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Employment: A Reality Check

Mr X is an individual who provides valeting services for a car cleaning business - Y. He enters into a written contract with Y that expressly defines his relationship with Y as that of sub-contractor and not employee.

The relevant clauses of his contract states (a) he will perform the services he has agreed to carry out on behalf of the company in a "good and workmanlike manner", (b) he is a self-employed independent contractor and (c) there is no intention that he should become an employee of Y and (d) that he is responsible for the payment of his income tax and NI contributions.

Although Mr X is defined as a sub-contractor, he exercises no control over the time, manner and terms upon which he does work for Y. Further, Mr X has no control over the material he uses when working for Y and has no economic interest in how his work is organised. Mr X subsequently brings an action against Y seeking to be recognised as a worker under Regulation 2(1) of the National Minimum Wage Regulations 1999 ("NMWR") (SI 1999/584) and Regulation 2(1) of the Working Time Regulations 1998 ("WTR") (SI 1998/1833). The aim of the action is to force Y to pay him in accordance with the NMWR and to provide statutory paid leave under the WTR. So should Mr X succeed?

The recent Supreme Court decision of Autoclenz Ltd v Belcher and Ors [2011] UKSC 41 indicates that the answer is YES! Based on a similar facts scenario, the Supreme Court held by a majority that in such circumstances, one must analyse the actual relationship between the parties to establish if the written contract reflects the true reality of their agreement. In Autoclenz the claimants although referred to as sub-contractors were, like Mr X, required (a) to perform their services as defined in their contract within a reasonable time and in a good workmanlike manner, (b) to be paid for their work, (c) to carry out the work offered to them by the company and similarly for the company to offer them work and (d) to do the work offered personally without providing a substitute. These were the actual terms of their contracts and the control exercised by the company in how those contracts were performed properly categorised them as contracts of employment and the claimants, like Mr X, as workers.

Elizabeth Dwomoh / 1st Aug 2011


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