A legal judgment that could seriously dent housebuilders’ profits

When is a contractor not a contractor? © Getty

published 4 March 2020

In all the excitement of the possible pandemic and the central bank reaction to it, all sorts of less extraordinary looking stories are being ignored. One that might end up being quite a big deal is a recent (first) judgment in the case of Harris and Kearny v Excel Brickworks Ltd.

The point of the case is to establish the exact employment status of two men who once worked for the construction company. One was a foreman and one a bricklayer. The former had worked for the company for 17 years and the latter for less than a year. Both had signed a contract called a Self Employed Contract for Services and both were dismissed without notice.

But were they really, as the contract suggested, subcontractors who were able to do all the things subcontractors can technically do (take on what work they like, refuse what work they don’t like, work the hours they wish, work in whatever method they wish, leave the site without permission and send substitutes to do the work) or were they in fact not able to any of those things – and hence really employees?

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The judge felt it was the latter. The contract may have existed but it did not, he felt, reflect the actual obligations of the workers.

This is only a first instance judgment (details here). But it does have obvious implications for the two men – not only should they not have been let go as they were but they should have had the rights of employees (holiday pay etc) while employed – as well as for the construction industry as a whole.

At the moment around 50% of the nation’s construction workers are classified as self-employed (although, weirdly, they are taxed at source under the tax-evasion prevention Construction Industry Scheme). Think of the hit construction company – and, say, housebuilder margins might take if it turned out many of them were actually all employees entitled to sick pay, holiday pay and pension contributions?

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.