Autoclenz Ltd v Belcher & Ors

A tribunal determining employment status must identify the parties’ actual legal obligations. A written contract is the usual starting point, but it does not conclusively determine the relationship where its terms do not reflect what the parties agreed. In employment relationships, disproving an unreal written term does not require proof of a common intention to mislead.

Under section 230(3)(b) of the Employment Rights Act 1996, worker status requires personal performance and a relationship other than that of an independent business serving a client or customer. Employee status further requires mutual paid-work obligations, personal service, sufficient control and no inconsistent contractual term. The practical reality may establish that purported substitution and work-refusal rights were not genuine contractual rights.

Twenty car valeters sought declarations that they were workers or employees of Autoclenz and were entitled to statutory rights, including holiday pay. Their written documents described them as self-employed subcontractors, permitted substitution and stated that neither side was obliged to offer or accept work on any particular occasion.

The Employment Judge held that the documents did not reflect the true agreement. The valeters were obliged to attend and work personally, Autoclenz controlled their work, and they were employees. The Employment Appeal Tribunal, UKEAT/0160/08/DA, set aside the finding of employee status but upheld the finding that they were limb (b) workers.

Autoclenz appealed against worker status. The valeters cross-appealed on employee status. The central issue was whether the written substitution and work-refusal clauses stated the parties’ actual contractual obligations.

1. The appeal was dismissed and the cross-appeal allowed. The court restored the Employment Judge’s conclusion that the valeters were employees, and therefore workers, under section 230 of the Employment Rights Act 1996.

2. The Employment Appeal Tribunal had erred in treating a written term as binding unless both parties had intended it to give a misleading impression. The inquiry is directed to the parties’ actual legal obligations. The written terms remain the starting point, but the tribunal must assess all relevant evidence, including the written agreement, the parties’ conduct and their mutual expectations. Conduct may support an inference about the true agreement, although non-use of a contractual right alone does not make that right unreal.

3. The Employment Judge was entitled to find that the work-refusal clause was ineffective. Evidence showed that valeters were expected to attend regularly unless absence had been agreed in advance. He was also entitled to find that the substitution clause did not reflect the agreement. No genuine substitution had occurred, and a long-serving valeter did not know of the asserted right. Those facts permitted the inference that substitution was not intended or realistically expected.

4. Once those clauses were disregarded, the valeters had undertaken personally to perform services for Autoclenz. They were not operating businesses of which Autoclenz was a client or customer. They were consequently limb (b) workers under section 230(3)(b).

5. The requirements of a contract of employment were also met. There were mutual obligations to provide and perform paid work, personal performance, and sufficient control over the manner of the valeting. The remaining term, that work would be supplied if available, was not inconsistent with employment. A contractual label of self-employment, and prior acceptance of that label for tax purposes, could not alter the true legal status or estop the valeters from asserting it.

• Court of Appeal (Civil Division) — Appeal dismissed and cross-appeal allowed. The court restored the Employment Judge’s finding that the valeters were employees: [2009] EWCA Civ 1046.

• Employment Appeal Tribunal — Allowed Autoclenz’s appeal against employee status, but upheld the finding that the valeters were limb (b) workers: UKEAT/0160/08/DA.

• Employment Tribunal — Held that the valeters were employees and, alternatively, limb (b) workers.