If a business gets it wrong, then they may find themselves having to pay and may also find itself defending claims that can only be brought by employees.
The Employment Appeal Tribunal has handed down a decision in the case of Larner v Launahurst Ltd (supporting the original Employment Tribunal decision) which demonstrates the importance of having accurate documentation.
A preliminary issue to be determined by the Employment Tribunal in this case was whether or not the Claimant was an employee.
You can access Larner v Launahurst Ltd UKEAT/0188/09/MAA here.
If the Claimant was an employee he would have the right to bring an unfair dismissal claim against his ‘Employer’, whereas if he was a self-employed contractor, any claim that he could bring would be restricted to breach of contract.
Parties had entered into a ‘Contract Supply Agreement’.
In order for there to be a contract of employment, there is an irreducible minimum that must exist:
- Personal Service;
- Mutuality of Obligation; and
The ‘Contract Supply Agreement’ was designed to be a contract for services (self-employed contractor agreement) rather than a contract of service (an employment agreement).
However, despite what was written in the contract, the reality of the relationship between the parties was much different: the Claimant always did the work personally; he never sent a substitute; work would be allocated by the company and the Claimant would do that work; the Claimant did not refuse work; the Claimant always gave notice to the company of proposed holidays and the company would adjust its work schedules to take account of the Claimant’s absences; the Claimant was told what to do and where to do it; the Claimant was given regular work, and was paid on a regular basis; the company provided a vehicle and paid for fuel. All these factors, and others, pointed towards the Claimant being an employee.
While the Claimant was responsible for his own tax and national insurance, which suggested that he may not be an employee, this was just one factor to be considered along with the rest.
Despite the terms of the written contract the Tribunal found that the Claimant was an employee.
The effect of the Tribunal decision is that the Claimant can now proceed with his unfair dismissal claim against his employer.
The current statutory cap on compensation, where the Employment Tribunal finds that dismissal is unfair, is £76,700.