Labour Law

Employment Status

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Employment Taxes Cases

Autoclenz Limited v Belcher and Others [2011] UKSC 41

Key Point

• The case establishes the substance‑over‑form principle: the court will determine the terms of the true agreement between the parties to determine if there was a contract of employment, and disregard the terms of the written contract where it represents a ‘sham’ (i.e., does not represent the true intentions of the parties).

Facts

• Autoclenz were a car-wash company which works at auctions and car sellers.
• 20 individual valets claim they were not paid the national minimum wage (NMW) or afforded paid leave as employees. Autoclenz say they were self-employed.
• In 2004 the Inland Revenue carried out a review of the arrangements between Autoclenz and the valeters. On 20 May 2004 it said, somewhat enigmatically, that “it is felt that the balance of probability leans more towards self-employment than PAYE”.
• Autoclenz later made them sign quite an intense document which specified Autoclenz had no obligation to engage their services.
• The employment tribunal found them to be employees: they have to wear uniform, they have no control over their hours, no economic interest in the business, they work in teams, and have to provide personal service. The strict clause in the renegotiated clause did not reflect what they agreed.

Issue

• Whether the written substitution and no‑obligation clauses were genuinely contractual terms and therefore prevented the valeters from being employees or workers.
• More broadly: How should courts determine the true terms of an employment contract where written terms conflict with the practical reality?