When is an employee not an employee?

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Employment law solicitor, Roger Cheves examines the definition of self employment status

If an “employee” acts like an employee and sounds like an employee, then he’s probably not a self-employed subcontractor. This was The Supreme Court’s decision in Autoclenz Ltd v Belcher, providing much needed clarity to the question of self employed contractors.

The case is about whether a person, who is expressly described as a ‘self-employed contractor’ in his contract, is really a ‘worker’ (and thus entitled to certain rights, including minimum wage and paid holiday) as a result of the true nature of the relationship between the parties. The Supreme Court actually decided that they were ’employees’, but the claims for minimum wage and holiday only required they prove they were ‘workers’.

These are the facts of the case. Some car valeters signed contracts describing themselves as self-employed subcontractors. They paid their own tax and had to purchase their own insurance, uniforms and materials (the latter two of which they could do from the “employer”). Their contracts stated they were under no obligation to attend work, although the tribunal decided – in practice – they were expected to attend work and provide services personally. The tribunal also found that they went into the contracts with their eyes open about being self-employed.

Which took precedence; the written contract, or the reality?

The Supreme Court decided that the real situation defeats what was written in the contract. It was not necessary for the valeters to prove a ‘sham’, in the sense that the parties intended to mislead HMRC. The fact that the employer had written a ‘substitution clause’ into the contracts did not reflect the reality, as everyone expected the valeters to carry out their duties personally.

The question to be decided is “what is the true agreement between the parties?” That may well be what is written down, but is not necessarily so.

Roger Cheves is head of Slee Blackwell’s Employment team and can be contacted at Exeter (01392) 423000.