Employment Status Sham-bles

Employment status is always an interesting topic which is continually raised with Employment Tribunals. An issue which is often disputed is whether or not contractual documentation entered into between an alleged self-employed individual and their "customer" is a sham, which in effect seeks to obscure the true nature of their relationship. This normally happens where an individual is initially happy to be viewed as a self-employed contractor (usually for tax reasons), but then wishes to argue that they are, in reality, an employee or worker when the relationship turns sour.

The recent case of Boss Projects LLP v Bragg involved such a scenario. Here, an individual who was unequivocally classed in the written contract as being in business on his own account, later alleged for the purposes of claiming holidays under the Working Time Regulations that he was in fact a "worker".

Mr Bragg was a Scaffolding Supervisor who had signed a contract with Boss Projects LLP. Boss provided services to an end client by way of a chain of contracts, but Boss paid Mr Bragg. The contract which he signed stated, amongst other things, that "this legal relationship is one of contractor and independent sub-contractor and specifically is not a relationship of master and servant or employer and employee". The contract also gave Mr Bragg the right to substitute and/or delegate his workload or hire assistance, for which he was to be financially responsible. Further, the contract set out that no holiday or sick pay would be paid to him and that he would be responsible for his own tax and National Insurance.

In line with earlier decisions, a Tribunal held that Mr Bragg was a worker and sought to award the holiday pay to which it felt he was entitled. The Tribunal came to this finding on the basis that, in practice, both parties had expected Mr Bragg to personally carry out the work and that the right of substitution was never intended to be exercised.

Boss appealed against this decision, but the Appeal Tribunal upheld the Tribunal’s view, despite the express contractual provisions. They decided that the Tribunal was right to look at the reality of the situation as well as what was stated in the contract.

This case goes to show that however "watertight" contractual documentation may seem, Tribunals will continue to look at the scenario in practice. For this reason, it is important to ensure that how a relationship works on a day-to-day basis reflects the terms of any agreement between the parties.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.