When is a contractor an employee?

The recent Supreme Court decision of Autoclenz Limited v Belcher and Others has done little to reassure businesses that express contractual arrangements which suggest self-employment will withstand scrutiny in an Employment Tribunal.  The case involved car valeters who were contracted to Autoclenz Ltd under terms which expressly provided that the valeters were independent contractors.  The standard contract included the following terms:

• Autoclenz would "engage the services of car valeters from time to time on a sub contract basis";
• The valeters could provide a substitute, "to carry out the valeting on your behalf, provided that such an individual is compliant with Autoclenz's requirements of sub-contractors as set out in this agreement"; and
• The valeter could refuse work that was offered: "you will not be obliged to provide your services on any particular occasion."

Despite the presence of terms in the contract which referred to independent contractor status, the Supreme Court concluded that the valeters were employed under contracts of employment and were entitled to receive the national minimum wage and holiday pay.  The contract terms were inconsistent with the reality of the arrangement between Autoclenz and the valeters.  The case is all the more interesting because of the HMRC's previous determination that the individuals were self-employed for tax purposes.

The decision confirms that where there is a dispute as to the genuineness of a written term, a Tribunal can look at evidence of how the parties conducted themselves in practice and the parties' expectations of each other.  It also emphasises the importance of the contract terms for an independent contractor reflecting the reality of the relationship between the parties.  For further advice regarding contract terms, please contact us.