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Right of Substitution - Franchisees Neither Employees Nor Workers

on Friday, 14 January 2022.

In the case of Stojsavljevic v DPD Group UK Ltd, the Employment Appeal Tribunal held that owner driver franchisees (ODFs) who carried out delivery and collection services for DPD, were self-employed franchisees rather than employees or workers.

What Was the Contractual Agreement Between the Parties?

In 2013, two ODFs entered into DPD's standard form franchise agreement relating to the provision of parcel delivery and collection services - known as the Agreement. They were also given a non-contractual operating manual - known as the Manual.

The Agreement required the ODF to supply a driver (who could be the ODF or another person) to perform the services. According to the Manual, if an ODF needed to engage a substitute driver, they would need to supply a copy of the driving licence of the proposed driver and complete an application form, in order for DPD to authorise the substitute. The Agreement confirmed it was the OFD's responsibility to ensure substitute drivers were trained in accordance with DPDs procedures and policies.

Status of the ODF's

A dispute arose between the parties, prompting the OFDs to claim at Tribunal that they held either employee or worker status. The Tribunal disagreed, and the EAT has now upheld the Tribunal's decision.

The ODFs' employment status turned on the right of substitution in the Agreement. The Tribunal correctly found the Agreement represented the true nature of the relationship between the parties.  The fact that the ODFs tended to use cover drivers who were other ODFs or drivers of other ODFs did not undermine the broad contractual right to use a substitute of their choice. It was reasonable for DPD to check a substitute driver's qualifications and training and this did not detract from the broad right of substitution. On this basis the EAT held the ODFs were self-employed franchisees.

Best Practice for Employers

This case highlights the importance of ensuring written terms between parties reflect the true nature of the working relationship. Here, the right of substitution was genuine and could not be unreasonably restricted by DPD. There was therefore no requirement to render personal service under the Agreement, and this meant the ODFs were not considered employees or workers.  

Organisations putting in place their own self-employed agreements should consider the extent of the right of substitution they feel able to permit. If that right of substitution is to be limited in any way, there may be implications for the other party's employment status and the rights they could assert at Tribunal if a dispute were to arise.

For more information or advice, please contact Mark Stevens in our Employment Law team on 0117 314 5401, or complete the form below.

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