On paper, when is an employee not an employee?

The Supreme Court’s decision in a case involving two companies already familiar to CUK readers- Autoclenz V Belcher- is expected soon, writes Ben Standing, of legal firm Browne Jacobson LLP. This anticipated decision will determine how far employers, and those who work for them, can dictate in the contractual documents whether someone is employed or a contractor.

The implications could be highly significant for businesses, particularly given that employees have greater employment protections - and incur higher costs to employers as a result, than contractors.

When faced with a question of employment status, the current law allows the court to look at the true legal relationship between the parties, how the relationship operates in practice – not just the contractual agreement.

But Autoclenz, a car valet provider, is arguing that the nature of the relationship is defined by the agreement – not by its practical operation. The only exception should be where evidence shows that the contractual documents are a sham.

In the event that the Supreme Court agrees with Autoclenz, consultancy and contractor agreements may become more appealing, at least to the company paying for the services of a consultant/contractor, as it provides for more flexibility so far as terminating the agreement without the dangers of the much more extensive protection which employees have. Whether the Supreme Court will go as far as Autoclenz is arguing, very much remains to be seen however.

A judgement which fully endorses Autoclenz’s arguments may receive a mixed response. So far as a genuine contractors are concerned, it may not influence matters a great deal in that the contract will properly reflect the true position.  However, so far as those who might, as matters currently stand, qualify as employees, such workers might find that they lose the protection which the valeters have thus far managed to establish.

Tuesday 21st June 2011