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Employee or contractor?
Real Time Civil Engineering Limited v Callaghan, Employment Appeal Tribunal, 9 December 2005

Facts

Mr Callaghan, a lorry driver, made deliveries in a vehicle owned and insured by Real Time. He took day-to-day instructions from the company's management. At the company's request, Callaghan signed a document entitled 'Self-Employed Contract for Services', clause 7 of which stated that Callaghan had an unfettered, absolute discretion to send a substitute to perform his work. Later, Callaghan brought tribunal claims for unfair dismissal and breach of contract.

At a pre-hearing review, the tribunal had to decide whether or not Callaghan was an employee.

Decision

The tribunal found that: Callaghan "clearly could not send a substitute in his place" based on the evidence of a company witness, who said that she was not aware of Callaghan ever having done so. Although the parties signed a contract which purported to ensure that Callaghan was self-employed, the reality was that it was a contract of employment.

The company appealed, arguing that for Callaghan to be an employee there must be a requirement upon him to perform any work personally. Therefore, if clause 7 was not found to be either varied or a sham, the contract could not be an employment contract.

Appeal

The Employment Appeal Tribunal (EAT) found that the agreement was not a sham nor had there been any variation to its terms. Although the finding that Callaghan was not allowed to send a substitute was plainly contrary to clause 7, the evidence went no further than to accept that as far as the witness was aware, Callaghan had never sent someone in his place to carry out the duties. Reversing the tribunal's decision, the EAT found that Callaghan was not an employee. His claims for unfair dismissal and breach of contract were therefore dismissed.

Comment

The EAT's decision serves as a reminder that a contractual clause which allows a worker to send a substitute to perform work in their place will be sufficient to ensure that the worker is not an employee, provided the clause is not found to be a sham and has not been varied by the parties to the agreement.