Lee Richards v Waterfield Homes Limited & Anor

Employment status is a conclusion of law drawn from the parties’ rights, duties and the reality of their relationship. A genuine agreement to use a self-employment label may assist where the intended obligations are doubtful, but it is not conclusive and cannot override a false description of an employment relationship.

Use of the Construction Industry Scheme is only one relevant factor. An Employment Tribunal errs if it treats that payment and tax arrangement as determinative without objectively evaluating the relationship as a whole. Where the findings permit only an employment relationship, an appellate tribunal may substitute that conclusion.

The claimant had worked for the respondents from 2010 as a multi-trade carpenter and was paid through the Construction Industry Scheme. In 2018, following advice to regularise employment relationships, he was given an employment contract. He contended that he had been an employee throughout the earlier period.

The Employment Tribunal at Exeter held that the pre-2018 relationship was one of self-employment. It regarded the parties’ agreed use of the Construction Industry Scheme as a genuine arrangement and found that the claimant had sufficient bargaining power. The claimant appealed, principally contending that the Tribunal had wrongly treated tax status and the parties’ label as determinative.

1. Appeal allowed. The Employment Tribunal erred in focusing upon the parties’ agreement to use the Construction Industry Scheme as the legal basis of the engagement. That arrangement was only one factor in determining employment status.

2. The correct approach, reflected in Ready Mixed Concrete and Young and Woods, is to determine the legal relationship from the rights and duties created and the reality of the facts. A label selected by the parties cannot decide their true relationship. Their genuine intention may be relevant where the intended rights and duties are uncertain, but it is not conclusive.

3. The absence of a sham did not answer the question. A description can be false as an account of the actual relationship without being a sham. Autoclenz was factually different because it concerned a written sham contract, but it did not justify treating an agreed self-employment label as decisive.

4. The Tribunal’s own findings showed normal weekday working, exclusive service for the respondent, and a relationship otherwise close to employment. No further factor pointing away from employment had been found. The later unilateral regularisation of the workforce also reinforced the conclusion that the earlier description was false. This was not a finely balanced case in which the label could tip the balance.

5. Applying Jaffri v Lincoln College [2014] EWCA Civ 449, only one conclusion was legitimately open on the facts found: the claimant was an employee throughout the material period. That finding was substituted and the case was remitted to the Employment Tribunal for a substantive hearing.

• Employment Appeal Tribunal: Appeal allowed. The Tribunal’s ruling on status was substituted with a finding that the claimant was an employee throughout, and the matter was remitted.
• Employment Tribunal, Exeter: Written Reasons sent on 1 December 2020. The Tribunal found that the claimant had been self-employed before November 2018.