Cleaning up

Autoclenz Ltd v Belcher and ors

Although the law defines who is an employee and who is a worker, it can often be hard for tribunals to decide their status in reality. In Autoclenz Ltd v Belcher and ors, the Court of Appeal has said that tribunals must consider whether the written contract reflects reality not just at the beginning of the contract, but also later on when the agreement may have been varied.

Thompsons was instructed by Unite the union to represent its members.

Basic facts

Mr Belcher and his colleagues were engaged by Autoclenz, cleaning cars for British Car Auctions (BCA). The company provided them with cleaning equipment for which they were charged five per cent of weekly pay. It also charged them £9 per week for insurance. The valeters were paid on a piecework basis. When working they had to wear overalls with the BCA logo. The valeters paid their own tax and National Insurance.

The contracts signed by the valeters had always described them as self-employed contractors. In 2006 HMRC had conducted a review and were satisfied that the valeters were self-employed for tax purposes. However, as a precaution, in 2007 Autoclenz introduced revised terms of contract which, as well as stating that the valeters were self-employed, contained a clause stating that they did not have to carry out the work personally (known as the substitution clause). There was also a clause stating that there was no obligation on Autoclenz to provide work nor on the valeters to accept work on a particular occasion (known as the non-mutuality of obligation clause).

In November 2007 Mr Belcher and a number of his colleagues claimed that they were employees, alternatively workers, and that they were, consequently, entitled to the minimum wage and to paid holiday.

Tribunal and EAT decisions

Relying on the decision of the EAT in Consistent Group Limited v Kalwak, the employment judge decided that the valeters were employees because the substitution clause and the right to refuse work were “unrealistic possibilities”. He concluded that the degree of control exercised by Autoclenz in the way the “contracts were performed placed them in the category of contracts of employment”.

The EAT, however, disagreed that they were employees mainly because after the tribunal had given its judgement, the Court of Appeal overturned the decision in Kalwak (see weekly LELR 77). Instead, it held that before a tribunal can decide that a term of a contract was a sham, it had to be shown that both parties intended to mislead somebody. As there was no intention on the part of the valeters to mislead anyone in this case, the written term could not be a sham. There was therefore no mutuality of obligation and the valeters could not be employees (see weekly LELR 90).

Court of Appeal decision

The Court of Appeal has now overturned the decision of the EAT.

Following the decision of another Court of Appeal in Firthglow Ltd (t/a Protectacoat) v Szilagyi, the Court said that it was essential for a tribunal to “consider whether or not the words of the written contract represent the true intentions or expectations of the parties (and therefore their implied agreement and contractual obligations), not only at the inception of the contract but at any later stage where the evidence shows that the parties have expressly or impliedly varied the agreement between them”.

In this case, the practice whereby valeters were required to notify the company in advance if they were unavailable for work was “wholly inconsistent” with the clause saying that there was no obligation on the claimants to accept work or on the company to offer it. As such the written term did not reflect the true expectations or intentions of the parties.

Equally, the tribunal had been entitled to infer from the available evidence that the substitution clause did not genuinely reflect the rights and obligations of the valeters, as no one had ever been substituted and one of the valeters (with 17 years of experience) was unaware that he even had the right to bring in a substitute.

As the valeters were, in reality, obliged to undertake any work offered to them, the Court of Appeal concluded that Autoclenz also undertook to provide work. And as it determined the way in which the job should be done and which products should be used, it was in control of how the valeters did their work.

On that basis, the Court of Appeal concluded that the claimants were, indeed, employees. Autoclenz is seeking permission to appeal to the Supreme Court (the Court of Appeal having refused permission).