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Employee, Worker or Self-Employed Contractor?

The Supreme Court has recently upheld a Court of Appeal judgement – if a written contract within the workplace is inconsistent with what has actually been agreed (e.g. between The Company and Sub-contractors) then the written contract can be disregarded. Basically the contract would not be worth the paper it is printed on.

This is illustrated in the case of Autoclenz Limited v Belcher & others. Mr Belcher and his colleagues had signed contracts with Autoclenz that stated that they were “self-employed contractors”. The contract clearly set out the intention of both parties and that the sub-contractor paid his own schedule D income tax and national insurance contributions. At a later date, Autoclenz produced two further documents which specified that the sub-contractors offered their services “from time to time” and that they were entitled to engage “one or more individuals to carry out the valeting on their behalf”.

However, the reality was that the valeters were not businessmen in business on their own account. They had no control over the way they worked and only limited control over their hours. They had no economic interest in the way the work was organised and were subject to the direction of Autoclenz. The substitution cause had no real weight. Additionally, they had no say in the terms under which they worked or the wording of the contract. The rates of pay were non-negotiable and even the invoices they submitted were prepared by Autoclenz.

Even though the contracts had been signed and expressly stated they were ‘not employees’, a tribunal will always look at what happens in practice. In other words, the reality outweighs express contractual terms. This then entitled Mr Belcher and his fellow “employees” to receive certain statutory rights such as the national minimum wage and holiday pay.

In light of this, companies that engage ‘self-employed’ contractors or consultants cannot afford to solely rely on signed, written terms as proof that they are not employees. Even a contractor deemed as ‘self-employed’ by HMRC for tax purposes may still be considered as an employee and may entitled to employee benefits under employment law principles.

It is recommended that any business using the services of contractors or consultants reviews its current contracts and agreements to ensure that they are confident about each individual worker’s employment status.

“There is evidence to suggest that good HR practice and people management in SMEs are key factors in strong business performance and can lead to increased productivity.”

- CIPD people Skills Project 2017


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