Autoclenz Ltd v Belcher

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Introduction: The conclusion in Autoclenz Ltd v Belcher & Ors[1] indicates a subtle, albeit potentially significant shift in the approach when deciding Employment Status and Sham Agreements.[2] Prior to this case, the written terms of a contract prevailed as long as it is not a “sham”. However the Supreme Court, in this case, has deemed such an approach too literal, thereby ruling that a written employment contract may be disregarded if the reality of the situation detracts largely from the essence of the agreement. As a result, it undermines the absolute mandate of a written contract, ensuring the protection of any oppressed parties. At the same time, it presents an alternate approach to apply for cases of doubt on the genuineness of contract terms where there is substantial dichotomy in bargaining power between the parties, as opposed to usual commercial transactions.[3] Brief facts about the case: The Claimants are 20 individual valeters who each signed a contract with Autoclenz to provide car washing services. Under the contract terms, the Claimants are expressly described as self-employed and should be working on a subcontract basis. It is also stated in the agreement that they are responsible for their own Tax, National Insurance Contribution (NIC) and cleaning materials. However, the contract did not explicitly state down any clause permitting the use of substitutes to perform valeting services on the Claimants’ behalf.[4] The Claimants’ self-employment state was also confirmed by the Inland Revenue in 2004 but the decision was regarded as “enigmatical” by the Supreme Court.[5] In 2007, the Claimants signed another contract to ascertain that any contractual relationship between them and the company is not of employer and employee.[6] It is also important to note that the 2007 contract contained a clause stating, “For the avoidance of doubt, as an independent contractor, you are entitled to engage one or more individuals to carry out the valeting on your behalf.”[7] The contract also stated that the Claimants “will not be obliged to provide your services on any particular occasion nor, in entering such agreement, does Autoclenz undertake any obligation to engage your services on any particular occasion.” [8] In reality, the working conditions of the Claimants detracted largely from the written terms. While the Claimants were responsible for payment of their own Tax and NIC, the company actually provided cleaning equipments and arranged group insurance cover. The company subtracted a fixed sum, for the insurance and cleaning provisions, from the Claimants’ weekly payment that was due after they submitted weekly invoices from their work. In addition, the Claimants were required to work on daily basis and must notify the company if they were absent from work. As a result, the Claimants appealed to be recognised as employees or workers of Autoclenz in order to gain access to the rights and benefits of an employee or a worker. They would then be paid in accordance with the Section 54 of the National Minimum Wage Regulations 1999 (NMWR) and receive statutory paid leave under the Regulation 2 of the Working Time Regulations 1998 (WTR).[9] However,

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