Employment Appeal Tribunal finds individual working through service company was not a worker

Background

In the case of Plastic Omnium Automotive Ltd v Horton, Mr Horton was engaged through a service company. He and another individual were shareholders of the service company and drew salary and dividends from it. There was a written contract in place between the service company and Plastic Omnium Automotive (POA) to govern the working relationship. Under the terms of the contract Mr Horton was not entitled to supply a substitute in his place, although in reality he did do so for a period of time. The contract also provided that there was not a contract of employment in place, and stated that Mr Horton was not entitled to holiday pay, sick pay or other paid absence.

In respect of Mr Horton's day-to-day working life, he was to a large extent integrated into POA. In particular, he was:

• provided with IT equipment, a company email address and an office access card
• required to report to one of POA's directors
• required to work regular hours and attend staff training paid for by POA
• treated the same way as employees, save for that he did not have to clock in or out, was not appraised and was not subject to a disciplinary procedure

What is worker status?

Worker status is a hybrid employment status, affording access to some employment rights including the right to paid holiday and other working time rights. All employees are workers, but not all workers are employees. Individuals who are not employees will be workers if:

• they have entered into a contract under which they undertake to personally perform work or services for another party to the contract
• the other party to the contract is not a client or customer of the individual's business

Litigation

When a dispute arose between Mr Horton and POA, he brought an Employment Tribunal claim asserting he was an employee or alternatively, a worker. POA argued that he was neither a worker nor an employee.

The Employment Tribunal found that Mr Horton was not an employee, but that he was a worker, due to his integration into POA and the fact that he was in a subordinate or dependent position. The Tribunal found that POA had unlawfully deducted some £28,000 from Mr Horton's wages. POA appealed to the EAT.

EAT decision

The EAT upheld the appeal. The contract accurately reflected the working relationship between the parties. Mr Horton had turned down the opportunity to become an employee of POA, saying that the existing contractual relationship was working well for him. The fact that there was another shareholder working for the service company in the same way was also relevant to whether POA was a client of the service company.

The EAT also noted that the contract was between POA and the service company. There was no contract with Mr Horton himself. As he could not be said to have entered into a contract with POA, he could not satisfy the first part of the test for worker status.

The fact that Mr Horton was well integrated into POA and in a subordinate working relationship did not mean that these other factors could be ignored. Mr Horton was neither an employee nor a worker in law.

Learning points

Whilst the extent of an individual's integration into the business may provide context to help understand the nature of a working relationship, this case provides a good example of the importance of referring back to the legal test in order to determine employment status.

For more information or advice, please contact Jessica Scott-Dye in our Employment on 0117 314 5652, or complete the form below.