In the case of Johnson-Caswell v MJB (Partnership) Ltd an employment tribunal has held that an independent financial advisor (IFA) who was purportedly self-employed was in fact an employee. In the tribunal's view, a key element pointing to employee status was the need to comply with Financial Service Authority (FSA) requirements. The tribunal considered that the training and supervision obligations that this entailed contributed to a sufficient element of 'control' by the employer over the Claimant's work.
MJB Ltd primarily acts as an independent financial advisor and consequently must comply with FSA rules. Rather than being regulated by the FSA directly, MJB Ltd was regulated under a FSA arrangement which permits individuals or small firms working as IFAs to engage 'principals' who ensure compliance with FSA rules. The Claimant worked for MJB Ltd as an IFA under a contract stipulating that he was self-employed and requiring him to comply with the directions, instructions, and training requirements of the principal. When the Claimant was told that his self-employment had ceased in March 2011 he lodged several claims, including unfair dismissal, at an employment tribunal.
At a pre-hearing review the tribunal held that the Claimant was an employee rather than an independent contractor and consequently his claims could proceed to a full hearing. The test from previous case law as to whether an individual is a worker or an employee, requires, among other things, a 'sufficient degree of control to enable the worker to be fairly called an employee'. The tribunal held that MJB Ltd did exercise such control over the Claimant. The fact that he was controlled as a result of higher obligations imposed by the FSA did not detract from MJB Ltd's significant degree of control. Nor did the Claimant’s discretion over how he worked and whether he was remunerated via commission or a fee detract from that fact.
While the tribunal's decision does not set a precedent, it is unlikely to be welcomed by the financial services industry, in so far as it suggests that compliance with FSA standards means the 'control' aspect of employment status is more likely to be satisfied. The same reasoning could be applied in other highly regulated sectors, where there is a need to comply with health and safety regulations, for example.
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