The Supreme Court has handed down its long-awaited judgment in the case of Autoclenz Limited v Belcher, which explores when a court or tribunal will look beyond express written contractual terms to determine an individual's employment status.
Autoclenz concerned car valeters who were engaged under written contracts which explicitly stated that the valeters were self-employed contractors. The contracts went to significant effort to provide that the valeters were not obliged to accept offers of work, were entitled to send a substitute in their place, and were responsible for accounting for income tax.
A group of the valeters brought employment tribunal proceedings asserting a right to receive the national minimum wage and holiday pay under the Working Time Regulations. In order to qualify for either entitlement, an individual must satisfy the definition of "worker", which means being either an employee - a person who works under a contract of employment - or someone who otherwise works under another contract whereby the individual undertakes to do personally any work or services other than in the context of a customer/business relationship, i.e. not the genuinely self-employed.
It has long been established that, in order to be an employee working under a contract of employment, certain conditions must be met. These are that (i) The individual must provide his own, personal service, (ii) The employer must have a sufficient degree of control over the individual to create a 'master' and 'servant' relationship, and (iii) there must be an irreducible minimum of obligation on each side - an obligation on the employer to provide work and an obligation on the individual to do the work provided.
On the face of it, the written contractual terms between Autoclenz and the valeters clearly ruled out any employer/employee relationship.
However, at the original employment tribunal hearing and upon subsequent appeal before the Court of Appeal, it was held that, despite the stark written contractual terms to the contrary, the valeters were in fact employees and thus entitled to receive the minimum wage and holiday pay (and, it follows, to benefit from other employee-status statutory rights such as the right not to be unfairly dismissed).
On appeal before the Supreme Court, the same conclusion was reached. The Supreme Court, endorsing the decision of the Court of Appeal before it, confirmed definitively that tribunals and courts are entitled to examine the reality of a situation and determine the true relationship between the parties. The tribunals and courts are not to be constrained to consider only the written terms. In Autoclenz, it had been found that, in reality, the written terms purporting to give the valeters the right to refuse work and to provide substitutes rather than attend personally were unrealistic possibilities which had not truly been in the parties' contemplation. It was likewise found that the valeters were subject to Autoclenz's control.
Those clients who had followed the Autoclenz case at the Court of Appeal will not be surprised that the Supreme Court came to the same view. The case highlights the fact that, whilst written terms of contract are important and relevant to the overall factual matrix in assessing employment status, the courts will be willing to delve further into the reality of a situation to determine an individual’s true employment status. Clients who engage self-employed contractors may wish to review how their engagements actually work in practice and consider the risk of employment status being asserted successfully, and what changes to the relationship might help reduce that risk.