Employment Law Advocates

The case of Autoclenz v Belcher is the last in a long series which caused a lot of confusion but resulted in the law being in much the same position it was in when the confusion began. The story starts with the case of Consistent Group v Kalwak in the Employment Appeal Tribunal in May 2007, in which President Elias stated the seemingly uncontroversial proposition that tribunals should examine the reality of the situation to see whether an employment relationship is perceived in the way that the contract suggests.

The tribunal in Autoclenz gave judgment On 1st March 2008, relying expressly upon Kalwak. On 28th April, President Elias employed similar reasoning in Protectacoat Firthglow v Szilagyi. Just a day later, everything was suddenly changed by the decision of the Court of Appeal in Kalwak in which the appeal was allowed, primarily on the basis of inadequate reasons, but Lord Justice Rimer also criticised the reasoning of the Employment Appeal Tribunal, and relied on the comments of Lord Diplock of Snook v London and West Riding Investment as authority for the proposition that, in order for there to be a finding that a contract is sham, there must be an intention to deceive a third party as to the nature of the relationship and it is insufficient that the parties understood it differently from the written contract.

On 4th June, Autoclenz reached the Employment Appeal Tribunal. Judge Peter Clark followed the Court of Appeal in Kalwak and allowed an appeal against the finding that the claimants were employees of the respondent, on the grounds that no Snook sham had been identified. However, he dismissed an appeal against the finding that they were workers. Autoclenz appealed this finding to the Court of Appeal which they are probably now regretting as it then allowed Belcher and his colleagues, who it appears were not intending to appeal, to put in a late cross-appeal regarding the finding that they were not employees.

The tide began to turn on 10th October 2008 with the case of Redrow Homes v Buckborough in the Employment Appeal Tribunal, in which Judge Burke noted that the House of Lords had used a different definition of a sham in Street v Mountford and this had come into employment law in Echo and Express Publications v Tanton. He suggested that there is no conflict between the the two approaches in Kalwak and that of Lord Justice Rimer was, in any event, obiter, given his other finding of inadequate reasons.

The extent to which all these decisions can really be reconciled is questionable. However, what is surely true is that the Street v Mountford definition is preferable to a narrow reading of the Snook definition. In the context of a situation in which an employer has a dominant bargaining position and the employee is being deceived as much as any third party, it is absurd to require that he or she also takes part in that deception. Indeed, it could be argued that tribunals should be much less sympathetic to workers who do willingly enter into sham contracts as they are likely to be tainted by illegality in most instances.

Orthodoxy has been restored in 2009, firstly when Szilagyi reached the Court of Appeal in February and now with the decision this week. Lady Justice Smith and Lord Justice Sedley gave judgment in both cases, agreeing with Judge Burke that there is no conflict but suggesting euphemistically that the formulation of Justice Elias may be of more assistance to employment judges than that of Lord Justice Rimer. There is no appeal in Redrow Homes so that should hopefully be an end to the matter for a few years at least.