Guimaraes v Findlater & Ors

In determining whether a worker is an employee under Employment Rights Act 1996, a tribunal must first identify the contractual terms. A term which is inherently inconsistent with a contract of service prevents employee status. Otherwise, the tribunal must assess all relevant features together and form an overall qualitative view of the relationship.

Payment only for work done, an absence of an express holiday-pay provision, and non-operation of PAYE may be relevant factors. None is necessarily inconsistent with employment. A tribunal errs if it treats such factors as legally determinative without a reasoned assessment of the relationship as a whole.

The Claimant worked within the Bounce Back organisation from 2007 until 2014. The Employment Tribunal found that, from about 2011, his contractual relationship was with the Second Respondent. It held that he was a worker, but not an employee, under section 230 of the Employment Rights Act 1996.

The Tribunal found personal service, remuneration and sufficient control. It nevertheless treated three matters as inconsistent with a contract of employment: payment only for work done, no provision for holiday pay, and no PAYE deduction arrangement. It struck out the claims dependent on employee status. The Claimant appealed solely against the conclusion that he was a worker rather than an employee.

1. Appeal allowed. The Employment Tribunal's conclusion that the Claimant was not an employee was unsafe and was set aside.

2. The Tribunal had correctly found a contractual relationship, personal service for remuneration, and sufficient control. The remaining task was to determine whether the other contractual provisions were consistent with a contract of service. Under the approach in Ready Mixed Concrete and Hall, that required findings on the relevant detail followed by an evaluative assessment of the overall picture.

3. The Tribunal instead treated each of three matters as inherently inconsistent with employment. That was an error of law. Payment only when work was performed may point towards worker rather than employee status, but an employee may suffer deductions for absence and retain employee status. The factor therefore required weighing with the other circumstances.

4. The holiday-pay reasoning was also unclear or potentially factually wrong. It was common ground that the Claimant had been paid for holiday taken from at least 2012. The absence of an express holiday-pay term in an informal and unwritten arrangement could be relevant, but could point either way. It did not itself establish an inconsistency with a contract of employment.

5. Likewise, the absence of PAYE deductions did not justify the conclusion reached. The Tribunal had deliberately left unresolved the parties' conflicting cases about responsibility for tax and National Insurance, because illegality might arise at a later merits hearing. Without findings explaining why PAYE had not operated, that circumstance was not necessarily incompatible with employee status.

6. The issue was remitted for fresh consideration by the same Employment Tribunal, so far as practicable. It had heard the evidence and made relevant factual findings, and remittal to it was proportionate. It could decide, through case management or at the full merits hearing, how the remaining employment-status issues should be determined.

• Employment Appeal Tribunal: allowed the Claimant's appeal, set aside the finding that he was not an employee, and remitted the issue for fresh consideration by the same Employment Tribunal.
• London (Central) Employment Tribunal: judgment sent to the parties on 22 January 2016. It found the Claimant to be a worker but not an employee under section 230 of the Employment Rights Act 1996, and struck out claims dependent on employee status.