Sham clause status of worker entitles paid annual leave claim

The Employment Appeals Tribunal (EAT) in Redrow Homes (Yorkshire) Limited v Buckborough and Sewell UKEAT/0528/08 have held that a contract clause provision stating that bricklayers was self-employed were a sham because the parties did not intend the clause to have any binding effect between them.

 

Workers have to be paid annual leave under the Working Time Regulations 1998. Under Regulation 2.1 such a worker is defined as someone who is obliged personally to provide work or services for a party.

 

In Redrow Homes (Yorkshire) Limited v Wright and Redrow Homes (North West) Limited v Roberts the Court of Appeal held that the bricklayers working for R were workers in accordance with Regulation 2.1 because in the circumstances the parties had intended the work to be performed personally i.e. there was no provision to allow for delegation or subcontracting.

 

In an attempt to avoid this R changed the standard contract wording and it was to this redraft that B and S signed.

 

B and S later claimed paid annual leave and that the true interpretation of their working relationship was that the reality was both were workers under Regulation 2.1 and were not independent contractors despite the arguments of R. The evidence to the tribunal produced was that neither R nor the claimants intended for the claimants to provide a substitute or refuse work.

 

R appealed to the EAT and the EAT dismissed the appeal finding that the tribunal had applied the correct legal test and had been entitled to reach its conclusion on the facts.

 

The EAT also stated when a sham agreement can exist:

 

 

The conclusion here is clear: contract provisions and realities have to co-exist in order to argue self-employment successfully. For practical pointers on the same and for expert drafting do get in touch.

 

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