Autoclenz Ltd v Belcher
|Autoclenz Ltd v Belcher|
|Court||Supreme Court of the United Kingdom|
|Decided||27 July 2011|
|Citation(s)|| UKSC 41|
|Transcript(s)||Full transcript of judgment and press summary|
|Prior action(s)|| EWCA Civ 1046,  IRLR 70|
|Judge(s) sitting||Lord Hope, Lord Walker, Lord Collins, Lord Clarke and Lord Wilson|
|Contract of employment, zero hours contracts|
Autoclenz Ltd v Belcher  UKSC 41 is a landmark UK labour law and English contract law case decided by the Supreme Court of the United Kingdom, concerning the scope of statutory protection of rights for working individuals. It confirmed the view, also taken by the Court of Appeal, that the relative bargaining power of the parties must be taken into account when deciding whether a person counts as an employee, to get employment rights. As Lord Clarke said,
|“||the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem.||”|
Twenty car valeters, including Mr Paul Huntington and Mr Belcher, worked for Autoclenz Ltd in Measham, Derbyshire. Autoclenz Ltd had contracted with British Car Auctions Ltd (BCA) to provide valeting services. The valeters engaged by Autoclenz claimed holiday pay and pay at the rate of the national minimum wage. They had each signed contracts describing them as self-employed. Paul Huntington worked full-time from 1991 until the hearing before the Employment Tribunal (and thereafter) except for a few weeks working for a competitor in 2002 and 2003. In 2007 Autoclenz Ltd invited the valeters to sign new contracts, purportedly clarifying that they were sub-contractors and not employees, that they must provide their own cleaning materials, that there was no obligation to provide services to Autoclenz and nor did Autoclenz have any obligation to offer work to the valeters. Furthermore, there was a term that a valeter could provide a suitably qualified substitute. Autoclenz made a 5% charge for materials, and a charge for insurance. The individuals wore the BCA logo on uniforms for security reasons. Autoclenz contended that the individuals were not 'workers' for the purposes of the statutory definitions of that term in the Working Time Regulations 1999 and the National Minimum Wage Act 1998.
At the Employment Tribunal, Employment Judge Foxwell held that the claimants were employees, and that even if they were not they were workers. Judge Peter Clark in the Employment Appeal Tribunal held that the claimants were not employees but that they were workers, following the decision of the Court of Appeal in Consistent Group Ltd v Kalwak. The company appealed against the finding that the individuals were workers, and the individuals then cross-appealed against the finding that they were not employees.
Court of Appeal
Smith LJ held that the car valeters were employees, despite the contract describing them as self-employed. Employers, and their advisers, cannot draft their way out of employment status if that does not accord with the reality of the relationship.
|“||It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee.
…where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were.
 Rimer LJ's exposition at paragraph 40 of his judgment (in the Kalwak case) and his reference to Snook's case, was not helpful in all cases. Where one party was relying on the genuineness of an express term and the other party was disputing it, there was no need to show that there had been a common intention to mislead. That was particularly so in a contract in the employment field where it was not uncommon to find that the ‘employer’ was in a position to dictate the written terms and the other party was obliged to sign the document or not get the work. In such a case, there was no need to show an intention to mislead anyone; it was enough that the written term did not represent the intentions or expectations of the parties.
Aikens LJ concurred in the result, but said that he would put the point in his own words.
|“|| As Smith LJ has stated in her judgment, section 230(3)(b) of the ERA sets out the statutory definition of a "worker" and that sub-section divides "workers" into two sub-groups. Paragraph (a) states that an individual who has entered into or works under a "contract of employment" is a "worker". So, as Smith LJ states, an employee is a "sub-group" of "worker". The ERA does not further define a contract of employment and there is no other statutory definition of the expression. There have been numerous cases where judges have had to decide whether a person has entered into or works under a contract of employment. In essence there are four basic requirements that must be fulfilled before it can be said that there is a contract of employment and so a relationship of employer and employee. First, the employer must have undertaken to provide the employee with work for pay. Secondly, the employee must have undertaken to perform work for pay. Those obligations are mutual. The third requirement is that the employee must have undertaken to perform the work personally; he is not entitled to sub-contract the work to another. Fourthly, it is also generally accepted that there is a further requirement before a court will hold that there is a contract of employment between employer and employee, i.e. that the employee agrees that he will be subject to the control of the employer to a certain minimum degree. These obligations have been described as the ‘irreducible minimum’ to produce a contract of employment: Nethermere (St Neots) Ltd v Gardiner  ICR 612 at 623 per Stephenson LJ.
 … Speaking for myself, I would respectfully suggest that it is not helpful to say that a court or tribunal has to consider whether the words of the written contract represent the "true intention" or the "true expectation" of the parties. There is a danger that a court or tribunal might concentrate too much on what were the private intentions or expectations of the parties. What the parties privately intended or expected (either before or after the contract was agreed) may be evidence of what, objectively discerned, was actually agreed between the parties: see Lord Hoffmann's speech in the Chartbrook case at  to . But ultimately what matters is only what was agreed, either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded. I accept, of course, that the agreement may not be express; it may be implied. But the court or tribunal's task is still to ascertain what was agreed.
 I respectfully agree with the view, emphasised by both Smith and Sedley LJJ, that the circumstances in which contracts relating to work or services are concluded are often very different from those in which commercial contracts between parties of equal bargaining power are agreed. I accept that, frequently, organisations which are offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept.
Sedley LJ concurred with Aikens LJ. He said,
|“||While I share [Smith LJ's] reasons for reaching this conclusion, I do so less hesitantly. I am also entirely content to adopt the reasoning of Lord Justice Aikens, recognising as it does that while employment is a matter of contract, the factual matrix in which the contract is cast is not ordinarily the same as that of an arms'-length commercial contract.||”|
Lord Hope, Lord Walker, Lord Collins, Lord Clarke and Lord Wilson, on appeal, unanimously held that the car valeters were engaged under contracts of employment and this was not affected by the clauses which stated that they were self-employed, had no obligation to work, no right to receive work, and could substitute another worker. Lord Clarke, giving the judgment of the court, emphasised that a contract of employment was a specific kind of contract, not to be treated the same as commercial contracts, because there may be an element of inequality of bargaining power. The judgment of Rimer LJ, in Consistent Group Ltd v Kalwak, suggesting that contractual documents contained the expression of the true intentions of the parties unless there was a sham, intended to deceive third parties, was expressly doubted. Accordingly under the valeters were employees and 'workers' as defined and were entitled both to remuneration at the rate of the national minimum wage and to paid leave.
|“||19. As Smith LJ explained in the Court of Appeal at para 11, the classic description of a contract of employment (or a contract of service as it used to be called) is found in the judgment of MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance  2 QB 497, 515C:
20. Three further propositions are not I think contentious:
20. The essential question in each case is what were the terms of the agreement. The position under the ordinary law of contract is clear. It was correctly summarised thus by Aikens LJ in the Court of Appeal:
21. Nothing in this judgment is intended in any way to alter those principles, which apply to ordinary contracts and, in particular, to commercial contracts. There is, however, a body of case law in the context of employment contracts in which a different approach has been taken. Again, Aikens LJ put it correctly in the remainder of para 89 as follows:
33. At para 103 Sedley LJ said that he was entirely content to adopt the reasoning of Aikens LJ:
34. The critical difference between this type of case and the ordinary commercial dispute is identified by Aikens LJ in para 92 as follows:
35. So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description.
36. With characteristic clarity and brevity Sedley LJ described the factual position as follows:
37. I entirely agree with those conclusions. They are in my opinion justified by the critical findings of fact in paras 35 to 38 of the judgment of Employment Judge Foxwell in the ET. They were these:
Mr Hassell was the Autoclenz manager at the Measham site.
38. These are findings of fact which Autoclenz cannot sensibly challenge in this Court. In short, they are findings which were open to the ET. It is true that, as Smith and Aikens LJJ both observed, the reasoning of the ET could have been fuller, but I also agree with them (and Sedley LJ) that the ET was entitled to hold that the documents did not reflect the true agreement between the parties and that, on the basis of the ET's findings, four essential contractual terms were agreed: (1) that the valeters would perform the services defined in the contract for Autoclenz within a reasonable time and in a good and workmanlike manner; (2) that the valeters would be paid for that work; (3) that the valeters were obliged to carry out the work offered to them and Autoclenz undertook to offer work; and (4) that the valeters must personally do the work and could not provide a substitute to do so. See in particular, per Aikens LJ at para 97. It follows that, applying the principles identified above, the Court of Appeal was correct to hold that those were the true terms of the contract and that the ET was entitled to disregard the terms of the written documents, in so far as they were inconsistent with them.
-  UKSC 41, 
-  EWCA Civ 1046, 
- AL Bogg, 'Sham self-employment in the Court of Appeal' (2010) 126 Law Quarterly Review 166
- KR Handley, 'Sham self-employment' (2011) 127 Law Quarterly Review 171