Employment Status: EAT decision in Staffordshire Sentinel Newspapers Ltd v Potter
In its recent decision in Staffordshire Sentinel Newspapers Ltd v Potter the Employment Appeal Tribunal (EAT) has considered the much litigated question of employment status. They followed the Court of Appeal decision in Express & Echo Publications v Tanton (1999 IRLR 367) the EAT confirmed that an "irreducible minimum" for there being a contract of employment is personal service. This is an important decision on employment status. The decision clarifies the question of employment status if there is an express substitution clause in the contract in writing. Workers with substitution clauses in their contractual agreements with businesses will only be able to argue that they are employees if these clauses are heavily fettered either in writing or in practice.
Mr Potter worked as a Home Delivery Agent for Staffordshire Sentinel Newspapers ("SSN"). At the outset he signed a delivery agency agreement, which was stated to be an agreement for services, not a contract of employment, and that Mr Potter was an independent contractor. Afterwards he signed a further agreement for services which included the right to substitute suitable people if he did not want to do his work personally for any reason. The clause did not contain any restrictions. Notably it did not require SSN's approval to any substitution. However, as a matter of fact, SSN did not always accept a substitute proffered by Mr Potter and either wanted Mr Potter to find someone different or chose a substitute themselves. When his appointment was terminated, Mr Potter claimed unfair dismissal, alleging that he was employed under a contract of service.
The Employment Tribunal resolved the issue in favour of Mr Potter. They concluded that Mr Potter's right to substitute a third party in his place was a limited right of substitution as the substitute had in practice to meet with SSN's approval. Consequently Mr Potter had employee status.
The EAT disagreed. The express substitution clause was clear and unlimited. The EAT concluded that where there is an express and unfettered substitution clause in the contract in writing the worker will not be an employee, provided that the contract is consistent with the facts and is not a sham.
Even the fact that SSN from time to time did not accept a substitute proffered by Mr Potter did not vary the right of Mr Potter to substitute "suitable" people. SSN's only right was to challenge whether a person was "suitable". It had no general right of approval. Therefore the right to substitute a third person was fatal to Mr Potter accruing status as an employee.
If you have any queries about employment status please contact Simon Jeffreys on +44 (0)20 7367 3421 or at simon.jeffreys@cms-cmck.com or Anthony Fincham on +44 (0)20 7367 2783 or at anthony.fincham@cms-cmck.com
