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Supreme Court ‘Autoclenz’ ruling confirms contractors were not self-employed

The Supreme Court has upheld the Court of Appeal' s decision that twenty car valeters were actually employees of Autoclenz Ltd and not self-employed as their employment contracts suggested.

In 2007 the Autoclenz valeters were asked to sign new contracts designed to prove they were sub-contractors rather than disguised employees. Hence, for example, a clause which was introduced into the contract saying that there was no obligation on the appellant to offer work or on the claimants to accept work was considered inconsistent by the requirement for the workers to give advance notice if they were unavailable to do the work, indicating that there was an obligation to attend work unless a prior arrangement had been made.

Consequently, The Supreme Court found that the valeters were employees fully integrated into Autoclenz Ltd's business and subject to its control.

The ruling clarified that express contractual terms may be disregarded if they do not reflect the parties' actual agreement - an intention to deceive a third party is not required.

Entitled to benefits

The valeters were performing the duties of employees and, as such, were entitled to benefits commensurate with their position such as minimum wage, holiday pay and sick pay.

In order to qualify for the rights they were seeking, the valeters had to show that two essential features, personal service and mutuality of obligation, were present.

Speaking at the Court of Appeal Lord Justice Sedley said: "Employment judges have a good knowledge of the world of work and a sense, derived from experience, of what is real and what is window dressing. The conclusion [of the original tribunal judge] that Autoclenz's valeters were employees in all but name was a perfectly tenable one."

Employee or Self Employed

Despite the fact that the valeters knew that when they were taken on Autoclenz regarded them as self-employed, what Autoclenz wished to create was not material. What mattered was what Autoclenz actually created. Lady Justice Smith stated, “It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee” and “In short I do not think that an employee should be estopped from contending that he is an employee merely because he has been content to accept self-employed status for some years.”

Comment

The landmark ruling in Autoclenz Ltd v Belcher and ors means that employers now risk giving regular sub-contractors employee status through poorly managed working practices. Businesses that regularly use self-employed workers should constantly review both the contractual terms and the physical working practices of these relationships so as to steer clear of claims. 

Contact us

Pearson Hinchliffe Commercial Law's Employment team can advise employers and employees on matters concerning employment status. 

As indicated, the tests for deciding whether an individual is an employee, self employed or a worker can be very complicated. If in doubt, please call Pearson Hinchliffe Commercial Law’s Employment law team for more information using the details provided below. 

Pearson Hinchliffe Commercial Law | Hollinwood Business Centre, Albert Street, Hollinwood, Gtr Manchester, OL8 3QL
Telephone: +44 (0)161 785 3500, Fax: +44 (0)161 624 2589, Email: enquiries@pearson-hinchliffe.co.uk