In the case of Rainford v Dorset aquatics Ltd, R and his brother, B, were co-directors and 40/60 shareholders of Dorset Aquatics (the Company). R worked for the Company in a range of capacities, including as site manager at a longstanding landscaping project, and by taking responsibility for marketing and social media. R decided his own hours of work and was not under the control of B or anyone else at the company. There was no written contract governing R's employment status. Both R and B were each paid an equal ‘salary’, from which PAYE and NI deductions were made. They also received dividends based on their shareholdings.
A dispute arose in June 2018 and R brought claims in the Employment Tribunal (ET) for unfair dismissal, notice pay, unlawful deductions and holiday pay. The ET considered R's employment status as a preliminary issue.
The ET found that R was neither an employee nor a worker under section 230 Employment Rights Act 1996, taking into account:
R appealed to the EAT.
The EAT dismissed the appeal, holding that:
We are used to categorising people who work for businesses as employees, workers or as self-employed. This case is a useful reminder of the fact that director/shareholders can perform work for a company without falling into any of these categories. From a practical perspective, it is always sensible to ensure appropriate documentation is in place that accurately reflects the reality of all working relationships in order to reduce the risk of such a dispute arising.