Rainford v Dorset Aquatics Ltd (Employee, Worker or Self Employed): EAT 8 Dec 2021

The claimant (Bradley) and his brother (Ben) were the co-directors of and 40/60 shareholders in the respondent which was a small family company. Bradley worked as site manager at a company site. The brothers were each paid an equal ‘salary’ agreed between them (latterly pounds 1,500 per month) and had PAYE and NI deducted/paid in respect thereof, but the EJ found that this was done on the advice of company accountants for tax reasons without any positive input by either brother. They also agreed between them on the amount of dividends to be paid at the end of the year in accordance with their shareholdings. There was no written employment contract or other record relating to Bradley’s status.

In June 2018 a dispute arose and in due course Bradley brought employment tribunal claims for unfair dismissal, notice pay, unlawful deductions and holiday pay. The EJ decided at a PH that he was not an employee or otherwise a worker for the purposes of s 230 of ERA 1996 and that his claims were therefore unsustainable.

The EAT rejected Bradley’s appeal which was brought on three grounds:

(1) Although there is no reason in principle why a director/shareholder of a company cannot also be an employee or worker, it does not necessarily follow that simply because he does work for the company and receives money from it he must be one of the three categories of individual identified in s 230(3);
(2) It had been open to the EJ to find that Bradley had a right to substitute another to act as site manager in his place based on Ben’s evidence at the hearing that he would have no problem with that and notwithstanding that the issue never arose in practice;
(3) The EJ had not made the error of regarding Bradley’s status as a director and/or shareholder as being mutually exclusive with status as an employee. The level of Bradley’s control over the company and the fact that he shared with Ben in the risk as to the company’s success were referable to his status as a director/shareholder and not directly relevant to the question whether he was an employee or worker but they formed part of the ‘backdrop’ and had not had any significant influence on the EJ’s decision.
Overall, the EJ’s conclusion that Bradley was not an employee or worker was one of fact based on relevant factors and was not perverse.

Hh Judge Shanks
Mr H Sing
Mr D G Smith
[2021] UKEAT 2020-000123
England and Wales


Updated: 27 December 2021; Ref: scu.670376