Sham agreement

Another sham employment agreement ruling…

 

An EAT has ruled that a written contract between parties is not decisive in determining the true working relationship-employee or independent contractor. It has also rules that the tribunal in question was entitled to determine the contracts in question were shams in that they did not represent the true intentions of the parties. Further, to be a sham there does not need to be a requirement to conceal or misrepresent the actual relationship.

 

As such the use-as here-of signed partnership/independent contractor agreements are of limited use if the facts do not support the reality of the situation. Here the tools and equipment were provided by the company concerned, P. The worker S was paid net of PAYE and was told he could not work for anyone else. He was also told to tell clients he was an employee.

 

As such the tribunal held the written documents were a sham and did not represent the true nature of the relationship.

 

On appeal the EAT dismissed the appeal by P and held that the test of a sham agreement is what is the true legal relationship of the parties and it is for the tribunal to determine after assessing all the facts of the case.

 

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