Editorial | Contract worker ruling demands urgent dialogue
While its immediate effect may be on the future of the private security industry, Justice David Batts’ ruling last week that guards employed to Marksman Limited were its direct servant, rather than independent contractors, is likely to have implications across the economy, given the increasing use of the arrangement, especially by firms seeking to lower costs and achieve greater labour market flexibility.
Marksman could well appeal the judgment. Nonetheless, the development is an important labour market issue requiring urgent action, and perhaps legislative clarity. Which means that it should be of utmost priority for Labour Minister Karl Samuda to engage labour unions, civil society groups and the political Opposition, which, especially under its former leader, Peter Phillips, often railed against a system that it felt was unfairly used against workers. In this regard, the administration has to be wary of knee-jerk calls by the security industry for the Government to arbitrarily extend the work week by 50 per cent, to 60 hours.
Justice Batts’ ruling had to do with a claim by the National Housing Trust (NHT) against Marksman, a leading security company, for nearly J$478 million in contributions, which the NHT said the company failed to make on behalf of 3,000 employees for the years 2000 to 2016. The NHT also requested penalties and interest.
Under the NHT law, employers have to pay three per cent of their wage bills to the Trust, while employees pay two per cent – for a total ‘contribution’ of five per cent. However, since the mid-1980s, with the tacit approval of the finance ministry, the security industry, Marksman included, treated its guards as independent contractors, and therefore responsible for their own statutory payments. Generally, the companies did not pay the employer’s contributions to the Trust, although, in Marksman’s case, starting in 1999, it deducted and remitted to the NHT three per cent of the wages of its guards – the rate of contribution for self-employed workers.
NEVER ATTEMPTED TO ENFORCE
While the NHT sporadically questioned that approach at meetings, and in correspondence between itself and security companies and their association, it never attempted to enforce its claim until its 2016 legal action against Marksman.
Aside from the question of the guards’ employment status, Marksman argued that the claim was statute-barred on the basis that the six- and seven-year limitations of the Tax Collection and Income Tax acts should apply to the NHT. However, Justice Batts rejected that argument, saying, “Although bearing a name which suggests it is voluntary, the payment of the employer’s ‘contribution’ is mandatory. Where a contributor is non-compliant, the NHT has power to prosecute and/or seek recovery in accordance with the Act. In this regard I agree with the NHT that, notwithstanding its mandatory nature, the contributions are not taxes. Therefore, the Tax Collections Act and the Income Tax Act are not applicable.”
Nonetheless, the judge rejected the Housing Trust’s demand for the money, insisting that by doing nothing for so long, the NHT essentially forfeited its right to seek retroactive compliance. Said Justice Batts, “I agree with Marksman that the NHT acquiesced in their treatment of the security guards as independent contractors, not by the conduct of the then minister of finance, but by the conduct of the NHT itself. In the period 2000-2016, the NHT accepted, without demur, payments of three per cent of gross emoluments from Marksman concerning its security guards ... . Moreover, I agree with Marksman that the NHT slept on its rights from the mid-1980s and failed, until the claim was filed in 2017, to take action to recover employer’s contributions.
“I find it would be unjust to give the NHT a remedy, since its consistent conduct over 30 years may be considered as a waiver of its entitlement to employer’s contribution and/or a representation to Marksman that the guards could safely be treated as independent contractors. The NHT would have placed Marksman in an impossible, egregious, unjust, unfair, and unreasonable position by bringing a claim for $477,980,257.77, plus interest, surcharge and penalties after all that time.”
MAKE NHT CONTRIBUTIONS
Critically, though, the judge found, based on the terms of their contracts, that Marksman’s guards were its employees, for whom it will now have to make NHT contributions.
On this basis, the judge argued that while the declaration of what a contract is may be a starting point of an assessment, the full test in this circumstance is what was achieved. Added Justice Batts, “On these findings, I conclude that the security guards are not in business on their own; they work for Marksman and are a part of its organisation. Marksman has the right to exercise direct control over the work done by the security guards.
“The security guards have nothing to gain from efficiently providing services and only receive the fees stipulated for the service performed. Just as in Market Investigation Ltd (a cited case) the security guards engaged by Marksman do not provide their own tools for work or risk their own capital. They are not in business on their own account. On the facts of this case, the security guards are employed by Marksman under contracts of service.”
This will resonate across the economy. However, the security industry’s call for special dispensation and for the expansion of the work week by 50 per cent, to 60 hours, to prevent what its bosses claim to be a possible collapse, cannot be a responsible response by the Government, without much more. Serious discussion, therefore, is necessary and urgent.