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Legislation update: Determining employment status

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LegislationDifferent statutory rights attach to members of a workforce, depending on whether they are employees, workers or genuinely self-employed. Richard White considers a recent case concerning car valeters, which highlights the factors used when deciding employment status.


Autoclenz Limited v Belcher and others

Autoclenz had a contract to valet cars for British Car Auctions (BCA). Autoclenz advertised for self-employed valeters who signed contracts stating that they were sub-contractors. In 2007, Autoclenz issued new terms to the valeters stating that:

  • The valeters were engaged from time to time on a subcontract basis.

  • The valeters were entitled to provide a substitute to carry out the valeting on their behalf.

  • There was no obligation on Autoclenz to provide any work to the valeters, and no obligation on the valeters to carry out any work if it was offered by Autoclenz.

The valeters cleaned cars at BCA’s Measham site. They wore BCA overalls and were provided with all necessary equipment and cleaning products by Autoclenz. Autoclenz also took out group insurance cover. The amount that the valeters were paid was dependent on the number of cars valeted. They submitted weekly invoices to Autoclenz, which then deducted a sum for the provision of cleaning materials and insurance, prior to making payment to the valeters. The valeters were responsible for their own tax and national insurance contributions. The Inland Revenue carried out an inspection in 2004 and confirmed that the valeters were self-employed.

The claim

In late 2007, the valeters presented claims to an employment tribunal, seeking a declaration that they were employees and an order for Autoclenz to pay them the national minimum wage and holiday pay.

The decision

The employment tribunal decided that the valeters were employees. Autoclenz appealed to the employment appeal tribunal (EAT).

The EAT noted that the contract stated that the valeters could provide a substitute to carry out the work for them and there was no obligation on either party to offer or accept any work. It decided that unless these particular terms had been a sham, intended to misrepresent the position between the parties, then it could not amount to a contract of employment. Hence the valeters were not employees.

“The use of ‘substitution’ clauses and ‘no obligation to provide work’ clauses in a contract will greatly assist in demonstrating that it is not a contract of employment.”

However, in relation to the question of whether the valeters were ‘workers’, the EAT noted that the contracts required the valeters to provide a ‘personal service’ for Autoclenz. Also, it decided that Autoclenz was not a client of the valeters. In other words, the valeters were not ‘in business on their own account’.

In those circumstances, the EAT decided that the valeters were workers. This meant that the valeters were entitled to be paid in accordance with the national minimum wage regulations, and were also entitled to holiday, pursuant to the working time regulations.

Comment

Autoclenz was partially successful with its appeal. As the valeters were not employees they would not benefit from certain employment rights, such as the right not to be unfairly dismissed, or the right to claim a redundancy payment. The way in which the contract was drafted by Autoclenz helped to ensure that the valeters were not employees.

The use of ‘substitution’ clauses and ‘no obligation to provide work’ clauses in a contract will greatly assist in demonstrating that it is not a contract of employment (unless the terms of the agreement are deemed to be a sham). However, businesses should be aware that those people may still be workers, entitling them to various statutory rights such as the minimum wage and holiday pay.


For further advice on this topic, please contact Richard White, specialist employment solicitor at Withy King, on 01225 352 921 or email: [email protected]

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