UK: Employment Terms - 'Self Employed' Or 'Employed'

In a recent case the Court of Appeal decided that a group of 20 car valeters who were employed under terms and conditions by which they professed to be 'self-employed' were, in reality, 'employees'.

The valeters' contracts consisted of terms including that they could supply suitably qualified substitutes to carry out the valeting on their behalf, and that there was no obligation upon the company to provide them with work, or upon the valeters to accept it. The valeters lodged claims in the tribunal seeking a declaration that they were workers or employees and therefore entitled to holiday pay and other benefits.

The tribunal initially held in favour of the valeters, holding that their contracts did not reflect the reality of the situation, but the EAT subsequently reversed the tribunal's decision in favour of the company, holding that before the tribunal could find that a term of a contract was a sham, it had to be shown that both parties intended the contract to paint a false picture, and there was insufficient evidence on the facts of such intention.

On appeal to the Court of Appeal, the decision of the EAT was overturned. The Court of Appeal held that in this situation, the court or tribunal had to consider whether or not the words of the written contract represented the true intentions or expectations of the parties, not only at the commencement of the contract, but also at a later stage where the parties may have expressly or impliedly varied the terms of the agreement between them. The fact that there was a joint intention between the parties that the valeters would turn up for work each day and accept the work provided, and that the substitution clause did not genuinely reflect the rights of the valeters, supported the tribunal's original decision. Accordingly, the EAT concluded that the valeters were in fact employees.

This decision confirms that where there is a dispute as to the status of the written terms of a contract, the focus of the tribunal must be to discover the actual legal obligations of the parties.

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