Should the Court look behind the contracts to determine employment status?

Autoclenz Limited v Belcher (2011) on the face of it conflicts with the ruling in James v Greenwich (2008) in that in Autoclenz the Court ruled that it is important to look behind the contracts at the actual circumstances, whereas the Court in James ruled that you should not look behind the contracts at the circumstances.

Prior to James the position was unclear. In the case of Dacas, an agency worker case, LJ Mummery had expressed the opinion, as an aside (obiter dicta) that it would always be necessary to look behind the contracts. However in James , another agency worker case, he appeared to do a U turn in that he qualified his Dacas statement by saying that it would only be necessary to look behind the contracts if on the face of the contracts they did not correctly reflect the working relationship in practice. In James the contracts sufficiently explained the relationship and there was no need to look behind them, it being decided that James was not an employee of either the agency or the end user. The James case has remained the best authority on employment status of an agency worker since 2008.

Autoclenz is not a case involving an agency worker but related to a claim that individuals who were directly contracted to Autoclenz were workers entitled to worker rights. Autoclenz had sought to introduce contracts for services that would have the effect of excluding worker rights on the basis that the individuals were self employed. The Court held that they are not self employed just because a contract says they are, and that is the reason why you must look behind the documents at the true position.

This result differed from James, which did not assess worker rights but only employment status of an agency worker where there was no reason to challenge properly formulated tripartite contracts. There had been no suggestion in James that Ms. James had no rights as a worker. Had that point been in issue perhaps because the agency had used a contract that described James as a self employed individual in business on her own account, thereby attempting to exclude worker rights, the Court would probably have looked in detail at the circumstances behind the contract.

Accordingly James is not necessarily affected by Autoclenz. All the same it is slightly worrying that there is one rule that applies if you try and exclude worker rights, and another if you try to exclude employment rights. The clear difference that most will want to rely on is that in James there was a tripartite arrangement involving an employment business, leaving many to conclude that it is far safer to use agency workers than it is to hire direct.

For our initial analysis on Autoclenz see here.