Employment Status – New judgement ignores contract

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A long running case based on whether individuals were self employed or employed has now been decided by the Supreme Court.  In Autoclenz Ltd v Belcher & Ors [2011] UKSC 41 it was found that individuals providing work were workers and not self employed.

In this case the reality of the situation has been found to entirely take precedence over the legal contracts. The contract was entirely overlooked due to it not reflecting the reality of the agreement between the individual providing the work and the entity paying for the work.

The contract contained a clause which provided: “For the avoidance of doubt, as an independent contractor, you are entitled to engage one or more individuals to carry out the valeting on your behalf, provided that such an individual is compliant with Autoclenz’s requirements of sub-contractors as set out in this agreement…”.  In practice it was found that the workers were expected to provide the services personally.

The contract also provided that: “You will not be obliged to provide your services on any particular occasion nor, in entering such agreement, does Autoclenz undertake any obligation to engage your services on any particular occasion.”  In practice the workers were expected to arrange any absence from work.

As a matter of law “no obligations” clauses and “substitution” clauses are inconsistent with contracts of employment or contracts of personal performance It was therefore common ground between the parties that if the terms of the written contract were valid then, as a matter of law, the valeters could not be said to be workers within the meaning of the WTR and the NMWR.

It was decided that the Employment Tribunal had been entitled to disregard the terms included in the written agreement between the parties on the basis that the documents did not reflect what was actually agreed between the parties.

The judgement stated that in the employment context the courts must be alive to the possibility that written documentation may not accurately reflect the reality of the relationship between the parties. Employers may include terms aimed at avoiding a particular statutory result, even where such terms do not reflect the real relationship:  The question in every case is “what was the true agreement between the parties”.

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