Employment status: the Supreme Court tears up the contract in the Autoclenz

In the landmark case of Autoclenz Ltd v. Belcher, the Supreme Court has endorsed the approach of lower courts in looking behind the written contract in employment cases to see what was actually going on.  Autoclenz said that its car valeters were self-employed, although they had never worked for anyone else for years and years.  They were found in fact to be employees: the court said that the ‘contract for services’ which they had signed did not reflect reality – see the judgment at http://www.bailii.org/uk/cases/UKSC/2011/41.html.

Courts have always been able to take this approach where they have suspected a sham: however what arenew here are the endorsement of the Supreme Court and the justification given for it, which goes somewhat wider than before. The lead judgment says that ‘the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed, and the true agreement will often have to be gleaned from the circumstances of the case, of which the written agreement is only a part’.

Reading the earlier judgments in this case, one is tempted to ask why Autoclenz bothered to appeal: the stance that their contract documents promoted had been contradicted by their own chief witness.  The result, though, is likely to be that courts will start looking into all ‘the circumstances of the case’ in instances that are much less clear cut, with many more findings for a status of employment.

 Moral: always make sure that your contracts reflect the facts on the ground.

For further information and advice on employment status, please contact David Kirk on 0845 519 5041, or e-mail him at dk@david-kirk.co.uk.