Mark Craven v Forrest Fresh Foods Limited

The Employment Appeal Tribunal held that the Employment Tribunal erred in law and reached a perverse conclusion in deciding that, following appointment as a statutory director, the claimant remained an employee but was no longer entitled to any remuneration as an employee. The EAT emphasised that where an employee enters into a contract of employment (here, August 2015) the tribunal must determine whether that contract was terminated, varied, or continued and must make findings about duties and agreed remuneration rather than treating the form of payment (dividends, loans, pay slips) as determinative.

The EAT applied and considered the statutory framework including sections 13, 27 and 230 of the Employment Rights Act 1996 and concluded that the Employment Tribunal failed to apply the correct legal principles and failed to make necessary findings of fact. The matter was remitted for further consideration by another Employment Tribunal.

Background and parties: The claimant had been employed by the respondent since 2009 in various roles and, on the Employment Tribunals findings, entered into a written contract of employment in August 2015 as Business Development Manager. The claimant was appointed a statutory director on 30 June 2016, received substantial payments characterised largely as dividends and directors loans, was removed as a director on 10 June 2022 and stopped receiving payments thereafter.

Nature of the claim / relief sought: The claimant brought complaints including unauthorised deduction from wages and claimed pay and sick pay (including statutory sick pay) after his removal as a director. He sought to recover sums he said were payable as wages and to vindicate entitlements under his contract of employment.

Procedural history: The Employment Tribunal (Employment Judge Cline) concluded the claimant remained an employee but found that, on the facts, payments received by the claimant were made in his capacity as a director and shareholder and that, once removed as a director, he was not entitled to further payments. That tribunal dismissed claims for unauthorised deduction of wages and for sick pay. Limited grounds of appeal were permitted to proceed to the EAT by Deputy Judge Bowers KC. A later Employment Tribunal hearing (May 2025) found the claimant was constructively and unfairly dismissed on 3 February 2023 and determined he remained an employee to that date; however, the EAT determination under this appeal addressed errors in the earlier factual and legal analysis.

Issues framed by the court:

• Whether appointment as a statutory director extinguished or altered the claimants contractual entitlement to wages under the August 2015 employment contract;
• Whether the Employment Tribunal correctly characterised the payments made to the claimant (dividends, loans, PAYE) and properly treated that manner of payment as determinative of entitlement to wages and statutory sick pay;
• Whether the Employment Tribunal applied the correct legal tests when deciding employee status and rights under sections 13, 27 and 230 of the Employment Rights Act 1996 and relevant authorities.

Courts reasoning and outcome: The EAT found the Employment Tribunals reasoning to be perverse because it concluded that the claimant remained an employee but had no entitlement to wages as an employee, a position inconsistent with the essentials of a contract of employment. The EAT emphasised that the tribunal should have determined whether the contract was terminated or varied when the claimant became a director, and should have investigated what duties the claimant performed and whether any additional directorial duties were part of his employment. The Employment Tribunal placed excessive weight on the form of payment (dividends and loans) rather than analysing the contractual relationship and factual matrix. For these fundamental errors of law and fact the EAT allowed the appeal and remitted the matter to another Employment Tribunal for reconsideration and further case management, noting it may be appropriate to determine the remitted issues together with remedy for the unfair dismissal complaint.

Appeal allowed and remitted to another Employment Tribunal for reconsideration. The EAT held that the Employment Tribunals decision was perverse and infected by legal error because it treated the manner of payment as dispositive, failed to decide whether the employment contract had been terminated or varied on appointment as director, and failed to make necessary findings about duties and agreed remuneration. Remittal was required so a tribunal can apply the correct legal principles and make the necessary factual findings.

The appeal proceeds from a judgment of the Employment Tribunal (Employment Judge Cline) delivered to the parties on 8 August 2023. Limited grounds of appeal were permitted by John Bowers KC, Deputy Judge of the High Court. The Employment Appeal Tribunal delivered the present judgment on 14 August 2025 ([2025] EAT 121), remitting the matter to another Employment Tribunal. Subsequent Employment Tribunal proceedings (Employment Judge Leach, May 2025) made findings of constructive and unfair dismissal, but the EATs determination addressed errors in the earlier tribunals legal and factual analysis.