Mark Craven v Forrest Fresh Foods Limited

An employee does not cease to have contractual rights to work and remuneration merely because they are appointed a statutory director. Where an employment contract predates the directorship, a tribunal must determine whether it was terminated or varied, and identify any agreed changes to duties and remuneration.

Payment descriptions, including dividends and director’s loans, may be relevant but do not alone establish that remuneration was received solely in a directorial capacity. A finding that a person remained an employee, while holding that their contract required no employee work and gave no right to employee remuneration, is legally incoherent.

The claimant had a written contract of employment as a business development manager. He was later appointed a statutory director and received payments principally described as dividends and director’s loans. After his removal as director in June 2022, the respondent made no further payments.

The Employment Tribunal held that he remained an employee but dismissed his claims for unpaid wages and sick pay. It found that he had acquiesced in a payment structure based on his directorship. The claimant appealed, contending that this approach wrongly deprived a continuing employee of contractual remuneration.

1. Appeal allowed. The Employment Tribunal’s conclusion was perverse. It found that the claimant remained an employee, yet treated his contract as requiring no work in an employee capacity and as conferring no entitlement to employee remuneration after his appointment as director. Those conclusions were incompatible with a contract of employment.
2. Where an employee is later appointed a director, the tribunal must first determine whether the existing employment contract was terminated. If not, it must identify any agreed variation and its terms. It must then make findings on the employee’s duties and agreed remuneration immediately before the appointment, and on whether any additional directorial duties were performed under the employment contract or on another basis.
3. The labels attached to payments did not resolve those issues. The Tribunal had focused excessively on dividends and director’s loans. The guidance in Clark v Clark Construction Initiatives Limited and another [2008] ICR 635 showed that such matters will usually carry little weight in identifying the true relationship. There is nothing unusual in an employee undertaking directorial functions as part of continuing employment.
4. A dispute over statutory sick pay eligibility is not for an Employment Tribunal to determine. Where entitlement is undisputed, however, statutory sick pay falls within wages under section 27 of the Employment Rights Act 1996 and may found an unauthorised-deduction claim.
5. The errors were fundamental. The wage and sick-pay issues were remitted to a differently constituted Employment Tribunal, which might determine them with remedy for the claimant’s unfair-dismissal complaint.

• Employment Appeal Tribunal: allowed the appeal and remitted the wage and sick-pay issues: [2025] EAT 121.
• Employment Tribunal (Employment Judge Cline): dismissed the complaints of unauthorised deduction from wages and unpaid sick pay in a judgment sent to the parties on 8 August 2023.
• Employment Tribunal (Employment Judge Leach): subsequently held that the claimant had been constructively and unfairly dismissed on 3 February 2023, remained an employee until that date, and had been absent through genuine illness.