Employees or not?

 

Employees or not? – the Supreme Court confirms that written terms that do not reflect the parties' actual relationship may be disregarded

 

The issue of deciding whether workers are or are not employees is a perennial favourite in terms of case law. It has long been accepted that a decision on this issue may rest on questions of fact over the true nature of the relationship between worker and employer, and not necessarily on the wording of written terms of engagement (if these contradict reality.)

 

However, there has been some confusion in the Courts over the precise circumstances in which the wording of written terms of engagement which do not reflect the true nature of the relationship can be disregarded.  Can they be disregarded only when there is a deliberate attempt to deceive a third party, or can they be disregarded more generally?

 

In the case of Autoclenz Ltd v Belcher and ors the Supreme Court has now clarified beyond doubt that express contractual terms may be disregarded where they do not reflect the nature of the parties' actual relationship - an intention to deceive a third party is not required.

 

Belcher and the other claimants in this case were engaged as valets by Autoclenz Ltd, under agreements that described them as 'sub-contractors'. These agreements stated that substitutes could carry out the valets' work; that no valet was obliged to provide his or her services; and that the company offered no guarantee of work. Such statements would normally imply that the valets were not employees.

 

 Subsequently, the valets sought to argue at an employment tribunal that they were actually employees of Autoclenz and that the agreements did not reflect the reality of their relationship with the company. For example, the valets stated that they were not actually able to provide a substitute, and were expected to turn up every day and do the work provided. On this basis, the tribunal agreed that facts showed that the valets were employees, and were fully integrated into Autoclenz’s business and subject to its control. The tribunal therefore ruled that the valets were entitled to unpaid wages and holiday pay.

 

When Autoclenz Ltd appealed, the Employment Appeals Tribunal (EAT) allowed its appeal on the grounds that the precedent set in another case,  Snook v London and West Riding Investments Ltd,  meant that a tribunal can look behind the express terms of a contract only where both parties intend the contract to paint a false picture (which was obviously not the intention of both the parties in this case).

 

The valets then appealed to the Court of Appeal, which restored the original tribunal's decision on the basis that another case, Firthglow Ltd (t/a Protectacoat) v Szilagyi, required a tribunal to consider whether or not the words of the written contract represent the true intentions or expectations of the parties, not only at the inception of the contract but at any later stage where the evidence shows that the parties have expressly or impliedly varied their agreement.

 

When Autoclenz Ltd finally appealed to the Supreme Court, their appeal was rejected.

 

The Supreme Court said that, while the Snook case had correctly established that a court may disregard contractual terms intended to deceive a third party, this was not the only circumstance in which a court can disregard written terms which do not reflect the parties' actual agreement. It emphasised that the correct issue to address is simply one of what were actually the true intentions of the parties to the agreement, taking account, if appropriate, of their relative bargaining power.  The true Intentions will often have to be gleaned from all the circumstances of the case, not just written agreements, as it may be easy for an employer to include substitution clauses inconsistent with employment in an agreement where, in actual fact, they have no correlation to the real relationship, and are simply a device which seeks to preclude the establishment of an employment relationship.

 

Thus the Supreme Court ruled that the decision of the original tribunal could not be sensibly challenged.

 

This case appears to simplify the consideration of “employee or not” issues, by confining them to questions of fact over the relationship between employer and worker, without the need to examine the intentions of the two parties.