Appeal court rules on employee status

A worker categorised as self-employed for tax purposes is not automatically excluded from claiming rights as an employee, the Court of Appeal has ruled.

In Payne v Enfield Technical Services Ltd; Grace v BF Components Ltd, Ray Payne and Ian Grace worked exclusively for their respective appellant companies on what they thought was a selfemployed basis. Subsequently, however, their employers indicated that they were employed. When the two men were sacked, both claimed to be employees and alleged unfair dismissal. The employment tribunals accepted that they were employees, but the companies claimed the men were precluded from making such claims since they were unable to establish a continuous period of employment of one year. Alternatively, they argued, any contract of employment that did exist could not be relied on since it was tainted with illegality on the ground that the parties had represented to the Revenue that they were self-employed for tax purposes. These arguments were accepted by the employment tribunal in Grace’s case but both the Employment Appeal Tribunal and the Court of Appeal found that while a contract of employment could be unlawfully performed if there were misrepresentations as to the facts, an error of categorisation alone, without false representations, would not make a contract illegal.

Stephen Moore, partner at Berry Smith LLP, which acted in the case, says: “The decision means that an employee will not be precluded from claiming unfair dismissal on the ground of illegality of contract even where he had been treated as self-employed but was later found to have been employed.”