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.
This update was published in Legal Alert - December 2014
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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.
- 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.
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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