Living or Working - What type of Contract was it?

Dated:

Employee status - Case Report

In the case of Troutbeck SA v White & Todd, the Court of Appeal considered whether an agreement between Troutbeck SA (‘the Company’), and Mr White and Ms Todd (‘the Claimants’), made on 1 August 2009 (‘the Agreement’) constituted a contract of employment.

The Company dealt with the Claimants through Ms Ibru whose family had bought a farm in Surrey as an investment. The Claimants had orally agreed with the Company to caretake and manage the property. For that purpose it was also agreed that the Claimants would live rent free in an adjoining flat and they had done so since 2006.

Commercial or Employment?

With a view to selling the farm, the Company served on the Claimants a 3 months’ notice terminating ‘your employment contract.’ The Claimants lodged claims of unfair dismissal. The Company argued that the Agreement was a commercial contract and did not constitute an employment contract.

The Employment Tribunal held that the Claimants were not employees, mainly owing to a lack of control exercised by the Ibru family who, as absentee owners, wanted someone to be responsible for the maintenance and management and to make decisions themselves, which was not ‘employment'.

The Employment Appeal Tribunal disagreed, saying that the degree of control exercised by the Company was not the only relevant factor but, in any event, the degree of control exercised in this case was sufficient to establish an employment relationship.

Appeal

The Court of Appeal noted that the Agreement contained various references such as to: ‘this employment agreement’; that the Company agreed to ‘employ’ the Claimants to caretake and manage the farm and that ‘on ceasing to be employed by the owner’ they would vacate the accommodation. Further, the Claimants were entitled to 30 days’ holiday a year, which, the Court held would be an unusual clause to find in a commercial contract whereas that provision is commonly found in contracts of employment and reflects the statutory protection afforded to employees. The Court further held that any intention to create a tenancy of the property was expressly negatived in the Agreement, the occupation being stated to be under a non-assignable license. On the other hand, nothing was stated about negativing an intention to create an employment relationship. The Court noted that both Claimants had jobs elsewhere and the Agreement provided that the Claimants could be employed by or in any other work provided that it did not diminish or restrict the performance of their duties under the Agreement.

Wrongly labelled

In summary, the Court of Appeal held that the Employment Tribunal had wrongly treated the low level of actual day-to-day control by the Company over the activities of the Claimants as precluding an employment relationship. The relationship between the parties, recorded in the Agreement, taking into account the surrounding circumstances, presented the principal elements of employment: work by the Claimants for reward at a workplace designated by the Company and for the continuing benefit of the Company, plus paid annual holiday reflecting the statutory protection of employees, coupled with a sufficient degree of control over the Claimants to preclude their independent status as contractors. As regards the labels chosen by the parties to describe their working relationship, the Court held that these are not necessarily the correct conclusion on the legal nature of the relationship, but in this case both parties signed a document referring to it "this employment agreement" and that was an expression of their intentions confirming the objective analysis of the legal position.

The Court of Appeal accordingly held that the Claimants were employees of the Company and therefore entitled to bring claims of unfair dismissal.




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