EVERYDAY LAW: Employee vs contractor
ONE OF THE ISSUES that employment tribunals have to decide from time to time is whether a worker is an employee or independent contractor.
Often the person or company that engages the employee will insert into the contract terms which, if literally applied, would result in the worker being classified as an independent contractor.
Unlike the general principle in other commercial contracts, in employment contracts the written contract may be set aside if the reality of the relationship is consistent with that of employer and employee. Such a case was the recent decision of the English Supreme Court in Autoclenz Ltd v Belcher & Others .
In that case, Autoclenz Ltd, which was in the business of providing car-cleaning services to motor retailers and auctioneers, engaged the services of 20 valeters to provide the services. The question arose as to whether the claimants (the 20 valeters) were workers within the meaning of the National Minimum Wages Regulations 1999 and therefore entitled to be paid in accordance with those regulations, and to receive paid leave under the Working Time Regulations 1998.
The definition of worker in the legislation is similar to definitions found in laws such as the Severance Payment Act and Employment Rights Act. It reads in part: “. . . ‘worker’ . . . means an individual who has entered into or works under . . .
(a) a contract of employment; or
(b) any other contract, whether expressed or implied and (if it is expressed) whether oral or in writing, whether the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.”
In the contract between Autoclenz and the valeters many of the common provisions suggestive of a contractor relationship were stipulated:
• The valeters were not obliged to accept work.
• The valeters had a right to substitute another person to do the work.
• The contractor described the valeters as independent contractors.
• The valeters were obliged to pay their own tax.
The court took the view that the degree of control exercised by Autoclenz over the valeters justified the finding of the Employment Tribunal that they were employees despite the fact that there were provisions in the contract which suggested otherwise.
The court relied on the findings of fact of the employment judge which in part stated:
“35. In my judgement these claimants are employees. I do not think it can be said that Mr Huntington and his colleagues are businessmen in business on their own account. They have no control over the way in which they do their work. They have no real control over the hours they work, save and except that they can leave when their share of the work on site has been completed.
“They do not have any real economic interest in the way in which the work is organised, other than the fact that the more work they do, the more they earn. They cannot source materials for themselves. They are subject to the direction and control of the respondent’s employees on site. They work in teams and not as individuals.
“It crossed my mind that each team might constitute a partnership, but it has never been suggested that these claimants are partners running business together and, whilst the make-up of each team seems to be fairly static, they can be adjusted to meet the respondent’s needs. The claimants have no say in the terms upon which they perform work, the contracts which were placed before them are devised entirely by the respondent and the services they provide are subject to a detailed specification.
“The invoices which they submit are prepared by the respondent. The respondent determines the deductions which are applied to those invoices and the amounts charged in respect of insurance and materials.
“37. I am satisfied that the claimants are required to provide personal service under their agreements with the respondent, notwithstanding the substitution clause that was introduced in 2007. I do not find that this clause reflects what was actually agreed between the parties, which was that the claimants would show up each day to work and that the respondent would offer work, provided it was there for them to do.”
The court found that the written agreement did not reflect the reality of the relationship, which was in substance that of employer and employee, and that the valeters were workers within the meaning of the minimum wage legislation.
• Cecil McCarthy is a Queen’s Counsel. Send your letters to Everyday Law, Nation House, Fontabelle, St Michael. Email [email protected] caribsurf.com.