When is a self-employed worker not a self-employed worker?

Wednesday, 03 August 2011 00:00

Over the years, employers have sought, in many different ways, to minimise the number of employees they directly employ, or avoid employer-employee relationships altogether. One way of doing that is to hire workers as self-employed contractors.

A self-employed contractor does not have the same rights as an employee (such as minimum wage, sick pay and holiday pay). The employer can also leave the worker to deal with their own tax and national insurance.

There is a third category of employment status, that of a worker. A worker does not have quite the same rights as an employee (they cannot claim unfair dismissal for example) but they are entitled to the minimum wage and protection under the working time regulations.

Accordingly, from an employment law perspective, an employee has the most protection, a worker has some protection, but a self-employed contractor has none.

Genuinely self-employed contractors pose no problem. Historically however, problems have arisen where employers have sought to require people that work for them to become self-employed but who are then treated in almost every way as an employee, or at least a worker. The most popular way of doing this is to provide, in a written agreement, that workers can substitute someone else to do their job when they are unavailable, and which says that the employer does not have to offer work and that the employee does not have to accept it when offered. It became hard for Employment Tribunals to override a written contract like this which, as a matter of general contract law, is usually conclusive.

Autoclenz Ltd -v- Belcher and Others, a long awaited case in the Supreme Court (formerly the House of Lords), has now made it clear that what is important in determining the employment relationship is not what the contract says, but what actually happens on a day-to-day basis. The Supreme Court went on to say the usual rule about written agreements being conclusive has to be viewed flexibly considering the special nature of an employment relationship.

In that case, Autoclenz arranged contracts with the workforce as described above but in reality, they were treated as employees, or at least workers. For example, they wore company uniforms provided to them, were told how to work and who to work with, whilst they invoiced Autoclenz, those invoices were prepared by Autoclenz, and all necessary equipment was provided to them. The claimants, of which there were at least 20 in the test case, were successful. It is likely that all other similar employees working for Autoclenz must now be regarded as employees or workers.

This case will have a significant impact on Autoclenz but is also important for all other employers. In acknowledging that an employment relationship is a special limb of contract law, uncertainty has been created because, despite what a contract says, an employee can successfully argue the true position is something different. It presents an opportunity for all atypical workers (agency staff, contractors and volunteers for example) to argue they are employees, or at least workers. Tribunal claims as a result could be expensive for employers.

For more information, contact our specialist employment team on 01392 207020 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it