Self Employed Contractor - Or are they an employee?

The recent supreme court judgement upheld the court of appeals decision in Autoclenz vs. Belcher and others that workers engaged as car valeters were in fact employees and not self employed.

The claim by Autoclenz that a substitution clause in the contracts which obligated the workers to provide a substitute to carry out the service when they were unable to do it meant the workers were self employed.

The supreme court stated that the clauses in the contract did not truly reflect the situation. The substitution clause was not used in practice, the workers were expected to provide a personal service and there was a mutual obligation to carry out and provide work. Given the control Autoclenz had over the valeters and the services, the valeters were employees for employment law purposes.

This is an important decision for the employers that engage to services of self employed contractors and consultants. All documents, contracts and agreements that are written should fully reflect the true working arrangement between the company and the self employed individual.

This decision also demonstrates that it is technically possible to be self employed for tax purposes and an employee under employment law.

Company's need to take appropriate professional advice when engaging self employed services, with employment tribunals increasing significantly and expectation that HMRC may also look to exploit this judgement.