Having “theatrical comedic potential” and “farcical consequences” are not labels employers strive to attach to their employment arrangements. Yet this is how the EAT described the concept of dual employment in a judgment in 2019. The EAT has returned to this issue a number of times recently. In this article we unravel the principles that have emerged from these cases and also look at how this concept has been applied in other legal contexts.

What is “dual employment”?

The current economic climate has seen many people take on additional jobs to boost their income, but the concept of dual employment is quite different. This describes the situation when someone is employed simultaneously by two different legal entities in respect of the same duties. Similar challenges could arise if the individual is engaged as a worker.

Although common in the US, the general principle in this country is understood to be that a “servant cannot have two masters”. However, a closer look at the case law suggests that to understand this as a blanket ban would be an overstatement: in certain situations the courts have been willing to recognise dual employment when it’s required or justified on the facts.

The fact that dual employment has been asserted by claimants in a number of recent cases has left employers eager to ensure they stay on the right side of this complex area of law and that there is certainty and clarity over employment arrangements when different entities are working closely together. In the context of a collaboration, a Claimant seeking to enforce their rights may, for reasons of practicality, solvency or jurisdiction, wish to pursue one entity over another. Employers will therefore be keen to minimise this kind of unexpected exposure.

What do recent cases tell us?

The problematic concept of dual employment was considered by the EAT in the case of United Taxis v Comolly. In this case a taxi driver provided services for a licensed taxi operator (United Taxis) through one of its shareholders, Mr Tidman. Mr Tidman paid Mr Comolly, but there was no written agreement in place and the relationship was described as one of self-employment.

At first instance, the employment tribunal made a finding of dual employment, concluding that Mr Comolly was both an employee of the shareholder and a worker of United Taxis for the same work at the same time. However, the EAT overturned this decision with a more orthodox finding that Mr Comolly was only a worker of Mr Tidman.

In reaching this decision, the EAT cast doubt on whether dual employment could be a legitimate arrangement, finding that it had not been referred to any authority that held that dual employment in respect of the same work is legally possible. On this basis, it found that it was not necessary to imply a worker relationship between Mr Comolly and United Taxis at all.

So far, so clear. However, this was very much a decision on its own facts. As we go on to explore, it would be oversimplifying this to say dual employment is never possible.

When might dual employment be possible?

In Comolly, the EAT identified different scenarios when dual employment might be possible:

• Two compatible jobs at the same time with different employers
• Employment by a consortium of several employers acting jointly
• Secondment arrangement.

Whilst the concept of secondment – when an employee is lent to another organisation but remains employed by their original employer – is a familiar one, the EAT’s comments left questions unanswered. It did not expand on what “compatible jobs” might be, or, more importantly, what will amount to a “consortium of employers acting jointly”. It's unclear from this judgment (and the decision from which this language originated) whether “acting as a consortium” is simply referring to formal arrangements in which someone is employed by two parties acting jointly (such as a traditional partnership, or unincorporated association), or whether it could extend to more informal collaborations.

A wider look at case law and also legislation does point to the theoretical possibility of dual employment when this arrangement is a reflection of the parties’ intentions. For example, although not justified on the particular facts, the EAT recognised the possibility of a contract of employment moving from one to multiple employers in a TUPE transfer situation. And in a breach of contract claim brought against a solicitor who had been jointly employed by two partners, the court’s decision turned on the facts that this arrangement was possible.

There is also an example in the prominent recent employment tribunal decision of Forstater (which we wrote about here) of a finding of joint employment. In this case the claimant worked as a researcher for two legal entities: CGD Europe and CGD. The tribunal found that both respondents acted as one and that “the general presumption that an employee cannot have more than one employer in respect of the same….can be displaced”. In this case the claimant was in fact engaged as a worker by both entities (relying on the broader concept of employment under the Equality Act 2010). Joint employment was found to reflect the reality of the situation – for example, the decision not to renew the Claimant’s contract was a decision taken by an individual acting as President of one entity and Chair of the other, with liability for discrimination thereby attaching to both entities. This structure was followed right through to the remedy decision, with both CGD and CGD Europe found jointly and severally liable for discrimination.

The potential for multiple employers also seems to be acknowledged in legislation: wording of the Employment Rights Act 1996 envisages the possibility of more than one employer in the use of the plural “a change in partners…who employ a person” (s. 218(5)). But again, the boundaries of this are unclear.

Making intentions plain

What is important to remember about the Comolly case, and other recent cases in which dual employment has been asserted, is that the court was being asked to imply a second contract. As courts are naturally reluctant to take such an interventionist approach, implying this kind of contractual arrangement would need it to be a business necessity, requiring a particularly convincing set of facts.

What appears to be untested is the situation in which two employers that are not already operating as a business entity together have asserted this model. Intentionally entering into this arrangement, with the ability to anticipate the potential confusion and duplication that might arise, could overcome many of the ‘farcical consequences’ the EAT feared. Where this would sit with the scenarios envisaged by the EAT in Comolly is unclear.

Joint employment and VAT

In our experience, joint employment arrangements tend to be more common in particular sectors (such as healthcare and property) where a primary driver is VAT. Subject to some limited exceptions, generally, where a business supplies staff to another business, the supplying company must charge VAT on the full amount of the consideration – this includes any fee payable by the recipient as well as any staff costs recovered from the recipient such as salary and benefits, pension contributions and PAYE and national insurance contributions.

In contrast, if individuals are jointly employed, there is no supply of staff (and therefore no VAT charge) between the joint employers. Accordingly joint employment arrangements are marketed as a way of saving VAT where the business cannot fully recover the VAT.

However, a joint employment should not be implemented without careful consideration - HMRC regularly challenge such arrangements as a sham, exposing the business to the risk of VAT arrears, interest and penalties. It is essential that there are valid commercial reasons for the arrangement and that these reasons are documented. In addition, the documentation must make it clear that the employee has joint employers (e.g., both employers must be mentioned on the employment contract and payslips) and that management and supervision of the employee (on issues such as pay, hours, holidays, sickness, appraisals, disciplinary matters etc.) is evenly shared between the joint employers. It is also essential to be able to demonstrate that management and supervision is actually shared between the joint employers in practice. In addition to facing an HMRC challenge, as we explore below, joint employment arrangements also create issues from an employment perspective.

Why do employers need to be cautious of this arrangement?

In Comolly, the EAT found that dual contracts performing the same work at the same time are “problematic” due to the fact that statutory protections such as those contained in the Employment Rights Act are drafted with only one employer in mind (although as we have flagged, this is arguably an oversimplification).

This would have a knock-on effect for how the employee is managed on a day to day basis. For example, if there are two employers, then which is responsible for the grievance procedure or disciplinary processes? Which employer would take the decision to dismiss the employee? And what would happen if the employers disagreed with each other’s approach?

Issues could arise if it is unclear which employer is responsible for instructing the employee day to day and what the employee is supposed to do in the event of a conflict. Then there are also practical considerations to consider such as which employer will pay the salary, holiday and pension contributions; and which employers’ benefits will the employee receive? What if each employing entity actually has a different offering in this regard – whose will prevail?

There are plenty of other administrative challenges too, even before the employment relationship has properly begun – such as which would-be employer runs the interview process, obtains the reference, carries out the right to work checks etc.

Although many of the actual employment eventualities could be addressed in the relevant written employment agreement, and also in an agreement between the joint employers, there would still be uncertainty about which entity would be liable for potential claims arising from employment. Indemnities between the joint employers may be needed to apportion cost.

There could also be legal confusion around comparators for discrimination and equal pay claims. Could a person employed only by company A, serve as a suitable comparator for a claim brought by a person jointly employed by company A and B? Would it be generally fair for a jointly employed person to receive a greater salary, say one calculated as an average of the offering of company A and company B, when a singularly employed employee works alongside that person (perhaps even doing work for the benefit of the group) and is paid less? Clearly there are significant areas open to challenge.

What alternative arrangements could be put in place?

Understanding there to be a blanket ban on dual employment seems to be an overstatement; whilst there may be a presumption against it, there seem to be scenarios where this structure might be considered justified on the facts. And as explained above, in certain sectors, this structure can bring about significant practical benefits.

However, there are various alternatives which may provide greater certainty if employers are looking to engage an employee or worker on a collaborative basis:

• Secondment: A secondment is when an employee is leant to another organisation/role but remains employed by the seconding employer. Agreements between the host and entity seconding the individual enable the day to day management responsibility for the secondee to be effectively managed.
• New legal entity: If two entities are collaborating, a new legal entity (such as a shared service company) could be created to employ the employers working for the enterprise.
• Restructuring: If the need for dual employment has arisen due to a merger or acquisition, is a restructure needed to pull the role into a different team or group company?
• Agency arrangements: agency workers are contracted out to an end-service user but remain employed by the agency. Although triangular situations, the courts have been reluctant to find joint employment in this context.

If you’d like further information on this complex area of law, feel free to contact us or your usual Lewis Silkin contact.

United Taxis Ltd v (1) Mr R. Comolly (2) Mr R. Tidman: [2023] EAT 93 – judgment available here.