There was much excitement, really, amongst employment lawyers following the Employment Appeal Tribunal (EAT) decision in Autoclenz. At that level the case provided a ray of hope for respondents faced with self employed contractors claiming that they are in fact employees. Essentially, at EAT level, far more weight was put on the express wording of the contractual arrangements and it was held that an intention by both parties to mislead and to create a sham contract was necessary in order to look beyond the express terms of the contract. The Court of Appeal, however, sought to quell the excitement by over-ruling the EAT and we now have the Supreme Court decision which, in upholding the Court of Appeal, has quashed that excitement completely.
Disputes over employment status are not uncommon and, until recently, it was widely accepted that the employment tribunal could look behind the label that the parties have given the relationship in order to ascertain its true nature. The three most important factors that a tribunal will consider in order to determine whether someone is an employee are: control; mutuality of obligation; and a requirement to provide personal service.
The Autoclenz case involved car valeters whose contracts expressly described them as being self employed. The contracts contained a substitution clause, to the effect that the valeters could engage someone else to do the work for them if they wished, and a clause stating that there was no obligation on Autoclenz to provide them with work and no obligation on them to accept any work that was offered to them. This clause sought to dispel the notion that there was mutuality of obligation, often referred to as the 'irreducible minimum' necessary for employment status.
The Court of Appeal and Supreme Court both thought the EAT was wrong and agreed with the employment tribunal's decision that the valeters were in fact employees. The Supreme Court held that it is not necessary to show a common intention to mislead and that the tribunal is entitled to, and should look at what happens in reality, rather than relying solely on the express contractual terms. Guidance was given to the effect that, in determining employment status, tribunals should try to ascertain what the actual legal obligations of each party are.
Although the result of this case was anticipated, now it has arrived it does little more, disappointingly, for those acting for companies/employers, than reinforce the status quo. The fact that what happens in practice can relatively easily override express contractual provisions in this area of law is problematic for companies/employers who will continue to be faced with costly and uncertain litigation by contractors seeking to prove, usually on termination, that they were in fact employees.