The People Bulletin

Following the decision by the Court of Appeal in October 2009[1] the UK Supreme Court have now ruled on the case of Autoclenz Ltd v Belcher.

Background

The case was initiated by Mr Belcher and his colleagues after Autoclenz introduced revised terms of contracts which set out to clarify that they were sub-contractors and not employees. This meant that they did not have to carry out the work personally and there was also no obligation for Autoclenz to provide work nor for the valeters to accept it. They paid their own tax and National Insurance. However, despite these changes Mr Belcher and a number of his colleagues believed they were actually employees and therefore entitled to:

• the right not to be unfairly dismissed; 
• holiday pay; 
• national minimum wage; 
• maternity pay; and 
• redundancy pay.

In October 2009, the Court of Appeal judged that the car valeters were employees, as there was enough mutuality of obligation and control retained by the cleaning company to give the valets employee status – despite what the revised contract had said.

As a result of the judgement in 2009 it became far more difficult for employers to assume contractors are ‘self employed’ and avoid conferring employment rights on them. 

The Supreme Court

On appeal the Supreme Court unanimously held that Mr Belcher and his colleagues were employees engaged under contracts of employment and this was not affected by the clauses which stated that they were self-employed. Giving the judgement, Lord Clarke emphasised that a contract of employment was a specific kind of contract, not to be treated the same as commercial contracts because there may be an element of inequality of bargaining power.

Tim Wragg, senior associate at international law firm Eversheds said:

 “Legal status in an employment law context is important, not least since it is only employees who benefit from the majority of employment law protection, such as unfair dismissal rights or rights to redundancy pay.

“Identifying employment status is not always straightforward. Confusingly also, the tax status the individual is given is not conclusive. Historically, some employers have placed great emphasis on the written terms of the contract as this has been thought to be a particularly strong indicator of employment status since the courts have been reluctant to look behind these terms unless there is evidence of a sham.

 “Organisations relying on flexible working through use of self-employed individuals or workers will need to be extremely careful from now on to ensure that any contractual terms entered in to reflect the reality of the working relationship. Failure to do so could well result in the contractual terms being ignored and a finding of worker status or employment status.”[2]

[1] ‘Reality of car valet relationship with cleaning company washes out self-employment status claim’ in The People Bulletin, 22 October 2009

[2] www.eversheds.com