A recent case in the name of Ter-Berg v. Simply Smile Manor House Ltd and others 2023, The Employment Appeal Tribunal (EAT) gives further guidance on status determination in relation to contract terms and conditions.
The working status of a person providing services to an organization is very important for tax and employment law purposes because if the organisation gets it wrong and the courts decide that the status relates to that of an employee or worker, they may be subject to various claims such as unpaid statutory holidays, unfair dismissal claims if they have worked for the organization for more than 2 years and redundancy payment claims ( if they have more than 2 years of service), there could be other claims falling within discrimination law.
Are contractual clauses irrelevant to determine a person’s work status?
The Supreme Court's 2021 decision in Uber BV v. Aslam 2021 held that Uber drivers were workers despite their written contract suggesting self-employment status, thus written terms were not conclusive to determine the relationship between the parties and that you needed to look behind any written agreement to identify the reality of the relationship between the parties, which is consistent with an earlier decision in the case of Autoclenz v. Belcher (2011) that even if there was no intention to mislead on the part of the organization relying on a status clause but if the contractual clause does not truly reflect the particular working relationship between the parties then such a clause would be void and thus ineffective.
Does the decision of the (EAT) in case of Ter-Berg v. Simply Smile Manor House Ltd change matters on relying on terms of engagement to determine status?
Ter-Berg (TB) was a dentist working under the terms of a standard service agreement provided by the British Dental Association that indicated (TB) was a “performer’’ providing dental services as an associate, the relationship was not that of an employee thus not working under an employment contract, (TB) was required to perform certain obligations like paying part of his fees if did meet certain targets over the year.
Also, there was a substitution clause that if (TB) did not provide his services to the business for a given period of time (20 days) he had to find a locum.
(TB) brought a claim for unfair dismissal when (TB)’s contract was terminated over a whistleblowing matter and he argued that his initial status of being self-employed had changed due to there being mutuality of obligations, the need for him to provide personal service together with the control the business had over his activities resulting in full integration into the business as an employee.
The Employment Tribunal (ET) looked at terms of contract and decided that (TB) was not an employee and thus (TB) took matter to EAT.
What did the (EAT) decide?
The (EAT) agreed with the (ET) to confirm that the terms of the contract should be addressed first to determine the status of an individual (clause 46 of the judgment) and that such terms were not irrelevant to decide the reality of the situation. However, such a reference is not conclusive in a contentious matter and one must consider all the circumstances of the case in particular if the clause is a deliberate attempt to avoid the protection provided under the Employment Rights Act 1996 to those who are employees / workers.
The above principles have previously been endorsed in cases such as Autoclenz Ltd v. Belcher [2011] (ICR 1157), Carmichael v. National Power Plc [1999] (1 WLR 2042) and re-emphasised by the Supreme Court in the case of Uber BV v. Aslam.
In Ter-Berg v. Simply Smile Manor House Ltd, (EAT) accepted that the substitution clause suggested that the setup may not be one of personal service, but despite this clause, looking at the other written terms and the factual circumstances as a whole, (TB) was still not an employee.
What action should businesses take?
Organizations must ensure upon taking professional legal /HR advice that their written contract terms reflect the true factual circumstances.
The article is for informational and educational purposes only and current to 1st March 2023 and should not be relied upon as legal advice. If you require any further assistance, please do not hesitate to contact our free advice line team at 0116 274 9193.
