In a recent Employment Appeal Tribunal case, a number of drivers brought claims against the company that engaged their services, ostensibly on a self-employed basis, to undertake vehicle collection, inspection, delivery, and transport services for a company’s customers in the automotive trade. The drivers brought claims for non-payment of the National Minimum Wage and holiday pay and sought to establish that they were "workers". Only workers and employees (rather than self-employed individuals) are entitled to these statutory payments; hence the requirement to prove either worker or employee status in the first instance in employment tribunal claims of this nature.
Among other tests, an individual can only be a worker for employment law purposes where they have only a limited right to send someone else to do the work (subcontract) in their place (i.e. where they have a contractual substitution clause that reflects the reality of the working arrangement).
The standard-form contract between the company that engaged their services and the drivers contained a substitution clause stating that drivers could provide a substitute contractor to undertake services, with the driver being responsible for negotiating and paying any fee to the substitute and ensuring the substitute met the company’s insurance and driving licence requirements.
The employment tribunal held that the drivers were workers. In particular, it found that the substitution clause was not genuine, in that it was never used, and nobody seriously expected a substitute to be used. The substitution clause was an unrealistic possibility that was not intended to be operated in practice, and it therefore did not form part of the true agreement. It did not reflect what the parties realistically expected to occur. While the legal question is not whether the individual chooses to provide personal service, but whether they are obliged to do so under the terms of the contract, the fact that in over 25 years, no driver had ever used a substitute and there were no practical arrangements in place for using a substitute was a strong indicator that the clause was not a genuine substitution clause. Among other considerations it was unrealistic to think the company would risk entrusting customers' high value vehicles to unknown individuals with whom they had no contact or relationship, especially where that person might be expected to store the vehicle overnight.
The Employment Appeal tribunal upheld the tribunal’s findings that the drivers were workers on the basis that the substitution clause in their contracts was not genuine.
FSB members can find fact sheet guidance on ‘employment status’ on the FSB Legal and Business Hub. FSB members should contact the FSB Legal Advice Line for legal advice.