Irish Supreme Court rules pizza delivery drivers are employees for tax purposes: What's the takeaway for the gig economy in Europe?

In October 2023, Ireland's Supreme Court handed down its judgment in the case of The Revenue Commissioners v Karshan Midlands t/a Domino's Pizza.¹ Following the CJEU ruling Yodel, and that of the UK Supreme Court in Uber v Aslam, this decision is yet another addition to the debate around the employment status of gig workers that European courts have been grappling with, in common and civil law jurisdictions alike. In Karshan, the Irish Supreme Court (hereafter: IESC) ruled that Domino's pizza delivery drivers should indeed be treated as employees for the purposes of taxation. Importantly, however, the ruling was delivered based on a different set of facts than some of the other gig economy cases heard in Europe – notably, in Karshan there was no digital platform and, therefore, the link between the delivery drivers and Domino's was more pronounced than in cases involving a platform. The scope of comparison to Yodel is, thus, limited. Furthermore, the judgment is narrow in its scope and, disappointingly, appears to deliberately leave many questions unanswered, failing to seize the opportunity to provide more clarity for gig workers and employers alike. This is typical of the current state of affairs in employment law, which - while aware that traditional approaches are inadequate to the evolving world of work, has not yet come up with a comprehensive way of addressing these challenges. Despite these shortcomings, Karhsan offers some valuable insights into the discussion on the gig economy as the EU institutions are working to adopt the much-anticipated Platform Workers Directive.²

The IESC's judgment in Karshan originated from a tax dispute between a Domino's Pizza operator and the Irish Revenue Commissioners. Back in 2014, it was assessed that Karshan owed the Revenue over EUR 200,000 in PAYE (personal income tax, which in Ireland is deducted by employers on behalf of employees) and PRSI (pay-related social insurance). Karshan contended that its delivery drivers were engaged as independent contractors under contracts for services, but the Commissioner argued that this was a misclassification of their employment status. The Revenue's assessment was upheld by the Tax Appeals Commission and the High Court,³ but was later overturned by the Court of Appeal.⁴

Karshan had signed overarching contracts with its delivery drivers, which were described by the Revenue Commissioner as ‘umbrella contracts’. They were open-ended agreements of indefinite duration, whereby Karshan subcontracted the delivery of pizzas and brand promotion. They could, however, be terminated by Karshan without notice. The contracts had provided explicitly that the drivers were to be independent contractors and, therefore, no income tax or social insurance contributions would be deducted or paid by Karshan on their behalf. The drivers’ remuneration consisted of two elements: 1) a performance-based commission depending on the number of successful deliveries, and 2) a flat-rate payment for what was described in the contract as ‘brand promotion’. Of interest is also clause 12 of the overarching contract, which allowed for substitution should a driver ‘be unavailable at short notice’, provided that the substitute was accepted by Karshan.⁵ In fact, if a driver was unavailable to complete a previously scheduled shift, they were required to find a substitute.⁶ Finally, another feature of the drivers’ arrangement with Karshan was that they used to fill out an availability sheet in order to be rostered for work.

The overarching contract, coupled with the way it was operated in practice, constituted the grounds of Karshan's contention that the relationship with its drivers was not one based on the common law concept of ‘mutuality of obligations’. This was understood by the defendant as a necessary and defining requirement (sine qua non) of an employment contract.⁷ While the Revenue concurred with that argument, it estimated that by agreeing to be rostered for specific shifts, Domino's drivers had in fact entered a relationship that entailed a certain level of mutuality of obligations.

Elaborated eloquently over no less than 191 pages by Mr. Justice Brian Murray, the IESC judgment begins by carefully scrutinising the relevant common law case law, including on the contested concept of ‘mutuality of obligations’, to conclude that Karshan has misinterpreted it. The judgment then argues that the existence of an ongoing reciprocal commitment between the parties, while relevant in the overall assessment, is not a sine qua non test for distinguishing a contract for service from a contract of service. Instead, Murray J. proposes a staged approach to determining the existence or otherwise of an employment relationship, yet only in the limited context of the employer's taxation and pay-related social security obligations. The judgment concludes that in the circumstances at issue, Domino's Pizza delivery drivers should indeed be treated as employees.

The IESC judgment may offer some interesting insights into the ongoing debate around the regulation of non-standard work in Europe, including platform work. Murray J. convincingly argues that the obligation for the employer to provide work is not the essence of the employment relationship. Indeed, this requirement appears to be a misconception and thus, the fact that platform workers’ services may not always be required should not be an obstacle to them claiming employee status – and the same should apply to zero-hour contracts. Conversely, what undoubtedly constitutes a defining feature of the employment relationship is the employee's obligation to be available for work and to accept work when required. Thus, the possibility to turn down work or provide substitution may indeed stand in the way for those in the gig economy who wish to be classified as employees.

This article has argued that the IESC in Karshan and the CJEU in Yodel are, really, on the same page when it comes to drawing the line between employment and self-employment; and the apparent differences in the outcomes are due to the different facts in each of the cases. Even though the IESC judgment is not a platform work case as such, it does address the difference between employment and self-employment which lies at the heart of the platform work debate. Consequently, it has raised several important questions for this debate, such as the difference between the ‘holistic’ and the ‘threshold’ approaches to determining the employment status. Unfortunately, the IESC did not seize the opportunity to answer those questions with sufficient clarity and precision.

As for the workers, if they are to be classified as employees for tax and pay-related social security purposes on one hand, yet do not have any employment rights on the other hand, the inevitable question that follows is: what is their employment status? Ireland is, of course, one of many jurisdictions where courts have been grappling with this issue, and in some of them the answer has been to invent an intermediate category of ‘workers’, separate from both ‘employees’ and the ‘self-employed’. Notably, this was the solution proposed in the UK in the aforementioned Uber v Aslam case. While the IESC in Karshan does not endorse this solution, it effectively enables it by saying that the same working arrangements may be treated differently for different purposes. However, the danger of following this path is that it will likely lead to a great deal of uncertainty for employers without necessarily addressing the workers’ precarity.

The author is grateful to Professor David Mangan for his insightful comments, and to the anonymous reviewers for their inspiring feedback.