An employment contract, amongst other things, involves the worker providing personal service for a business – in general, if the individual is free to ask someone else to do the work instead, they'll be classed as self-employed. That's known as a 'substitution clause'.
But does such a clause always mean it's not employment? Not necessarily. As shown in a recent case, if a substitution clause is narrowly defined so that it can only sometimes be relied on, it could still be an employment relationship.
In this case, the worker was a live-in carer. Normally, the agency rotated carers every 3 or 4 weeks. However, this client wanted carers to work for him for a minimum of 6 months and she remained in that placement for over 3 years. The placement was terminated because the client decided that the carer was underperforming in her duties. She then brought a claim at an employment tribunal that would only be allowed if she was an employee – e.g. unfair dismissal. The recent judgment doesn't identify what type of claim she wanted to bring; it just addresses whether she was an employee.
Tribunals decide this by applying several factors and looking at the overall situation – they look at the written terms of appointment, but they're only one factor as sometimes (whether intentionally or not) they don't reflect the true situation.
One condition of employment is that the worker provides 'personal service' – in other words, that they provide the service themselves. On the other hand, if the obligation is to make sure the service is provided, they'll be considered self-employed. For that reason, one of the first things that a tribunal will look at is whether the worker is allowed to ask someone else to step in and provide the service instead.
In this case there was such a clause, but it had very limited use – the carer was allowed to ask others to step in, but they had to be other carers from the same agency, and only when she was on leave. As a general rule, she had to provide the care herself. For this reason the tribunal decided she was an employee, not self-employed.
This follows established principles. But it should be noted that in one high-profile case the claimants failed because the business genuinely gave them a right to substitute others to do the work for them.
What this means for you
If you allow your workers to substitute others in their place, they may be self-employed and therefore have fewer legal rights than workers or employees. However, we'd suggest you first consider the best way to engage them and then, impartially, consider what sort of a contract it is – or an employment tribunal might decide otherwise.
How we can help
We have an Employment agreement plus other agreements for more specific circumstances, such as a Fixed-term employment agreement and an Employment statement. We also have a Consultancy agreement and a Zero-hours worker agreement that could be suitable if you've decided it's not an employment relationship.
Employee 1 insults Employee 2. The insult appears to relate to race and is therefore discriminatory. But Employee 2 laughs and insults someone else. From your observations, this seems to be commonplace in the office. Has Employee 2 suffered unlawful discrimination?
As explained in a recent Employment Appeal Tribunal (EAT) judgment, if the insults weren't unwanted then it's not harassment. However, there are great risks in allowing such a culture.
In the EAT case, the claimant was employed as a sales representative from 4 January until his dismissal on 16 December the same year. He then brought an employment tribunal claim alleging:
As an example of the harassment, he cited being called a 'fat ginger pikey'. 'Pikey' was alleged to relate to his connections with a traveller community, which is why it was alleged to be race discrimination. He said that his weight issue was caused by his diabetes, which is a disability.
The Equality Act's definition of harassment includes that it's unwanted, so that part of his claim failed. This was partly because he appeared to accept the insults in good humour and responded in kind.
He also failed to show that his dismissal was discriminatory. Rather, it was because of his performance as the team's sales were down and he hadn't made any sales.
What this means for you
We'd suggest that this case doesn't mean that it's OK for your employees to routinely insult each other. The employer may have been lucky – another tribunal might not have believed that the claimant wanted these insults. Also, even if in a sense he welcomed the insults, it may be that he'd become accustomed to such maltreatment, and this response was a defence mechanism.
Another risk is that a new recruit might be uncomfortable with that unsavoury culture and have found the 'banter' unwanted. Indeed, a female colleague had complained about the claimant calling her 'pudding' and trying to hug and cuddle her, even after she asked him to stop. The managers asked him to stop, but didn't escalate the matter. It's possible that she could have brought a claim.
For these reasons, we'd strongly suggest you adopt, communicate and enforce a robust equality policy. That means communicating the policy to staff and disciplining those who contravene it.
How we can help
Our Employee handbook includes policies on Harassment, Equal opportunities and Disciplinary procedures. We also have a series of 9 disciplinary letters, for example the Employee disciplinary meeting outcome letter.
You agree a contract that entitles you to commission if another business makes a sale. What happens if you forget to include a term saying when commission will become payable?
You'll probably get your commission. The Supreme Court has recently confirmed that if the other business denies that commission is due, a court would probably 'imply' the necessary term into the contract – after all, it's obvious that the contract needs that term. However, the Court of Appeal had thought otherwise, so it's worth taking this matter seriously.
In this case, the claimant was an estate agent; the other party was selling flats. During a telephone conversation they reached an agreement about the work – the principal term was that commission would be 2% plus VAT.
The agent found a buyer and the sale was completed. However, the seller refused to pay the commission, saying that it didn't specify when commission would become due, so it was too vague to be a binding contract.
The judge at the County Court decided in the agent's favour. He said it was obvious they intended to make a legally binding contract, and he implied a term into the contract as to when commission would be due – namely, when the sale was made. There are a few situations when a court will imply a term into a contract – in this case, the term was implied for 'business efficacy': in other words, their business intentions wouldn't have been realised without that term. Alternatively put, it would have been obvious to a reasonable bystander that commission would be due on completion.
The Court of Appeal disagreed, saying that a court can only imply a term into a contract that exists. As the agreement was too uncertain without that term, there was no contract and so they couldn't imply a term into it to make it work.
The Supreme Court took a different approach. Like the County Court judge, they said it was obvious the parties had intended to create an enforceable contract. They then said that the reasonable person would interpret the agreement as commission being due at the time of the sale. In other words, it wasn't even necessary to imply an extra term. However, they also said that they would have implied the term about the timing of commission (had they not interpreted the contract that way anyway) as it was necessary for 'business efficacy'.
What this means for you
Sometimes, it's not only the letter of the contract that counts – if it's obvious that the contract needs something extra, it might be interpreted that way or terms might be implied into it.
However, certainty is paramount in business, so we'd suggest you put your contracts in writing and include all the important terms – especially those in your favour.
How we can help
We have numerous contracts. In particular, considering the facts of this case, we have an Agency agreement and a Simple introduction commission agreement.