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When is a self employed contractor an employee

When is a self employed contractor an employee
Richard Rowell
Written by
Thursday, 20 October 2011 18:59

A recent case in the long line of many regarding employment status has gone before the courts. However, this one addressed the issue of what a contract states versus what actually happens in reality.

Specifically. this case addressed the issue of whether an individual, who is expressly described as a self-employed contractor in his contract, is really a 'worker'.

Daniel Barnett's Employment Law Bulletin reports:

If it looks like an employee and quacks like an employee, it's probably not a self-employed subcontractor. So say the Supreme Court in the long awaited decision of Autoclenz Ltd v Belcher.

The case is concerned with whether an individual, who is expressly described as a self-employed contractor in his contract, is really a 'worker' (and thus entitled to certain rights including minimum wage and paid holiday) due to the true nature of the relationship between the parties. In fact, in this case, the Supreme Court also upheld a finding that they were 'employees', but the claims for minimum wage and holiday only required they prove they were 'workers'.

Twenty car valeters signed contracts describing themselves as self-employed subcontractors. They paid their own tax and had to purchase their own insurance, uniforms and materials (the latter two of which they could do from Autoclenz). Their contracts stated they were under no obligation to attend work, although the tribunal found as a fact - in practice - they were expected to attend work and provide services personally. The tribunal also found that they went into the contracts with their eyes open about being self-employed.

So what trumped? The written contract, or the reality?

The Supreme Court held the real situation trumped what was written in the contract. It was not necessary for the valeters to prove a 'sham', in the sense that the parties intended to mislead HMRC. The fact that the employer had written a 'substitution clause' into the contracts did not reflect the reality, as everyone expected the valeters to carry out their duties personally.

The question is: what is the true agreement between the parties? That might be what is written down, but is not necessarily so.

Richard Rowell

Richard is the managing director of Dataplan Payroll Limited and is also responsible for the ideas and development of Dataplan's innovative technology solutions such as ePaysafe.

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