Quashie v Stringfellows Restaurants Ltd

Where an individual is engaged for a particular period, personal service, a bargain involving work or availability for work and a sufficient degree of control may establish a contract of employment for that period. Payment need not be described as wages or come directly from the employer. The source or route of payment does not determine employment status.

An umbrella contract may arise from regular engagements combined with continuing enforceable obligations between them. Relevant obligations may include attendance at meetings, compliance with rota arrangements and restrictions connected with holidays.

A contract is not rendered illegal merely because employment status was wrongly categorised for tax purposes. Knowingly false representations to HMRC in performing the contract may, however, make it unenforceable. The issue requires findings on the alleged falsehood, bad faith and its scale.

The claimant was a lap dancer at the respondent's clubs between June 2007 and December 2008. She claimed unfair dismissal. At a pre-hearing review, the Employment Judge held that she was self-employed because there was no mutuality of obligation, and dismissed the claim for want of jurisdiction.

The claimant appealed on employment status. The respondent cross-appealed on illegality, contending that the claimant's tax returns and tax-credit material made the contract unlawful in performance. The Employment Appeal Tribunal considered whether she was employed on each night she worked, whether an overarching contract provided continuity of employment, and whether the alleged representations to HMRC could bar her unfair-dismissal claim.

1. Appeal allowed; cross-appeal allowed; case remitted. The Employment Judge's finding that the claimant was not an employee was set aside. On the Judge's unchallenged findings, the claimant had personal-service obligations and the respondent exercised substantial control over her work.

2. On each night for which the claimant was engaged, there was an admitted contract containing reciprocal obligations. The claimant had to attend and work as directed, including performing unpaid stage dances. The respondent had to provide the opportunity to dance, redeem vouchers into sterling subject to agreed deductions, and pay the balance. The fact that customers supplied the vouchers did not alter the reality that the respondent paid for work done.

3. Applying Stephenson v Delphi Diesel Systems Ltd, once a contract exists during work actually performed, mutuality establishes the existence of a contract. Personal service and control then determine whether it is a contract of employment. The Judge erred by requiring a continuing overriding arrangement when deciding status for an individual night's work.

4. An overarching employment contract also existed. The claimant was contractually committed when the rota was agreed, had to attend unpaid Thursday meetings on pain of sanctions, and remained subject to obligations concerning holidays and re-audition. Those continuing obligations, regular engagements and the parties' expectation of further work established continuity exceeding one year. Alternatively, any relevant short gaps could have been considered under Employment Rights Act 1996 section 212.

5. The contract was not illegal from its outset. However, knowingly false representations to HMRC concerning earnings or expenses could amount to unlawful performance and prevent enforcement of the statutory unfair-dismissal right. Mere mistaken categorisation of status would not suffice, and minor tax irregularity does not automatically bar a claim. The Employment Judge had not adequately analysed the relevant material or law. The alleged HMRC representations were therefore remitted with the unfair-dismissal claim to a fresh three-person Employment Tribunal.

• Employment Appeal Tribunal: Allowed the claimant's status appeal, allowed the respondent's contingent illegality cross-appeal, declared continuous employment of over one year, and remitted unfair dismissal and illegality to a fresh tribunal.
• Employment Tribunal, London Central: At a pre-hearing review, in reasons sent on 9 November 2010, held that the claimant was not an employee and dismissed her unfair-dismissal claim for want of jurisdiction. It found insufficient evidence to determine that the contract was illegal in performance.