Massey v Crown Life Insurance Co

Entitlement to claim compensation for unfair dismissal depended on employment under a contract of service. The parties could not alter an unambiguous employment relationship merely by attaching a different label to it.

Where the relationship was genuinely ambiguous, however, the parties could resolve that ambiguity through an agreement defining their legal status. The agreement, its detailed terms and the surrounding circumstances could provide strong or decisive evidence of the true relationship. A genuine agreement intended to change an ambiguous status from employee to self-employed independent contractor was effective. A party who obtained the benefits of that arrangement could not subsequently assert employee status merely to claim statutory compensation.

The appellant managed the respondents’ Ilford insurance branch. Until 1973 he was treated as an employee, with tax and other deductions made from his remuneration. He also acted under a separate general agency agreement which expressly denied an employer-employee relationship.

At his own request, the parties entered into a new agreement under which he traded as John L. Massey & Associates, received gross remuneration and was treated for tax purposes as self-employed. His duties remained substantially unchanged, although he left the respondents’ pension scheme and obtained the return of his contributions.

Following his dismissal, the Industrial Tribunal and Employment Appeal Tribunal concluded that he was not employed under a contract of service and could not claim unfair dismissal compensation. The central issue on his appeal was whether the 1973 agreement genuinely changed his status to that of an independent contractor.

1. Appeal dismissed unanimously. The Industrial Tribunal was entitled to find that the appellant was not employed under a contract of service and therefore did not qualify to claim compensation for unfair dismissal under section 30(1) of the Trade Union and Labour Relations Act 1974.

2. Per Lord Denning MR, the true relationship between parties could not be altered merely by applying a different label. A dishonest arrangement which misdescribed that relationship to deceive the Revenue would be illegal and unenforceable. The tribunal had found, however, that the present agreement was genuine and was not made solely to deceive the Inspector of Taxes.

3. Per Lord Denning MR, where the relationship was doubtful or ambiguous, the parties could resolve that ambiguity through their agreement. The agreement could then be the best evidence of their true legal relationship, and an express declaration of self-employment might be decisive. Here the appellant’s commission-based work, ability to undertake other work, tax treatment, withdrawal from the pension scheme and express agreement supported independent-contractor status.

4. Per Lawton LJ, the appellant’s simultaneous roles as manager and freelance general agent before 1973 created genuine ambiguity. The detailed new contract contained terms, including a power to employ others, which were fundamentally inconsistent with mere employment. The circumstances demonstrated a genuine intention to change status, and that change was legally effective.

5. Ferguson v John Dawson & Partners (1976) 1 WLR 1213 was distinguished. That case involved little evidence of the contractual terms, which therefore had to be implied and were consistent only with employment. The present case contained detailed express terms and evidence of a genuine intended change of status.

6. Having requested and obtained the benefits of treatment as self-employed, the appellant could not subsequently deny that status to obtain unfair dismissal compensation. Eveleigh LJ agreed with both judgments. The appeal was dismissed with costs, and leave to appeal to the House of Lords was refused.

• Court of Appeal: Dismissed the appeal unanimously, upheld the conclusion that the appellant was not employed under a contract of service, and refused leave to appeal to the House of Lords.
• Employment Appeal Tribunal: Upheld the Industrial Tribunal’s conclusion that the appellant did not qualify to claim compensation for unfair dismissal.
• Industrial Tribunal: Found that the 1973 agreement genuinely changed the appellant’s status and was not tainted by illegality. It held that he was not an employee under a contract of service.