Employment Update: Employment status

11 November 2008

Employment Group

Parties need not intend deception for a document to be a ‘sham’.
 
In Redrow Homes (Yorkshire) v Buckborough and Sewell, the EAT has had to consider (again) the distinction between 'workers' (as defined in Regulation 2(1) Working Time Regulations (WTR)) and self-employed contractors.
 
Their contracts described the claimants as self-employed builders, who had the right to provide a substitute to do the work in question and also had the right to refuse to do it .
 
The employment tribunal found that, on the facts, these contracts were 'shams' and the claimants were in fact workers and so entitled to paid holiday under the WTR.

On appeal to the EAT, the employers argued that the Court of Appeal had said, in its judgment in the case of Consistent Group v Kalwak , decided in April 2008, that a document can only be called a 'sham' if both parties intend it to paint a false picture of their respective obligations. It was not enough simply to say that the parties operated differently in practice.
 
The EAT now says that there are two circumstances in which a contract may be called a 'sham' -

  • as above in Kalwak - where both parties intended that the document should paint a false picture; but also

  • as in this case -  where neither party intended the written provisions of the contract to be effective. This probably means the same thing but requires slightly less in terms of intention, particularly from claimants, who can say that they simply signed whatever document was put in front of them because they wanted the work.

Point to note –

  • Because of the significantly different statutory rights granted to employees, workers and self-employed contractors, it is always important to be clear as to an individual’s legal status before working with them in any capacity. The documentation will be important, but employers and end-users of services will also need up-to-date legal advice on the current case law to be clear as to their legal rights and obligations.