In order to decide whether someone is an employee or an independent contractor, tribunals have to consider the degree of control that the employer has over the individual, among other things. In Bannerman v Euroscot Engineering Ltd, the Employment Appeal Tribunal (EAT) held that the claimant was not an employee because he could not show that the company had ultimate control over him.
Mr Bannerman was engaged by Euroscot Engineering Ltd in June 2014 to provide advice on “business matters” such as business development as well as generally improving productivity and processes. In addition, he provided advice in relation to a specific project in the Middle East. Mr Bannerman was given free rein in terms of deciding how to do his work and when he should do it.
Although the managing director, Mr Rorison, took advice from Mr Bannerman and did not direct what he did nor how he did it, he still retained the power to make strategic decisions and give directions designed to implement those decisions. Equally, however, it was said that at times, Mr Bannerman told Mr Rorison what to do.
In June 2017, Mr Bannerman lodged tribunal claims for unfair dismissal and wrongful dismissal, among other things. The first question for the tribunal was whether he was an employee or not.
The tribunal examined the evidence with reference to the test in Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance which held that a contract of employment exists if the three following conditions are satisfied:
- The “servant” agrees that, in exchange for a wage, they will personally work for the master;
- They will be subject to the master’s control; and
- The other terms of the contract are consistent with a contract of service.
The tribunal concluded that, although there were some indicators that Mr Bannerman had a contract of employment with the company in the sense that he had to work personally and the company had to offer him work which he had to do, he operated largely independently. He was therefore a consultant, not an employee.
Mr Bannerman appealed on the basis that the tribunal was wrong about the question of control. Although he could act independently on a day-to-day basis, ultimate control over what he did rested with the company.
The EAT held that the key question was whether the tribunal’s findings showed that the company had an overarching right of control to the extent that a term to that effect should have been implied into the contract.
The tribunal had decided in this case that the company retained control over business strategy while Mr Bannerman had control of the day-to-day running of the business and the implementation of the strategies. Although this might imply that the company had ultimate control of Mr Bannerman’s work, this did not automatically follow.
The tribunal was satisfied that, as Mr Bannerman sometimes told Mr Rorison what to do, this constituted prima facie evidence of his independence from the company. Although that did not mean he could not be an employee, no evidence had been offered to show that these apparently autonomous acts were in fact subject to the ultimate control of the company.
The EAT was therefore satisfied that, having applied the test in Ready Mix, the tribunal was entitled to decide that while the company had ultimate control over some matters, it was not enough to justify the conclusion that Mr Bannerman was an employee.
It therefore dismissed the appeal.
A key point in this case was the fact that there was no written contract and very few facts on the degree of control between the parties. In the absence of any facts that necessarily implied a term giving complete control of all matters to the employer, it was open to the tribunal in these circumstances to decide that a right of control was held by them. This case is a reminder that employee status cases are fact specific. It is therefore important to gather as much evidence as possible as to who has ultimate control.