Employer is made to face up to regulations and responsibilities

Employers have been given a warning about using employment contracts to try and get round working time and minimum wage regulations.

The judgement from the Supreme Court in the recent case of Autoclenz Ltd v Belcher and others, has shown that an apparently cast-iron contract will not help an employer to avoid their responsibilities.

Instead, the Court has said, what matters is the reality of the relationship rather than the wording of the employment contract and companies must not try to outwit the system.

Autoclenz provided car cleaning services to motor retailers and auctioneers and described their valeters as sub-contractors in their contracts, rather than employees. The contract also said that the valeters could get other people to carry out the valeting for them; that they were not obliged to provide their services and that Autoclenz did not guarantee that it would provide work on any specific occasion.

The aim of the contract was to make the valeters self-employed, so that they would not qualify for paid leave and the minimum wage.

But 20 of the valeters, supported by their union, brought a case against Autoclenz claiming that they were really ‘workers’ for the purposes of the Working Time Regulations and the National Minimum Wage Regulations. When the case reached the Supreme Court, the judges ruled in their favour, saying that they were employees in spite of the wording of their contract.

In the ruling, the Supreme Court said that a contract for work or services is different from an ordinary commercial contract between parties of equal bargaining power. Very often a company that is offering work is able to present the individual worker with a written contract on a take it or leave it basis. Because of this, the Court ruled that relative bargaining power of the parties must be taken into account in deciding whether the written contract represented the truth of what was agreed, saying that they had to consider all the circumstances, not just the written word.

This case demonstrates that even if an employer comes up with an apparently cast-iron contract, it will not help them to get round the Working Time and Minimum Wage Regulations. Employers must accept their responsibilities and not try to outwit the system.

When it comes to employment contracts, the Courts are going to be ‘realistic and worldly wise’, as the judges put it in this case, and will be looking beyond the wording of the contract to assess the true situation.