Employment Status

Autoclenz Ltd v Belcher & ors

The Supreme Court considers whether express contractual provisions in a consultancy agreement reflected genuine self-employment, and concludes that they did not.

Employees come with two expensive price tags. The first is a raft of statutory rights, such as the right not to be unfairly dismissed. The second is employer's National Insurance Contributions, currently charged at 13.8% of earnings and paid by the employer. Businesses are well aware of this and their professional advisers will be all too familiar with the refrain "let's make him a consultant then".

Many businesses will know that such a 'transformation' is not easy to achieve and that the manner in which the parties describe themselves (and their intentions) will not be decisive if, in reality, the 'consultant' is treated no differently than employees carrying out the same job.

Similarly, the fact that the parties choose to operate their relationship as one of self-employment for tax purposes (for example, invoicing for services with VAT applied) does not mean that a court or tribunal will agree that no employment exists.

The question of whether an individual is an employee is not easy to answer. One important factor is whether the individual providing the services in question has the right to appoint a substitute. This is considered to be inconsistent with being employed, on the basis that an employee is obliged to perform work personally.

However, in Autoclenz Ltd v Belcher & ors the Supreme Court (the "Court") upheld the Court of Appeal's decision that car valets, whose contracts stated that they were self-employed, were actually employees. This was the case even though the contracts contained an express term allowing the valets to appoint a substitute. The Court held that express contractual terms may be disregarded where they do not reflect the parties' actual agreement. This could be wholly innocent and an intention to deceive a third party was not...