Autoclenz staff ruled to be employees

The UK Supreme Court has ruled on the case of Autoclenz Ltd v Belcher, in which a number of car valeters whose contracts suggested they were self-employed claimed they were not genuinely self-employed but were workers, entitled to holiday pay and the national minimum wage.

In this case, the Supreme Court went further and found them to be employees.

Tim Wragg, senior associate at law firm Eversheds, commented:

“It is by now a well-established principle that, in legal terms, the label attached to someone who carries out work for another party is not definitive of their actual legal status, be that of employee, worker or self-employed person. The Supreme Court has clarified this principle by confirming that contractual terms between the parties may be largely ignored in this context. It is the actual legal obligations of each party which dictate employment status, the Court has said.

“Legal status in an employment law context is important, not least since it is only employees who benefit from the majority of employment law protection, such as unfair dismissal rights or rights to redundancy pay. Over the years the courts have made clear that simply labelling an individual as ‘self-employed’ is not sufficient to defeat the accrual of these rights and the courts have devised various tests, intended to shed light on the reality of the working relationship. For example, the degree of control exercised over the individual might indicate insufficient autonomy on his or her part, as may an obligation to undertake work offered.

“Identifying employment status is not always straightforward. Confusingly also, the tax status the individual is given is not conclusive. Historically, some employers have placed great emphasis on the written terms of the contract as this has been thought to be a particularly strong indicator of employment status since the courts have been reluctant to look behind these terms unless there is evidence of a sham. As a result, parties have proved creative in the contractual terms they have entered into, including provisions which suggest a freedom of spirit one might expect of a genuinely self-employed individual, such as a right to offer a substitute or to turn down work.

“[This] judgment is significant as it places limits on the power of employers to blur the relationship through carefully crafted contractual terms. The Court has now made clear that, unless an individual is in reality operating in business on his or her own account, terms in their contract which suggest self-employment or, indeed, that of a worker but which are not in fact ever applied in practice will not be relevant to their true employment status. Recognising the difference in bargaining power between the individuals and the employer, the Court found the contractual terms were not conclusive.

“Ultimately, what matters is only what was agreed, either as set out in written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded.

“Organisations relying on flexible working through use of self-employed individuals or workers will need to be extremely careful from now on to ensure that any contractual terms entered in to reflect the reality of the working relationship. Failure to do so could well result in the contractual terms being ignored and a finding of worker status or employment status.”