in December 2017. 

The EAT found in favour of Mr Blakely and made several decisions which create legal precedents and will be used in future employment tribunals. These Include: 
•    Mr Blakely was a worker 
•    When deciding whether there was a contract (part of the test of whether someone is a worker) an employment tribunal has to consider the intentions of the worker and not just the employer 
•    There was a contract between Mr Blakely and On-Site. The use of an umbrella/payroll company did not avoid this relationship. 
•    Mr Blakely and other agency workers paid via a payroll/umbrella company could be a worker of the agency, the payroll company or both. The possibility of being a worker for more than one body potentially dramatically reduces the amount of payroll/umbrella company rip offs. 

The case was referred back to the employment tribunal to decide on the level of Mr Blakely’s award but On Site settled in full shortly before the case was heard. Heritage Solutions took no part in the employment tribunal hearing, as the company has ceased trading and is facing being struck off as a registered company. Any award against Heritage would have been a pyrrhic victory 

Final victory 

Unite assistant general secretary Howard Beckett said: “Following a two year battle Mr Blakely has finally received the compensation he deserved. 

“While the sums are not large the principles established at the EAT will be vital in fighting the scourge of umbrella and payroll companies in construction and other sectors. 

“Unite will now be ensuring that the decisions contained within this case will be applied to other similar cases and the rip offs inherent in the employment agency, umbrella company/ payroll company model are tackled and stamped out. 

“This case absolutely underlines why workers need to be a member of a trade union. A worker without free legal support would have been totally denied employment justice in such a complicated case.” 

The case was also historic for Unite as it was first taken by Unite’s Strategic Cases Unit. 


Notes to editors: 

Unite in ground breaking legal victory 

For more information please contact Unite communications officer Barckley Sumner on 020 3371 2067 or 07802 329235. 

Email: barckley.sumner@unitetheunion.org 

Twitter: @unitetheunion Facebook: unitetheunion1 Web: unitetheunion.org 

Unite is Britain and Ireland’s largest trade union with over 1.4 million members working across all sectors of the economy. The general secretary is Len McCluskey.