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Employment Status of Workers – When contractual amendments are a sham
Monday, October 20th, 2008
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In 2004, the Court of Appeal ruled that, in the cases Redrow Homes v Roberts and Redrow Homes v Wright, the two bricklayers, working at different Redrow building sites, were required to provide their services personally. As a result, they both fell into the category of “worker” as defined in the Working Time Regulations 1999 (WTR) and were entitled to paid holidays.
Employment law, principally in the area of working time and the national minimum wage, provides rights for individuals who are classified as “workers”. Although generally viewed and treated as self-employed, individuals are “workers” if they are required to provide services personally for someone who is not a client of their business. In the case of Mr. Roberts and Mr. Wright, in the 2004 cases, the tribunals and Court of Appeal decided that they met the definition of “worker” because they had to perform the work of bricklaying personally for Redrow and could not provide a substitute bricklayer if, for example, they were ill.
Redrow learned lessons from the Court of Appeal decisions and amended the contracts they offered to skilled tradesmen in order specifically to allow, and even require, bricklayers to provide substitutes if they could not perform the work themselves. The contracts stated:
“The Contractor is responsible for ensuring that there is sufficient labour to maintain the rate of progress laid down from time to time by the Company for completion of the Works and shall provide such labour as is necessary to comply with that rate of progress. For the avoidance of doubt the obligation to perform the work is not personal to the Contractor and their obligations may be performed by other labour. Further the Contractor is required to provide other labour if it is necessary to carry out the Works or to maintain the rate of progress stipulated by the Company.”
In August 2007, despite the contract amendments, an employment tribunal again decided that two bricklayers, this time Mr. Buckborough and Mr. Sewell, were “workers” and entitled to holiday pay. The case was brought by the Union of Construction, Allied Trades and Technicians (UCATT). The tribunal was
“entirely satisfied…that it was never expected by either side, seriously or otherwise, that either of the [bricklayers] would seek to provide a substitute or refuse the work offered. That was not the manner in which the [bricklayers] had worked in the past and they could not be expected to work in that manner for the future. It was not the manner in which [Redrow] had used labour of this sort in the past nor could [Redrow] expect that to be the position in the future.”
Although the contract terms had been devised by what the tribunal referred to as “armies of lawyers”, the tribunal found that
“the provisions as to the right to provide a substitute and to provide other labour if necessary to carry out the works or maintain the rate of progress were a sham inserted into the document to give the appearance of relieving [Redrow] of contracting with the [bricklayers] as workers and did not seriously reflect the relationship between the parties. [Redrow] in effect wanted workers but did not want to incur the obligation to pay holiday pay.”
Redrow appealed the employment tribunal’s decision to the Employment Appeal Tribunal (EAT). In a decision given on 10 October 2008, the EAT upheld the tribunal’s decision. After reviewing the various decisions of the EAT and Court of Appeal that set precedents in identifying “workers”, the EAT agreed that the revised contract was a “sham”.
The term “sham”, the EAT stated, may be used to describe a contract or a contractual provision in two different contexts, namely
- a case in which the parties have a common intention and the documents which they have created in some material respect appear to give rise to legal rights and obligations which both parties intend not to exist, in order to deceive third parties or the court, or
- a case where, in reality, neither party intends the contract or contractual provision to be effective or to constitute an effective obligation between them, whether or not the parties intend to deceive a third party or the court.
Further information:
Redrow Homes (Yorkshire) Ltd v Buckborough & Anor
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