Regulated Professions - Employment Status?

Date: 26/10/11

An Employment Tribunal recently held that an Independent Financial Advisor (IFA) who was purportedly self employed, was in fact an employee of the business we provided services to.  In the Tribunal’s view, a major factor which indicated employee status was the need for the individual to comply with Financial Services Authority (FSA) requirements and obligations which contributed to a sufficient element of “control” by the employer over the Claimant’s work.

Facts of the Case

The Respondent Company was engaged primarily in the business of independent financial advice and is subject to strict compliance with the rules and directions of the FSA. 

The Claimant entered into an agreement with the Respondent on 23 December 2003, the nature of which was in issue in this case.  The preamble recited that the Respondent wished to engage the Claimant as a sales consultant.  In addition, the agreement stated that “the Consultant [the Claimant] be self employed and not an employee or officer”.  Furthermore, the Claimant was to sign a compliance undertaking which, amongst other things, stated that the Claimant was responsible for ensuring that all life assurance, pensions, annuity, unit trusts, investments and related or similar business generated by him was placed through the member with the Company.  There was also a non solicitation clause for the period of one year. 

In November 2004, the Claimant was authorised by the FSA to act as an independent financial advisor.  He remained in that position until the contract was terminated by the Respondent on 15 March 2011 when he was informed that “your self employment with NJB Partnership has ceased”.  During the period that the Claimant was working for the Respondent as an IFA, he received periodic training either through the Respondent or on the Respondent’s behalf by the principal. 

The Judge in this case noted that the Claimant appeared to have had a level of discretion to decide what policies were provided to the clients, and whether this would be on a fee or commission basis.  The Judge also noted that the Claimant had discretion as to the hours he worked.  He was paid by way of commission, and arranged his own tax and national insurance obligations as an independent contractor.  The Claimant was provided with stationary and cards which describes the Claimant as an Independent Financial Advisor with the Respondent’s logo and address together with details of the principal.  It was acknowledged that this card indicated to the Claimant for the purposes of the outside world was fully representing the Respondent.   Consultants such as the Claimant did not receive holiday pay, sick pay or Christmas bonuses in contrast with the Respondent administrative staff in the office who received such benefits and who were on PAYE tax status.


It is now well established law that when one is considering employment status three questions need to be asked:

1. Did the worker undertake to provide his own work and skills in return for remuneration?

2. Was there a sufficient degree of control to enable the worker fairly to be called an employee?

3. Were there any factors inconsistent with the existence of a contract of employment?

On the question of control in this case, the key factors were that:

1. The agreement between the Claimant and the Respondent required the Claimant to comply with directions and instructions of the Respondent and to promote the interests of the Respondent.

2. The Claimant was prevented from doing any other work in any capacity without first obtaining the consent of the principal.

3. He was obliged to comply with any of the Respondent’s requirements in respect of training and supervision.

The Judge came to the conclusion that the fact that the Claimant was controlled as a result of higher obligations imposed by the FSA, did not detract from the fact that he was controlled by the Respondent.  The fact that he could exercise discretion as to how he undertook his work and the nature of remuneration (commission or fee) did not detract from a significant degree of control by the Respondent.

The decision in this case suggests that compliance with FSA standards means the “control” aspect of employment status is more likely to be satisfied.  Consequently, a similar reasoning could be implied in other highly regulated sectors, where there is a need to comply with health and safety regulations, for example. 

Practical Points

As we have know for some time simply stating in the agreement that the worker is self employed does not necessarily mean that an Employment Tribunal will agree when scrutinising the true substance of the agreement, the intention of both of the parties together with reflecting upon the true nature of the relationship.

If it is apparent that the agreement is more in keeping with employment rather than a self employed independent contractor under a contract for services, the Employment Tribunal will not hesitate to come to this conclusion.   This is only a decision of an Employment Tribunal, therefore not binding, but it will be interesting to see whether Judges choose to take into account the level of control exercised by a professional body over an individual when determining his/her status.

For further information, please contact Emma Harvey on 0151 907 3020 or email

DWF go further

Your industry

Services for insurers

Services for businesses

Services for individuals

News & events