Confusion over employment status leads to £28k payout

  • Business Advice
Confusion over employment status leads to £28k payout
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Peninsula Team, Peninsula Team

(Last updated )

Employment status has been the subject of much debate over the years, and a number of significant cases have been brought in an effort to determine where the line lies when it comes to employees, workers, and those not in an employment relationship.

In this case, Plastic Omnium Automotive Ltd v Horton, the claimant was engaged through a service company to provide services to the respondent. Along with another, the claimant was a shareholder of the service company from which they drew salary and dividends.

The service company and the respondent had in place a written contract. Under that contract, the claimant could not provide a substitute in his place although in reality, this happened for some time. The contract also clearly stated that there was no employment contract in place and the claimant was not entitled to holiday or sick pay. However, the daily fee charged by the service company for the services of the claimant included a sum in respect of holiday.

Under the arrangements, the respondent provided the claimant with the IT equipment needed to perform his role, a company email address and an office access card. He also reported to one of the respondent’s directors, was required to work set hours and attend training provided by the respondent. In essence, the claimant was treated the same as any other employee of the respondent, other than that he was not subject to the appraisal or disciplinary process. He was required to sign in and out of buildings, as did employees of the respondent, and requested leave in the same way as employees.

An issue arose between the claimant and the respondent. The claimant brought a claim before an employment tribunal that he was an employee, or a worker, and that the respondent had unlawfully deducted his wages by failing to pay him.

The Employment Tribunal held that whilst not an employee, he was a worker because he was integrated into the respondent’s business and the relationship between the claimant and the respondent operated with the claimant in a subordinate position. The respondent provided the claimant with IT equipment, an email address and he was required to work regular hours and report to one of the respondent’s directors.

The claimant was awarded £28,500 in unlawfully deducted wages.

On appeal, the Employment Appeal Tribunal disagreed and found that he was neither an employee nor a worker. There was no contract between the claimant and the respondent, so he did not satisfy the first part of the test for worker status which would have required the claimant to have entered into a contract personally with the respondent. The contract in place was between the service company and the respondent and it was reflective of the working relationship between the claimant and the respondent. Also, whilst the claimant was well integrated into the respondent’s company, the EAT found that this did not mean that the other factors should be ignored.

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