Autoclenz Ltd v Belcher and others [2009] EWCA Civ 1046 CA
employment status | whether express terms represent intention
The Court of Appeal has upheld an employment tribunal decision that a group of car valeters were employees despite the existence of a written agreement that described them as independent contractors and that allowed them to substitute others to carry out their duties. The written agreement did not accurately reflect the agreement between the parties, and the requirements for an employment contract were satisfied.
A group of car valeters worked for Autoclenz Ltd. There was a written agreement that described them as sub-contractors. In 2007, the valeters signed a new agreement confirming that the contractual relationship was one of client and independent contractor. The agreement entitled the valeters to substitute others to carry out valeting on their behalf. It also stated that valeters were not obliged to provide their services, and Autoclenz was not obliged to engage a valeter, on any particular occasion.
The valeters bought claims in an employment tribunal, seeking a declaration that they were workers or employees and were therefore entitled to, among other things, holiday pay. Under s.230(3) of the Employment Rights Act 1996, a worker is an individual who has entered into or works under “a contract of employment” (s.230(3)(a)), 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” (s.230(3)(b)). Workers that fall under s.230(3)(a) are also employees and are entitled to a wide range of employment rights, whereas workers under s.230(3)(b) are not employees, but are entitled to some employment rights, for example paid holiday under the working time provisions.
The employment tribunal held that the valeters were employees. They were not in business on their own account, and were subject to the Autoclenz’s direction and control. Also, they were required to provide a personal service regardless of the substitution clause introduced in 2007. This clause did not reflect what was actually agreed between the parties. The tribunal referred to Consistent Group Ltd v Kalwak and others [2007] IRLR 560 EAT, in which the Employment Appeal Tribunal (EAT) held that, if in reality no one expected there to be a substitution, the fact that the contract provided for this unrealistic possibility did not alter the true nature of the relationship. The tribunal in this case was satisfied that the written agreement did not describe the true nature of the relationship. Autoclenz appealed.
The EAT held that the tribunal had been wrong to follow the EAT in Kalwak, as this had been overruled by the Court of Appeal in Consistent Group Ltd v Kalwak and others [2008] IRLR 505 CA. The EAT held that for a written contract to be rejected, it had to be shown that both parties intended to mislead somebody. In this case there was no evidence of an intention for the written term to be misleading. Therefore it was not a sham. However, the existence of a qualified substitution clause did not undermine the conclusion that that the valeters had undertaken to do or perform a personal service for Autoclenz. The lack of mutuality of obligation to provide or carry out work also did not prevent the contract from being one of personal performance. Services were not provided to a client or customer. Therefore the valeters were workers (under s.230(3)(b)).
Autoclenz appealed and the valeters cross-appealed, arguing that if it was accepted that they were workers, the degree of control exercised by Autoclenz meant that they were employees. The Court of Appeal dismissed Autoclenz’s appeal and allowed the valeter’s cross-appeal. The Court of Appeal held that there was evidence to justify the employment tribunal decision that, despite the written term that there was no obligation to work, in fact there was. The main issue was whether or not an express term in a contract should be disregarded because it did not represent the actual intentions of the parties. The Court referred to Protectacoat Firthglow Ltd v Szilagyi [2009] IRLR 365 CA, in which the Court of Appeal considered the EAT and Court of Appeal judgments in Kalwak, and the Court of Appeal judgment in Express and Echo Publications Ltd v Tanton [1999] IRLR 367 CA. In Szilagyi the Court of Appeal held that there was no difference of substance between the ruling of the EAT and Court of Appeal in Kalwak, there was a difference only of expression. The issue was whether or not the words in a written contract represent the true intentions or expectations of the parties. In this case the Court of Appeal held that, consistent with Tanton, Kalwak and Szilagyi, where there is a dispute about whether or not a written term is genuine, the focus should be on the actual legal obligations of the parties, for which the tribunal will have to look at the relevant evidence, including the written terms within the context of the agreement and the conduct and expectations of the parties. Szilagyi meant that the EAT in this case had misdirected itself when it held that if there was no evidence of an intention to mislead, the written terms must be taken to represent the intentions of the parties.
The employment tribunal had correctly considered whether or not the written terms were genuine. It had been right to find evidence that the parties had a joint intention that the valeters were obliged to work. The tribunal was also entitled to infer from the evidence that the substitution clause did not genuinely reflect the rights and obligations of the valeters. The fact that a valeter could work for a number of years without knowing that there was a right to send a substitute was evidence that no one expected the right to be exercised. Therefore the valeters were workers. On the question of whether or not they were employees, the Court of Appeal held that both the control test and the requirement for personal performance set out in Ready Mixed Concrete (South East) Ltd v Ministry of Pensions and National Insurance [1968] 1 All ER 433 HC were satisfied. Although the term that entitled Autoclenz not to provide work was inconsistent with a contract of employment, the true agreement was that it would provide work if it was available. This was not inconsistent with an employment contract.
Case transcript of Autoclenz Ltd v Belcher and others (on the BAILII website)
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