At first glance this might appear to be a simple question. It is
certainly an important one, because for many statutory claims, the
Claimant / Pursuer must be able to establish that he or she is an
employee. It is in fact a complex issue, which courts have been
grappling with in recent years. It figures in two decisions from
the Supreme Court this month.
Jivraj v Hashwani
In this first case, the Supreme Court took a restrictive
interpretation to the scope of the discrimination provisions
relating to employment. These provisions protect those in
employment from various forms of discrimination. The definition of
employment is broad, and includes "employment under ... a contract
personally to do work." Previous case law had found that
self-employed individuals can potentially fall within the
definition, provided they undertake to perform their work
personally. The issue in this case was whether or not this
definition was wide enough to include arbitrators appointed by the
parties to a contract.
The case involved a joint venture agreement containing an
arbitration clause which provided that arbitrators must be
respected Ismaili Muslims. A dispute arose and one party attempted
to appoint a non-Ismaili arbitrator, claiming that the arbitration
provision breached the Employment Equality (Religion or Belief)
Regulations 2003.
The Supreme Court found that arbitrators are not employees and
thus are not covered by the Regulations. It was held that the
question was whether "on the one hand, the person concerned
performs services for and under the direction of another person in
return for which he or she receives remuneration or, on the other
hand, he or she is an independent provider of services who is not
in a relationship of subordination with the person who receives the
services." Specifically, they decided that arbitrators are
independent providers of services who are not in a relationship of
subordination with the person receiving the service and,
importantly, that the arbitrator was not under the direction of the
parties.
Although this case was decided under the now repealed Employment
Equality (Religion or Belief) Regulations 2003, the provisions
considered were identical to those under the Equality Act 2010, and
therefore the case remains relevant.
The decision was welcomed in the field of arbitration, for
obvious reasons. However, the case has much wider implications to
all situations where individual contractors provide services to
other businesses, such as in the case of plumbers, electricians,
accountants and so on. In these situations, the issue of whether
the individual contractor is in employment will also arise and will
be determined on the basis of the tests set out above. As a result,
each case will depend on its own facts and a crucial consideration
will be the extent to which the individual contractor is under the
control of the business to which they are providing their services.
The greater the level of control, the greater the risk that the
individual will be found to be in employment for the purposes of
the Equality Act 2010.
On a separate but equally important issue, the Supreme Court
also considered the "occupational requirement" exemption contained
in the Regulations and the Act, and held that this was not a test
of "necessity" but rather the less stringent test of whether the
discrimination was "legitimate and justified" as an occupational
requirement.
Autoclenz Ltd. v Belcher
This case concerned claims by twenty car valeters for paid
holidays and the minimum wage. To succeed with their claims the
valeters had to establish that they were "workers" under the
definitions in the National Minimum Wages Regulations 1999 and the
Working Time Regulations 1998. Autoclenz argued, based on the terms
of the contract with the valeters, that they were selfemployed and
therefore not eligible to make these claims.
The valeters had each entered into contracts with Autoclenz
which included statements that the valeters:
• were independent contractors
• would not be regarded as employees of Autoclenz
• would be responsible for their own tax and national
insurance
• were entitled to appoint a substitute to perform the services in
their place.
The valeters also had to purchase their own insurance, uniforms
and materials (of which the uniforms and materials could be
purchased from Autoclenz). Therefore, on the face of these
documents, and if they were the only consideration, it would be
very difficult to argue that the valeters were workers and were
entitled to bring claims.
However, the Employment Tribunal held that the valeters were
employees in all but name and that the contracts did not reflect
the reality of the situation. As such, they found that the valeters
were employed under contract of employment and were therefore
workers for the purposes of the legislation. This decision was
appealed to the Employment Appeal Tribunal and the Court of Appeal
before finally being appealed to the Supreme Court.
The question for the Supreme Court was the extent to which it
was permissible to disregard the terms of a written agreement on
the basis that the documents did not reflect what was actually
agreed between the parties and / or the true intentions or
expectations of the parties.
The Supreme Court upheld the decision of the Employment Tribunal
and the Court of Appeal, finding that the valeters were workers
employed under a contract of employment notwithstanding the terms
of their written agreement. The Supreme Court emphasised that the
crucial question was "what was the true agreement between the
parties?" There was no need for there to be a sham contract before
the court was permitted to look beyond the written terms of the
contract to the reality of the situation.
This case is further confirmation that the contractual
documentation will not necessarily be the determining factor in
deciding whether or not an individual is an employee or genuinely
self-employed, and that the court may look at the reality of the
situation to establish the true relationship between the
parties.