16th October 2009
The Court of Appeal holds that a written contract is not conclusive of employment status.
In Autoclenz Limited -v- Belcher & Others the Court of Appeal held that a group of car valets engaged under written terms and conditions that labelled them self-employed were, in fact, employees.
A group of valets responded to adverts seeking self-employed people and were engaged under contracts that described them as “sub-contractors”. The contracts provided that they could supply substitutes to carry out their work, that there was no obligation to accept work that was offered to them and that there was no guarantee of work.
The valets subsequently lodged claims seeking a declaration as to whether they were workers or employees, and for unpaid wages and holiday pay. The employment tribunal found that in reality the valets were employees as they were obliged to work when it was offered and had to give personal service. The EAT overturned the Tribunal decision, and held that the Tribunal was not entitled to look behind the written contract unless it gave a false impression. The claimants appealed to the Court of Appeal.
The Court of Appeal held that the Tribunal was entitled to consider whether the words of a written contract reflect the true intention of the parties, and that this is the case not only at the inception of the contract but also at a later stage, if the evidence shows that the parties have varied their agreement.
The ruling confirms the principle that employment status is determined by the substance of the relationship and not the form or label attached to it. Tribunals will look behind a written contract to determine the true intention of the parties and it is important that employers ensure that contracts reflect the reality throughout the entire period of the relationship.