Autoclenz Limited v Belcher and others 2011 UKSC41

The Supreme Court in this case upheld the Court of Appeal’s decision that car valeters whose contracts stated that they were self-employed were actually employees.  This was notwithstanding that HMRC had determined the valeters to be self-employed for tax purposes.  When determining an individual’s employment status tribunals may disregard terms included in a written agreement where those terms do not reflect the genuine agreement of the parties.  The focus of a tribunal’s enquiry should be on the legal obligations of the parties. 

20 car valeters had contracts that stated they were subcontractors.  Their contracts contained several indicators of self-employed status, including a clause permitting a substitute to carry out their work and a clause indicating that they were not obliged to provide their services.  The work was carried out for a British Car Auctions whose overalls they wore although Autoclenz provided all their cleaning products, equipment and insurance cover.   

In November 2007 the valeters presented claims to a tribunal that they were entitled to the National Minimum Wage and holiday pay.  An employment judge held that they were employees or alternative workers as they were required to turn up for work each day and to notify Autoclenz in advance if they were unable to work.  The Employment Appeal Tribunal held that the valeters were not employees but they were workers.  Autoclenz appealed against this decision and the Court of Appeal reinstated the tribunal’s decisions finding that when determining an individual’s status the tribunal should look at the actual legal obligations of the parties and that they were employees.   

Autoclenz appealed to the Supreme Court who unanimously dismissed their appeal and upheld the decision of the Court of Appeal.  The valeters were employees employed under contracts of employment and thus entitled to receive the National Minimum Wage and statutory paid annual leave as well as workers. The tribunal had been entitled to find that their documents did not reflect the true agreement between the parties, having examined all the relevant evidence, the written terms, how the parties conducted themselves in practice and what their expectations were.   

Key point for employers:  At the outset of a working relationship the parties should agree what works best for both.  As employees are so much better protected than the self-employed there will always be a risk of a challenge to employment status when the parties fall out.