Michael Clifford: A 25-year odyssey to expose bogus self-employment

Martin McMahon, a former courier, tells PAC that the big problem for workers is the way in which employment is interpreted by the State agencies

Bicycle couriers on St Patrick's St, Cork City. Couriers are among workers affected by bogus self-employment. Picture: Larry Cummins

Martin McMahon doesn’t fit the typical profile of a witness to an Oireachtas committee.

Those who normally appear before the politicians are judicious with statements, wary of questions and avoid opinions. Mr McMahon tore up the playbook at the Public Accounts Committee (PAC).

The former courier let fly with facts, court judgments, and his own strident opinions, safe in the knowledge that he was the authority in the Zoom room on the subject of bogus self-employment.

The politicians probed him here and there, but, for the greater part, accepted his expertise. What remains to be seen is whether they will proactively address the glaring wrong he brought to their attention.

Bogus self-employment is one of those subjects that sounds sinister but complicated and, to a certain extent, it is. It involves the classification of workers as self-employed, when to all intents and purposes they are employees. The bogus status means they don’t have the rights of employees. It also allows employers to dodge PRSI contributions.

Mr McMahon estimates that this costs the exchequer at least €1bn annually. A report into bogus self-employment in the construction industry in 2016 found that up to €640m was lost to the exchequer each year by the practice. Other sectors of concern are the aviation industry, media, couriers, and the whole gig economy.

Last November, the National Economic and Social Council pointed out that “investigations into certain sectors suggest that up to 25% of workers in some workplaces could be wrongly classified as self-employed”.

Insidious in the gig economy

The practice is particularly insidious in the gig economy, where part-time workers are exploited, often don’t receive the minimum wage and exist at the grace and favour of employers.

Mr McMahon said: “Who benefits from this? It’s not the State. It’s not the worker. It’s the employer, who can save 30% on labour costs.”

He said that the practice was driving down standards of employment. If your competitor is at it, they are working from a lower cost base of business.

“It’s effectively an illegal tax break. You must do as they do because it gives them a competitive advantage,” he said.

He became interested in the area 25 years ago when was working as a courier and the practice was rife. Now, he is the authority on the subject and was the sole witness at yesterday’s PAC meeting.

So why isn’t it stopped?

Mr McMahon told the committee that the big problem is the way in which employment is interpreted by the State agencies. If you are classified as self-employed and believe you are entitled to employment status, you can apply to be reclassified.

This is decided by a body in the Department of Social Protection called Scope. If either worker or employer is unhappy with the decision, it can be appealed to the Social Welfare Appeals Office (SWAO). Rarely has the SWAO agreed to reclassify a self-employed worker as an employee.

Mr McMahon has examined this in detail.

Following an earlier appearance at an Oireachtas committee, a letter was sent from the SWAO to the committee. It stated: “On occasion over the years, an approach of having test cases has been considered by the Social Welfare Appeals Office.”

In other words, if you’re in a particular line of work, your employment circumstances don’t matter because you will be classified as self-employed based on a test case. While such a set up is very convenient for employers, there is an obvious injustice to workers who want their status regularised.

“It doesn’t matter what case a worker makes to the Scope section [about their working circumstances],” Mr McMahon told the committee. “The policy of the State is to overturn any Scope decision which threatens unlawful test cases, regardless of evidence.”

If he is correct — and the department has yet to answer the specific charge — serious questions arise about how exactly workers are regarded by the State.

There have been a handful of High Court cases over the last 20 years about this matter, including one that went to the Supreme Court. In each one, judges have ruled that the specific circumstances of a worker’s employment determine what status they should have.

For instance, if a courier is working for one employer for set weekly hours, and another provides services to different employers in his own time over the course of a week, their respective circumstances are entirely different.

The former is in all likelihood entitled to employee rights. The latter is obviously self-employed. Yet, according to Mr McMahon, and admitted by the department, both are automatically treated as self-employed.

Such a scenario is entirely beneficial to employers, but deals a serious blow to the rights of a worker.

As such, the decisions made in the departmental decision-making bodies don’t appear to be taking account of the legal principles established in the High Court.

Apart from that, the appeal process is in private, rendering the whole system as lacking transparency.

There is one avenue of recourse — anybody unhappy with the appeal process can trot off to the High Court.

This requires deep pockets, most likely an adventurous legal team on a ‘no foal, no fee’ retainer and nerves of steel. 

Such armoury is unavailable to the vast majority of workers.

Mr McMahon told the committee that the decision-making process needs to be put on a legal footing. This would force those making the decisions to take direct account of the High Court judgments that have been issued, which would render the process some way even-handed.

He also suggested that anybody unhappy with an initial decision should be allowed to appeal to the circuit court, a less onerous avenue that may be available to some who would fear going near the High Court.

At the end of the meeting, the parliamentarians resolved to take this further. For Mr McMahon, it was another step in an odyssey in which he has been banging on doors for years and is only now seeing some of them inch open.

“As a whistleblower, there is no forum for people like me to sit down and tell it like it is,” he told the meeting. “That’s what I’m doing — blowing the whistle on bogus self-employment. This Public Accounts Committee is the only forum available to me.”

He could hardly have done more to highlight the opaque system that works to complicate what should be a straightforward issue. As a result, it will be very difficult for the body politic and State apparatus to keep looking the other way, rather than tackling this injustice.