To qualify for the minimum wage and holiday pay, individuals have to establish their employment status as workers. In MacAlinden v Lazarov and ors, the Employment Appeal Tribunal (EAT) held that, in order to decide, judges have to focus on whether the worker is actively marketing their services as an independent person to the world in general or working for someone else as an integral part of their operations.
After successfully auditioning for a play being produced and directed by Mr MacAlinden, five actors agreed to the terms of an “actors contract”. This included a clause that they would be paid by way of a profit share once the production was over.
However, although the play gained critical success it did not produce a profit so none of the actors received a payout. They lodged a tribunal claim that, as workers, they were entitled to the national minimum wage as well as holiday pay under the Working Time Regulations.
Under section 54(3) of the National Minimum Wage (NMW) Act a worker is defined as an individual who either works under a contract of employment or any other contract … “whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.”
Section 230(3)(b) of the Employment Rights Act (ERA) covers individuals contracted “to do or perform personally any work or services for another party to the contract” unless that party is a client or customer of the individual’s business or profession.
The tribunal judge said that the five claimants had each entered into a contract with Mr MacAlinden and that as they had each undertaken to perform work personally, there was “a sufficient degree of mutual obligations on the facts found” for them to be workers.
Mr MacAlinden appealed on the basis that the judge had failed to consider the exception under both the NMW and the ERA. That is, whether the actors were carrying out a profession or business undertaking, making him their client or customer.
The EAT agreed that the employment judge had failed to take note of a crucial passage in Cotswold Developments Construction Ltd v Williams. This made clear that judges should focus on whether the “purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations”.
In this case, there was evidence that at least one of the actors was marketing her services as an independent person as opposed to having been recruited to work for Mr MacAlinden as an integral part of his theatrical operations. In other words although she was “immersed in [the] play once she had been cast in it … she was not integrated into [his] theatre production business”.
As the judge had failed to approach the question of worker status correctly and had not given sufficient reasons for his decision, the case would be re-heard by a new tribunal.