Attorney-at-law Mark-Paul Cowan, an associate of one of the Caribbean’s largest and oldest law firms, is warning employers to get their houses in order, arguing that the determination of whether a person is an “employee”, or “independent contractor” could attract ‘significant and unforeseen legal consequences’ as seen in the recent Supreme Court decision involving the National Housing Trust (NHT) and Marksman Limited.

In that decision handed down on Friday, September 23, the court ruled that effective then, third-party security guards employed to Marksman Security Limited are employees and not independent contractors and that the company should immediately begin paying over their three per cent NHT statutory contribution.

Speaking with the Jamaica Observer in a recent interview Cowan, an associate at Nunes, Scholefield, DeLeon & Co, said, “Employers need to look closely at the issue as it is something that can come back to bite you many years down the road.”

“What employers need to be mindful of is that you can’t just slap a label on somebody, and the law is going to just honour that label. The law is going to look at the substance of the relationship so you as an employer have to be mindful of what is the exact relationship,” Cowan pointed out.

He said while the “label of independent contractor” might help entities avoid certain statutory liabilities, “when the court looks at it maybe five, 10 years down the line it [could very well say] no, you guys are really in an employment relationship”.

“An employee [servant] performs work for his employer [master] pursuant to a contract of employment or a contract of service. An independent contractor is a self-employed person who carries out work for customers under a ‘contract for services’ — he embarks on an ‘adventure in the nature of trade’ for his own account,” Cowan explained, noting that a contract of employment is defined by the existence of three essential ingredients.

“This person comes in every single day, is subject to your direction, wears your company uniforms, is a part of the fabric of your organisation. He is an employee. He is not somebody pursuing an adventure for his own profit. So that is the point. You can’t get around certain legal obligations by slapping on a label, you have to really look at the substance of the relationship,” the attorney pointed out.

“You have to be mindful of the substance, it’s substance over form and that’s really the essence that I take away from the ruling. They [the courts] are going behind what the contract says, the contract will say you are an independent contractor, but the court doesn’t stop there. Just because you designate them as such that’s not where the inquiry finishes. The court wants to know the entire circumstances to be able to determine which side you fall on,” Cowan noted.

He said already a number of individuals and companies outside of the security industry have been approaching the firm anxious to assess their own standings since the September ruling.

“A lot of people are taking a look at it, and they are deciding how they are going to treat it as in whether there should be some collective bargaining, if they should do it through unions. It’s not just security guards. Outside of the security industry, I know of certain journalists and reporters who are also re-evaluating their relationships with their employers because they have been termed freelancers or contractors,” Cowan told the Observer.

He said some employers have also stepped forward since the ruling wanting “to find out if what they have been doing is right, they want to look at what is their legal exposure”.

According to the attorney, “there is merit in taking a second look at the relationship to determine if they are independent contractors or if they are really employees and should be getting the proper employee benefits”.

“So it’s not just the security industry alone, there are other persons that have ongoing relationships, there is no end date per se so it’s an ongoing contractual relationship and it’s really more akin to the employer-employee relationship even though they are saying you are an independent contractor, you sort out your deductions, you sort out your insurance and we just give you a fixed salary or pay you on commission,” Cowan said.

The Income Tax Act saddles employers with the responsibility to calculate and deduct the appropriate tax amount from their employees’ taxable emoluments whereas an independent contractor is responsible for the payment of his own taxes.