Lifting the veil – WRC willing to look behind a corporate structure to determine a contractor is in fact an employee

On 14 February 2025, the Workplace Relations Commission (WRC) issued a significant decision in Paul Lingard v Randridge International Ltd (In Examinership) concerning the employment status of a construction / civil works manager and his entitlement to unpaid wages under the Payment of Wages Act, 1991 (the Act). The case centred on whether Mr Lingard was an employee or an independent contractor even though the documented contractual relationship was between Mr Lingard’s private limited company, PSL (Aberdeen) Ltd (PSL) and Randridge (the Contract). The case comes against the backdrop of recent media reports detailing the approximately €4m that RTE has paid to the Revenue Commissioners and the Department of Social Protection in respect of worker misclassification – highlighting that employee misclassification is very much a “hot topic” and can give rise to material financial exposure and potential reputational harm.  

What happened in Paul Lingard v Randridge International Ltd (In Examinership)?

The working relationship between the parties commenced in July 2020 and concluded in April 2024. Mr Lingard accepted that when the Contract was entered into, his company had simply been retained to provide his services as an independent contractor. However, he claimed the relationship morphed over time and at the time the contract terminated in April 2024, he had become an employee of Randridge. 

What did Randridge argue?

Randridge maintained Mr Lingard could not be one of its employees for the purposes of the Act – as there is a legal distinction between a contract of service (i.e. an employment contract) and a contract for service (i.e. a contract with an independent contractor). Randridge submitted that there was a commercial relationship between two companies under the Contract; and that Mr Lingard simply owned and operated PSL. In support of this contention Randridge pointed to clause 17 of the Contract which stated “The Sub Contractor as an independent limited Sub Contractor is not entitled to rights under employment law”.

What did Mr Lingard argue?

Interestingly, Mr Lingard confirmed he accepted on entering the Contract that he was not an employee and admitted he was familiar with the contractor / sub-contractor business model and confirmed he had operated via such a model for a considerable period of time.

However, he submitted that other than for the fact Randridge did not deduct tax on payments made indirectly to him at source, his relationship with Randridge was identical to that of a directly employed employee.

What did the WRC decide?

The WRC had regard to the Supreme Court’s judgment in Revenue Commissioners v Karshan Midlands (Ltd t/a Domino’s Pizza [2023] IESC 24 (read our briefing here). That judgment set out five factors to be considered whenever employment status falls to be determined, with the WRC commenting that the Supreme Court “basically decided that the key question” is factor four. The five factors are:

1. Does the contract involve the exchange of wage or other remuneration for work?
2. If so, is the agreement one pursuant to which the worker is agreeing to provide their services personally, or can they be delegated to someone else?
3. If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?
4. If these three requirements are met, the decision maker must then determine whether the terms of the contract between the business and the worker, interpreted in the light of the factual matrix, and having regard to the working arrangements between the parties, are consistent with a contract of employment, or with some other form of contract.
5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration which needs to be taken into account.

The Supreme Court noted that the description given to the parties’ status in an agreement does not prevent a court from determining, as a matter of law, what the status actually is.

Taking the first three factors in turn in Mr Lingard’s case, the WRC found:

1. the exchange of remuneration for work was in place, albeit between two commercial entities;
2. while substitution was permitted under certain circumstances in the contract with PSL, it was a limited right and one that was never utilised; and
3. day-to-day “micro” control was not possible over the work performed by Mr Lingard – but on “reading the contract closely the degree of control over the complainant was quite explicit” (examples provided included contractual provisions in respect of deadlines, the necessity for clocking in/out, and the potential need for medical certification in cases of absence). There was also a restriction on Mr Lingard’s ability to take on other work during and after the Contract terminated.

All of the above led the WRC to find that “the relationship on a day-to-day basis, the “Working Relationship” as referenced by the Supreme Court was on, the balance of all probabilities, that of Employee to Employer – A Contract Of Service”. The WRC went on to decide that the sum due by Randridge to PSL totalling €8,500 at the time of termination should be considered wages under the Act and ordered Randridge to discharge this sum to Mr Lingard personally.

What does this mean for your business?

This decision is a further example of a recent trend of the WRC making clear that, in certain circumstances, there is scope to look behind the corporate veil to determine the “true” relationship between the parties – either as a preliminary issue when considering a claim or as the substantive issue (as in this case).

Recent examples of the WRC’s willingness to look behind the corporate veil include a series of anonymised claims brought by one individual against a Hotel Resort. In those claims (brought under various pieces of legislation alleging various breaches of statutory employment rights) the WRC found as a preliminary point in each case that the complainant was in fact an employee – and specifically highlighted that although the respondent in its defence placed a great deal of reliance on the fact that all payments were paid through a third-party company controlled by the complainant, that did not, in and of itself, defeat the complainant’s claim of employment status.[1]  

These recent WRC decisions firmly underscore that the substance of the relationship is what matters whenever a contractor claims employment rights before the WRC. They also put to bed the suggestion that simply engaging an individual via a limited company is a risk-free way of retaining an individual to provide personal services.

Other guidance

In November 2024, a revised Code of Practice was published by the Department of Social Protection, Revenue and the WRC[2]. It was revised to take account of the five-step framework set out by the Supreme Court in Karshan. Interestingly, it provides that where a contract for services is agreed between the end-user and an intermediate company owned/directed by the worker, the relationship will nonetheless be subject to the five-step framework and a decision maker or adjudicator may determine that the end-user is in fact the employer. The caveat to this general guidance is that, of course, each case is determined on its own facts.

Conclusion

It is becoming increasingly clear that the WRC and the Courts are becoming more and more willing to carry out a “factual” or “reality on the ground” analysis which can include a lifting of the corporate veil to consider the true nature of the relationship between the parties. In fact, it is clear the authorities will now also consider the evolution of the relationship between parties – even where it was intended to be, and documented as, an independent contractor relationship at the outset.

It is particularly important for businesses to bear in mind, as pointed out in the Code of Practice, that in some cases a level of dependency can develop between a worker and the end-user over a period of time, so that an engagement that commenced as a contract for service (self-employment) may evolve into an effective contract of service (employment).

This is a fact which should be at the forefront of the minds of those who procure services and those who provide them, in order to avoid an employer-employee relationship (and all that entails) inadvertently coming into existence.

For further information in relation to this topic, please contact Michael Doyle, Partner, Triona Sugrue, Senior Knowledge Consultant, Oisin O’Callaghan, Associate, or any member of the ALG Employment team.