Employers who wish to avoid unintentionally giving contractors employee or worker status must pay attention to day-to-day working arrangements in light of a recent Court of Appeal (CoA) ruling.
The case of Autoclenz v Belcher and others concerned 20 car valeters who were treated as self-employed contractors. They worked for Autoclenz at its premises at Measham, Derbyshire, cleaning vehicles for British Car Auctions.
The valeters brought an employment tribunal claim seeking a declaration that they were workers or employees and were therefore entitled to, among other things, holiday pay. Autoclenz said the valeters were self-employed contractors and were not entitled to any statutory rights.
The Nottingham Employment Tribunal held that the claimants were employees. The judge said that if he were wrong about that, they were certainly workers. Autoclenz appealed to the Employment Appeal Tribunal (EAT), which allowed the appeal against the holding that the claimants were employees but held that they were workers.
Autoclenz appealed against the ruling that the claimants were workers, and the claimants cross-appealed, contending that they were employees and that the tribunal was right in the first place. The CoA recently dismissed the Autoclenz appeal and has allowed the cross-appeal by Belcher et al to go ahead.
Lord Justice Sedley, sitting at the CoA, said: “The contracts began by spelling out that each worker was required to ‘perform the services which he agrees to carry out for Autoclenz with a reasonable time and in a good and workmanlike manner’ – an obligation entirely consistent with employment. Notwithstanding the repeated interpolation of the word “sub-contractor” and the introduction of terms inconsistent with employment which, as the judge found, were unreal, there was ample evidence on which the tribunal judge could find, as he did, that this was in truth an employment relationship.
“Employment judges have a good knowledge of the world of work and a sense, derived from experience, of what is real and what is window-dressing. The conclusion that Autoclenz’s valeters were employees in all but name was a perfectly tenable one on the evidence the judge had before him.”
Commenting on the ruling, Michael Ball, employment partner at Halliwells, said: “Companies that would prefer to avoid risking giving their regular contractors employee status will find it more difficult as this decision places the emphasis on what the reality of the situation is rather than what written terms have been agreed. Any agreement does not have to be shown to be a ‘sham’ intended to deceive, but if the working practices conflict with what is written down, employee status may be inferred.
“However, the written contract is still very important. The courts will still look to the written contract as the first point of reference, and if satisfied that this does reflect the working relationship, there should be no further investigation. The tribunal will take into account surrounding circumstances and the intentions of the parties, so when entering into work arrangements, the contractor should be clearly informed of the right to send a substitute and the freedom to reject work.”