Commissioners for Her Majesty’s Revenue and Customs v Thorn Baker Ltd (IDS 836)
Although the law says that statutory sick pay (SSP) is only payable to employees, agency workers are included in that definition.
However, the Court of Appeal has said in Commissioners for Her Majesty’s Revenue and Customs v Thorn Baker Ltd (IDS 836), that they have to be employed on contracts of more than three months to get SSP.
Relevant law
Section 151(1) of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) states that employers are required to pay SSP to their employees (including agency workers). However, paragraph 2 (b) of Schedule 11 states that if the employee's contract of service is for less than three months, then they are not entitled to it.
Although this restriction was repealed by the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations, agency workers were specifically excluded by regulation 19. This states that "These Regulations shall not have effect in relation to employment under a fixed-term contract where the employee is an agency worker.”
Basic facts
Mr Paradise was taken on by Thorn Baker as an agency worker under terms and conditions set out in an “Agency Workers’ Agreement”. He then fell ill and claimed sick pay from Thorn Baker. The agency refused to pay it saying that, although it deducted Class 1 national insurance from him, it was not obliged to pay him SSP because his contract was for less than three months.
The general tax commissioners agreed and the authority responsible for enforcing liability to make statutory sick payments, the Commissioners for Her Majesty's Revenue and Customs (HMRC), appealed against that decision. The High Court judge accepted the agency’s argument that Schedule 11 fell within the scope of regulation 19, which meant that Mr Paradise was not entitled to SSP.
New arguments
The Revenue appealed again, this time arguing that the exclusion of agency workers in regulation 19 was limited by the words: "in relation to employment under a fixed-term contract".
As a result, Schedule 11 did not relate to employment under a fixed-term contract at all. On the contrary, it just repealed part of SSCBA 1992, which meant that workers who had previously been excluded from SSP because of their short term contracts now had an entitlement.
As an alternative, the Revenue also argued that even if paragraph 2 (b) of schedule 11 did fall within regulation 19, it only applied to cases where the agency worker was employed under a fixed-term contract of employment, and not a general contract for services (like Mr Paradise).
Decision of Court of Appeal
The Court concluded that however ingenious the Revenue’s arguments, they were fallacious.
It pointed out that agency workers were only entitled to SSP because they were deemed to be employees under section 151(1) of SSCBA. The repeal of paragraph 2 (b) of Schedule 11 did not alter that fact.
It was important to bear that statutory assumption in mind, the Court of Appeal said, because it then “becomes plain that Regulation [schedule]11 is within the scope of Regulation 19”, despite the fact that it contains the words "in relation to employment under a fixed-term contract".
Schedule 11 did therefore “have effect in relation to employment under a fixed-term contract, because, for the purposes of statutory sick pay, agency workers are employed under fixed-term contracts.” Otherwise there would be no basis for the very “statutory assumption” on which the agency worker’s entitlement to statutory sick pay depended.
It also rejected the Revenue’s second argument, saying that it was irrelevant whether the agency worker had a contract of employment or a contract for services with the agency or the end user.