Who is an employee?

Over the years there have been a number of cases on the important question of who is an employee.  The Employment Rights Act contains a rather circular definition of an employee – being someone who works under a contract of employment.  Many years ago Lord Denning in the Court of Appeal said that he would recognise an employee when he saw one!  Not surprisingly businesses and workers want more certainty because the question of employment status is important – most employment rights, such as the right to minimum notice to terminate the contract, the right to claim unfair dismissal and many more are only available to employees.It is also of course relevant to the treatment of income tax and National Insurance. 

In 2000 the House of Lords provided some clarity.  They said that where there was no requirement for the worker to provide personal service, then there would not be an employment relationship.  This meant that where the worker had a right to send a substitute to do the work, then they would not be employees.  Their Lordships also said that where there was no obligation on the “employer” to provide work, and no obligation on the worker to do any work offered, then again there would not be an employment relationship.

However, over the intervening years since then the relative certainty provided by the House of Lords has been eroded by a number of judicial decisions.  The latest of these is the Supreme Court’s decision in Autoclenz v Belcher.  In this case the workers were car valeters who worked under contracts which provided that they were self employed and were able to provide substitutes to carry out the job.  The contracts also provided that there was no obligation on Autoclenz to provide work, and if they did offer work, there was no obligation on the workers to carry it out.  Notwithstanding the wording of the contract, the Supreme Court has held that the workers were in fact employees.  The Court unanimously held that what happened in practice was what counted – not simply what was written into the contract.  In practice, the workers did turn up for work every day and were provided with work; in practice, none of them ever provided a substitute.  The Supreme Court said that in order to determine employment status, you had to look not only at what the parties agreed at the outset, but at any later stage where the evidence shows that the parties have expressly or impliedly varied their agreement.

The decision in Autoclenz v Belcher does provide protection for workers who might otherwise be abused by “employers” seeking to avoid workers having employment rights by careful drafting of contracts.  However, it does lead to greater uncertainty for businesses wanting to contract with people on a self employed basis – which in appropriate circumstances can have attractions for both parties.

It will often still be possible to minimize the risk of a court finding that workers are in fact employees by careful drafting of the contract, and this is something we can help with.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])