| Summary |
CA (Civ Div) (Pill LJ, Maurice Kay LJ, Lloyd LJ) 22/4/2008
Where employees had been treated as self-employed by the Inland Revenue but were later found to have been employees, they were not necessarily deprived of their rights to claim for unfair dismissal. The employees had not performed their contracts illegally as they had acted in good faith and made no misrepresentations to the Inland Revenue as to the facts of their employment relationship.
The appellant employers (E and B) in joined proceedings appealed against an Employment Appeal Tribunal decision ((2007) IRLR 840) that the respondent employees (P and G) had not acted illegally in the performance of their contracts. P and G had worked on a self-employed basis, P at his own instigation and G at the request of B. They did not receive holiday pay or sick pay and were treated as self-employed by the Inland Revenue. When their employment ended, P and G claimed unfair dismissal, arguing that in reality they were employees. The EAT found that G and P were employees but had believed themselves to be self-employed in good faith and had not misrepresented the facts of their relationship to the Inland Revenue. They were therefore entitled to claim unfair dismissal. E and B submitted that P and G had participated in an illegal performance of their contracts. They argued that the EAT was wrong to require misrepresentation and bad faith to be established before finding illegality.
HELD: (1) A decision as to whether a relationship was one of employment or whether the person performing the services was self-employed would often be very difficult. An incorrect characterisation of the relationship would not necessarily prevent an employee subsequently claiming the advantages of having been an employee. However, a contract of employment could be unlawfully performed if there were misrepresentations, express or implied, as to the facts. An obvious example was when taxable salary was claimed to be non-taxable expenses, Miller v Karlinski (1946) 62 TLR 85 CA, Salvesen v Simons (1994) ICR 409 EAT and Daymond v Enterprise South Devon Unreported June 6, 2007 EAT considered. That was to be distinguished from an error of categorisation unaccompanied by such false representations, even if the employee had claimed the advantage of self-employment before the dispute arose. There were limits to that principle, and the circumstances in which a miscategorisation was made could amount to bad faith which would deprive the employee of the right to claim the benefits of employment, Hall v Woolston Hall Leisure Ltd (2001) 1 WLR 225 CA (Civ Div) considered. (2) The EAT had correctly found that P and G's contracts of employment were not unlawfully performed. None of the parties were found to have made any misrepresentations to the Inland Revenue. Until corrected by the employment tribunal, the Inland Revenue had been prepared to accept that P was self-employed. G's case for self-employment was less strong. He had actively participated in the payment of his salary by daily gross instalments but he had acted in good faith and made full disclosure to the Inland Revenue. A genuine claim to self-employment did not amount to unlawful performance and did not prevent P and G from enforcing either the contract or their statutory rights under it.
Appeals dismissed
Counsel for the first and second appellant: Marcus Pilgerstorfer
LTL 22/4/2008 : (2008) IRLR 500 : (2008) ICR 1423 : Times, June 2, 2008
 |
