Ryanair loses self-employment tribunal appeal

The Employment Appeal Tribunal (EAT) has dismissed Ryanair and employment agency Storm Global Limited’s appeals relating to an employment status decision of one of Ryanair’s former pilots, signifying wider implications for the airline industry in terms of the rights of self-employed pilots and agency workers.

Former Ryanair FO Jason Lutz, supported by the British Airline Pilots Association (BALPA), brought a test case against Ryanair and Storm Global (formerly MCG Aviation Limited), asserting that his ‘self employed’ status was a sham and that he was entitled to the same employment terms as pilots directly hired by Ryanair.

In the original tribunal ruling, which has now been upheld by the EAT, it was deemed that Mr Lutz was in fact a worker of MCG and an agency worker for Ryanair, rather than a self-employed contractor as the parties had intended. As an engaged worker, Mr Lutz had accrued certain employment rights including holiday pay.

In August 2017, Mr Lutz applied for a FO position with Ryanair. Having passed a preliminary assessment in September 2017, Mr Lutz’s was then contacted by MCG Aviation Limited (now Storm Global Limited) to be informed that he had passed the assessment and that he was to be offered a place as a contracted pilot, subject to completing a 737 type rating course which he was required to pay for.

A subsequent email from MCG sent in October 2017 informed Mr Lutz that he needed to set up an Irish limited company as part of his contract with Ryanair. He was given the names of three accountancy firms who could do this for him and who would then manage things.

He was told to pick one of the three and he picked ContractingPlus Ltd which set Mr Lutz up with a limited company, Sudeley Ltd, and arranged for him to sign an agreement with MCG, described as ‘the Contractor’, and Mr Lutz as ‘the Company Representative’.

The Employment Judge (EJ) overseeing the tribunal summarised: “Accordingly, Mr Lutz having applied to Ryanair and been told that he was successful, was told that he was to be engaged through another company, MCG… and that he would have to set up an Irish limited company (which had doubtless never occurred to him to do), through an Irish adviser picked for him by MCG, when he had no connection with Ireland… He was told that he was to be processed through MCG, which is an English company based in Watford (to whose offices Mr Lutz had never been).”

The EJ added: “There is no action taken by Mr Lutz that was not directed by Ryanair and all were non negotiable. He wanted to be employed by Ryanair. That was what he had applied for. Throughout his time as a contracted pilot with Ryanair he pressed Ryanair to become an employed pilot.”

In the event, Mr Lutz did not end up working for Ryanair under the agreement arranged by ContractingPlus.

Instead in February 2018 ContractingPlus informed Mr Lutz that they were in a formal collaboration with accountancy firm Scanlons who subsequently informed Mr Lutz that they had “installed” him into a new Dublin based company called Dishford Port Limited.

The EJ found that Mr Lutz did not know that this was happening and had received no prior instruction, or had given any; that he was not a director, shareholder or employee of Dishford at the time and he never became one; that the agreement was signed on behalf of Dishford by someone he had never heard of; and “far from being a self employed businessman running his own company, he was being moved from pillar to post as Ryanair dictated.”

Having been installed in the new company, Mr Lutz was then obliged to sign a document headed ‘Terms and Conditions of Contract for Services as a Co-pilot’, essentially duplicating the same terms as is earlier ContractingPlus agreement, with Mr Lutz offered no input into its contents.

The new contract defined MCG as being the ‘Contractor’, Dishford the ‘Service Company’, and Mr Lutz as the ‘Company Representative’. The contract stated that the Service Company was engaged as an independent consultant by the Contractor to provide the services of the Company Representative on the terms and conditions set out in the contract. The EJ observed that this was “not an accurate assessment of the situation”.

The five-year fixed term contract between Dishford and MCG required Mr Lutz “or an agreed acceptable and qualified nominated substitute” to work exclusively for Ryanair, with Mr Lutz receiving no holiday pay under this structure.

The crucial element that the tribunal needed to establish was the status of Mr Lutz’ employment. It was held that as both a worker and an agency worker, Mr Lutz was entitled to certain rights such as fair working conditions, a limitation of maximum working hours, annual leave and pension contributions.

The tribunal held that Mr Lutz was a worker engaged by MCG and an agency worker placed by MCG with Ryanair. He was not self employed, nor an employee of Ryanair as there was no contract of employment between them.

The tribunal held that in order to be an agency worker, the work provided by the worker must be temporary. The five-year fixed term contract between the service company and MCG was not indefinite and was therefore temporary, the tribunal concluded.

Furthermore, the tribunal held that Mr Lutz had a contract with MCG to provide his services personally and not via the service company. One important factor towards the personal service test was that Mr Lutz’ ability to swap shifts was not a genuine substitution but merely a rearrangement of the day and time when his personal service was required. There was, in fact, no unconditional right of substitution.

The tribunal ruled that any documents purported to show that Mr Lutz was self-employed, and Ryanair was a customer of his personal services, were “a sham”. Mr Lutz was expected to wear the Ryanair uniform, could not negotiate his pay, and was unable, in practice, to determine his working hours.

Ultimately, Mr Lutz had a contract with MCG to provide his services personally to Ryanair and was subject to Ryanair’s framework of control. “Mr Lutz was not in business in his own account and Ryanair and MCG [Storm Global] were not his clients; that there was a complete imbalance of power and Mr Lutz was not able to alter anything about the arrangements; that the service company he was required to use was a fiction; that the substitution clause in the written agreement was a sham; and that the dominant purpose of the arrangement was for Mr Lutz to provide personal service as pilot to Ryanair,” the EJ concluded.

Commenting on the appeal rejection, BALPA representatives Farrer & Co said: “The Employment Appeal Tribunal has robustly rejected Ryanair’s and Storm Global’s (formerly MCG’s) grounds of appeal in full. The decision to uphold the Employment Tribunal’s findings has immense implications for the use of the pilot contractor model in the aviation sector, and leaves the way open for other potential claims by pilots engaged under similar arrangements.”

Interim General Secretary and Head of Legal Services at BALPA, Miranda Rackley, added: “Once again the courts have ruled in our favour and that’s not only good news for Jason Lutz, but also for all the other similarly purported ‘self-employed’ pilots in the aviation sector.

“We urge Ryanair and Storm Global to take note of the ruling and to focus on working with BALPA to set out clearer, more secure forms of employment for their pilots.”

Image accredited to Ryanair.

Author: FTN Editor

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