The applicant had complained of unfair dismissal.The employment contract had been dressed as a self employed service provider’s contract to privide him with tax, and was unlawfully so. The employer appealed, saying that as an unlawful contract, the court should not support it.
Held: The company’s appeal failed. The lower tribunal had correctly concluded that he was employed under a contract of service. It would not be contrary to pubic policy to allow an employee to withdraw from an unlawful contract.
Ackner LJ said: ‘It is by now well settled that the label which the parties choose to use to describe their relationship cannot alter or decide their true relationship; but in deciding what their relationship is, the expression by them of their true intention is relevant but not conclusive. Its importance may vary according to the facts of the case.’
Stephenson LJ said:
‘[T]he Master of the Rolls [in Massey] appears to be saying that, when an agreement is made for a man to be self-employed, that affords strong evidence that that is the real relationship; and he may be saying that, if such an agreement is found, the man must accept it. He cannot afterwards assert that he was only a servant. On the other hand, it may be that the Master of the Rolls meant that, if the evidence is strong enough to show that a contract for services is the real relationship and that is found to be the real relationship, then the man must accept it. I do not myself find the words entirely clear but, read in their context – which itself clearly indicates considerable sympathy with dissenting view expressed by Lord Justice Lawton in the Ferguson case [Ferguson v John Dawson and Partners (Contractors) Ltd [1976] IRLR 346] – I do not think that they would justify me in concluding that wherever there is an agreement openly made that a particular person shall be treated by a company as self-employed, it follows that he must accept the position and cannot claim compensation for unfair dismissal as if he was not self-employed but an employee. It must be the court’s duty to see whether the label correctly represents the true legal relationship between the parties in that case as in every other.
. . Then the learned Lord Justice [Lawton] went on to consider the facts of the case and to find that that was not, on the facts of that case, so. Lord Justice Eveleigh agreed with both judgments.
It is nowhere stated by Lord Justice Lawton in the judgment which he gave that an agreed change in the status of a person or an agreed choice of status necessarily determines that status and prevents that person from resiling from his choice or from pursuing what would appear to be a remedy completely inconsistent wit the choice that he has deliberately made.
Fairness and justice have throughout incline me to accept the minority view in this case. If Mr West chooses to call himself self-employed for fiscal advantages which are denied to an employee, why should he claim the advantage of statutory rights which are available to an employee but denied to the self-employed? And why should the agreement of employers to treat him as self-employed make any difference to the injustice or unfairness of his having both advantages? But, in my judgment, the answer is that he and his work should be classified not by appearance but by reality. If he is really self-employed the Industrial Tribunal should refuse to consider his statutory rights as an employee. If he is really an employee or servant the Inland Revenue should reclaim tax deductions which have been granted to him as self-employed; and, if this court declares that the true legal position between him and his employers is not in accordance with the agreement deliberately chosen by the parties and put before them for their information, I do not suppose that the Inland Revenue would fail to discharge their statutory duty.
But I have come to the conclusion that the minority view cannot prevail. I have come to the conclusion that the decision of the Industrial Tribunal was right and that the true legal relationship of the parties was not that of a self-employed agent working independently for this company.’
Ackner, Stephenson LJJ, Sir David Cairns
[1980] IRLR 201, [1980] EWCA Civ 6
Bailii
Employment Protection (Consolidation) Act 1978 54(1)
England and Wales
Citing:
Applied – Market Investigations v Minister of Social Security 1969
One way of deciding whether a person is self employed is to ask whether he can be said to be running a business of his own. Different tests may have to be combined to produce an overall answer.
Cooke J said: ‘The fundamental test to be applied . .
Cited – Massey v Crown Life Insurance Company CA 4-Nov-1977
Massey worked as Crown Life’s manager under 2 contracts, one a contract of employment, the other a contract of general agency. Tax and other contributions were deducted from wages paid under the former, while commission was paid under the agency . .
Cited by:
Cited – Brook Street Bureau (UK) Ltd v Dacas CA 5-Mar-2004
The applicant cleaner sought compensation for unfair dismissal. The issue was whether she was an employee of the respondents, of their client where she did her work, or was not an employee at all. She worked for an agency, who sent her out to . .
Lists of cited by and citing cases may be incomplete.
Employment, Contract
Leading Case
Updated: 31 October 2021; Ref: scu.194292