What worker status might mean for you
The essence of an associate agreement has remained largely the same for a long time. But things change. Following a recent decision of the Employment Appeal Tribunal, we are advising practice owners and associates to review their contracts to make sure they are fit for purpose.
We reported on this Employment Appeal Tribunal decision before. We have been assessing the implications of this case and have taken advice from a senior employment law barrister. The case involves something that employment lawyers refer to as “worker status”. Worker status is something in between being an employee with full employment rights and being completely self-employed with no rights. Importantly, it is still a form of self-employment.
The important distinction is that workers provide their own work in return for payment. In considering whether an associate is a worker, it is helpful to assess whether the associates must carry out the dental treatment themselves, or whether they can ask a locum to do the work for them. Associates who are not free to find a locum are more likely to be workers. The tribunals may also consider whether worker status is needed to protect vulnerable associate dentists. An associate who has been able to negotiate their associate agreement, who has been treated well at the practice, and who has had the freedom to be expected of a self-employed professional is less likely to be a worker.
If it is established that you are a worker, but not an employee, you are still self-employed for tax purposes. Workers have some employment rights, the two most relevant are protection from unlawful discrimination and paid holiday.
This recent legal case suggests it may be more likely that some associate dentists would be considered workers. Much will depend on the individual circumstances of the relationship between practice owner and associate. Many associates will quite rightly still be regarded as traditionally self-employed.
Change more likely in England and Wales
We believe the situation is different in England and Wales to that in Scotland and Northern Ireland when it comes to NHS dentistry. In England and Wales, the practice holds the NHS contract. The practice then pays the associate to do work under that contract.
In Scotland and Northern Ireland, the associates hold their own contract with the NHS. The associate does work for the health service, not for the practice. Whilst the practice might act as a conduit for the money, that money still comes from the health service.
At present, we believe the changes from this appeal tribunal case are less likely to be relevant to practices providing NHS care in Scotland and Northern Ireland.
The choice you're facing
We have been working on updating our model associate agreements. We will have two versions available for members:
1. An updated version of our current traditional self-employed associate agreement for those who want to retain full independence
2. A new associate agreement where the associate will be a worker.
This will give associates and practices a choice of contracts to accurately reflect how they work together. Associates who retain full independence, flexibility, and control over how they work, should use the updated associate agreement.
Where most of the work an associate does is for the practice, the worker associate contract may be more appropriate.
"Whichever option you choose, it is important that the way you work in reality reflects the contract signed."
It is always for the two parties to negotiate on pay levels, but one option here is for the associate to receive a little less pay, and for the practice to compensate for that by giving the associate paid holiday. Practices and associates can negotiate any change in pay, but that approach would leave the associate with the same amount of money once the holiday pay has been added to the reduced pay percentage.
We are currently finishing drafting our new contracts. We are also working on advice for members which will be ready in November 2022. This will help give you enough information to choose the correct contract for you and make sure you know how to operate the contract in practice. Whichever option you choose, it is important that the way you work in reality reflects the contract signed.
Practice owners may be reluctant to consider these choices but having an associate on the wrong contract could bring increased risk of future litigation.
What about private practices?
In relation to private treatment, another factor will be whether the associate is working for the patients, or whether the associate is working for the practice.
If patients understand that any agreements they have for treatment are with the associate and not the practice, then a tribunal is likely to consider that associate is working for the patient, and they are not a worker. The traditional form of self-employment would therefore be appropriate.
However, if the patient believes they are being treated by the practice and that they are paying the practice, rather than the associate, for the work, then it is more likely that the associate will be considered to be doing work for the practice and is therefore a worker.
Private practices which prefer to have their own brand may wish to engage associates on a worker contract. Whereas private practices which are happy to be more of a facilities provider may prefer to engage associates on the traditional model.
Can limited companies protect self-employment status?
Some professionals may advise you that an associate is less likely to be a worker if a practice engaged an associate through a limited company. Many associates operate under limited companies, especially in relation to private work. However, working through limited companies may not always prevent an associate being a worker.
Working through a limited company would preclude access to NHS benefits such as the NHS pension scheme and NHS parental leave and sickness payments. In some cases, a tribunal could look behind the limited company arrangement to imply a direct contract between the parties.
Can associates claim for paid holiday?
This case raises an interesting question about paid holiday. If associates are workers, should practices be paying holiday pay to associates now and, if they aren't, can associates bring claims for paid holiday they haven't been paid up to now? Can they use such claims to retrospectively change the commercial balance of the associateship?
Each case depends on its own facts. Our current associate agreements have clauses that make such claims less likely to succeed. It will also depend on the nature of the relationship between the practice owner and the associate.
No doubt some associates will bring claims. Some of them may succeed. Those associates will have a small cash windfall paid for by the practice but clearly there are always risks and costs involved in bringing any litigation. By and large, associates and owners have entered knowingly into a relationship based on an understanding of the law and pay arrangements at the time. There are potential unintended consequences in retrospectively seeking to challenge an agreement, not least the impact on ongoing relationships.
We would encourage associates and practice owners to look forward rather than back, working collaboratively to agree contractual arrangements fit for the future and which allow both parties to profit fairly from the relationship.
Worker status and self-employed status for tax purposes
Associates engaged on our model associate agreements have significant control over how they work and risk. They have control over their hours of work, how much they charge private patients, and – of course – they have full clinical freedom. Associates face commercial risks arising from that control. For example, they may have to compensate practice owners if they fail to meet UDA targets and the practice owner can pass to the associate the full cost of any discount for private treatment. Following the advice we had from Jolyon Maugham KC, we don't believe that associates engaged on our worker associate contracts, and who follow the terms of that agreement, will need to worry about whether they are still self-employed for tax purposes.
Both our model associate agreements will continue to provide associates with commercial freedoms, responsibilities and risks that are part and parcel of the self-employed status associate and practice owners value.