Case law: Court of Appeal confirms tests to determine whether staff operating through personal service companies are employees

Businesses will welcome a ruling confirming the test they should apply when staff taken on through, for example, personal service companies, claim they are employees and protected by discrimination and other employment laws.

A cosmetic salesperson worked at Heathrow Airport selling a cosmetic company’s products from its retail space there which was managed by a company called WDF. Staff were provided by an agency called CSA. The salesperson operated through a personal service company, and CSA had contracted for her services with her personal service company.

Problems arose and the salesperson claimed discrimination. She claimed she was ‘in employment’ with WDF under a ‘contract personally to do work’.

The Court of Appeal has upheld an Employment Appeal Tribunal (EAT) ruling that she was not employed, and her claim failed. The Court said she did not personally have a contract with either WDF or CSA. It also rejected her claim that she was in an employment relationship because she was in a ‘subordinate’ position to WDF – that is, she was bound to act on any instructions they gave her. The Court found she had not been in a subordinate position. In addition, under the contract with her personal service company she had the right to substitute another person to do the work rather than do it personally (which she had done in the past).

This decision confirms that the test of whether a person is to be treated as an employee is:

• Whether there is a contract between the ‘employer’ and the individual.
• If there is, whether it requires them to do the relevant work personally, so they cannot substitute someone else, or sub-contract the work.

The Court rejected her argument that, provided she could show she was ‘in employment’ with WDF, there was no need to consider whether she had a ‘contract personally to do work’.

Operative date

• Now

Recommendation

• Businesses taking on staff via arrangements involving, for example, agencies and personal service companies, should ensure they are clear whether or not a staff member is an employee entitled to employment law rights such as the right to bring discrimination claims.

Case ref: Halawi v WDFG UK Ltd T/A World Duty Free [2014] EWCA Civ 1387