From chamois leather to sham contracts...
The Court of Appeal, in the recent case of Autoclenz Ltd v Belcher and others, has revisited the much discussed issue of the importance of express contractual provisions in determining an individual’s status as an employee, worker or self employed contractor. Jane Wallenstein explains more.
Questions of legal status frequently arise when individuals whose express contractual terms describe them as self employed (such as contractors or bank workers), subsequently try to argue that the contracts are a sham and they are in reality workers or employees and therefore entitled to the legal protection that is afforded to these positions. This has led to a long line of cases considering how to approach allegedly “sham” contracts. Earlier this year the Court of Appeal gave some guidance in the case of Protectacoat Firthglow Limited v Szilagyi when they held that when assessing whether express contractual provisions should be disregarded when determining an individual’s status “The question is always what the true legal relationship is between the parties. If there is a contractual document that is ordinarily where the answer is to be found. But, if it is asserted by either party, or in some cases by a third party that the document does not represent or describe the true relationship, the court or the tribunal has to decide what the true relationship is.”
The current case was bought by a number of car valeters engaged by Autoclenz, in 2007, on a “subcontract” basis. The terms issued to the valeters stated that:
- the valeters could provide a substitute to carry out the valeting on their behalf (i.e. there was no personal service required); and
- the valeters would not be obliged to provide their services on any occasion;
- Autoclenz was not obliged to provide work (i.e. there was no mutuality of obligation).
The reality of the working arrangement was that Autoclenz provided all the cleaning products and equipment for the valeters and arranged group insurance cover. The valeters were paid on a piecework basis and submitted weekly invoices. Autoclenz deducted a fixed sum each week for the provision of the insurance cover and cleaning materials and the valeters were responsible for their own payment of tax and NICs.
In November 2007, the valeters bought a claim in the tribunal seeking a declaration that they were in fact employees and an order that Autoclenz pay them unpaid holiday pay under the Working Time Regulations and also salary no lower than the national minimum wage.
The Tribunal decisions
The Employment Judge upheld the claim finding that the degree of control exercised by Autoclenz fully integrated the valeters into its business and that the contract terms allowing them to provide substitutes and suggesting a lack of mutual obligations did not reflect the reality of the situation.
Autoclenz appealed and the EAT allowed the appeal to the extent that they held the valeters were not employees, but they went on to find they were workers. In reaching this decision the EAT held that the Tribunal had misdirected itself in looking behind the express terms of the written contract and concluding that they did not reflect the true nature of the parties relationship. According to the EAT, in order to disregard the express contractual terms that had been agreed between the parties, an intention by both parties to misrepresent was necessary. Autoclenz appealed the decision that the valeters were workers and the valeters appealed against the EAT’s decision that they were not employees.
Court of Appeal
The Court of Appeal held the valeters were employees.
What does this mean for you?
Helpfully, the Court of Appeal gave the following guidance about how tribunals should address disputes over the genuineness of a written term of a contract:
- In an employment context where an “employer” is in a position to dictate what terms are signed by the individual, it is not necessary to show a common intention to mislead.
- The focus of the Tribunal’s enquiries must be to discover the actual legal obligations of the parties.
- Evidence of how the parties conducted themselves in practice may be persuasive but, the fact that a particular contractual provision is never actually exercised (i.e. the right of substitution), does not automatically mean that it is not genuine.
Coleman v Attridge - EAT widens the scope of "associative" to any third party
Although the DDA prohibits discrimination in employment against a disabled person and harassment which relates to a disabled person’s disability, it does not expressly protect non-disabled individuals from discrimination or harassment based on their association with a disabled person. Chloe Edwards sets out the latest position in this long running litigation.
Ms Coleman’s claim against her former employer has been widely publicised. In brief, she claimed that she had been subjected to direct discrimination on the grounds of disability. Ms Coleman was not disabled but she was the primary carer for her disabled son.
A pre-hearing review considered the preliminary issue of whether Ms Coleman was entitled to bring her claim under the Disability Discrimination Act 1995 (DDA), as she was not disabled but was relying on her association with a disabled person. The tribunal referred to the ECJ the issue of whether associative discrimination is prohibited under the Framework Directive (the Directive which establishes a general framework for equal treatment in employment).
The ECJ held that direct discrimination and harassment on the grounds of disability, in relation to a non-disabled person who is a primary carer of a disabled child, are prohibited by the Framework Directive.
Attridge appealed to the EAT again, arguing that the tribunal had erred in that it had “distorted” and “re-written” the DDA and that the Directive could not have any effect on events occurring before 2 December 2006 (which was the date by which member states were obliged to implements the Directive into domestic law).
The EAT dismissed the appeal on both grounds and the claims were remitted to the tribunal to consider the substantive merits of the claim.
The Employment Appeal Tribunal has agreed with the tribunal that the wording of the DDA should be read to cover harassment or discrimination of or related to a third party disability. The EAT has however gone further and has said that there is no need for there to be an “association” between the claimant and the disabled person; it is enough that there has been adverse treatment on the grounds of disability. The fact that the disability is not the claimant’s own is irrelevant.
What does this mean for you?
The judgment is therefore not limited to carers or those “associated” with a disabled person; rather it covers direct discrimination or harassment based on the disability of any third party. The case does not however extend to require employers to make reasonable adjustments for carers.
Employers should keep in mind that this case may have implications for other types of associative discrimination, for example, age and sex discrimination. The Equality Bill, which is intended to come into force in October 2010, will prohibit all forms of discrimination.