Supreme Court finds Sham contracts are just that.

I have been waiting for the outcome of this case for a while as the significance is profound on many workers and especially those in the inland inshore diving industry

The case of Auto Lenz v Belcher has been published by the Supreme Court.
See HERE for link to the case

The repercussions of the decision which went the way of the workforce will be felt across industry as the Judges found the claimants were employees agreeing with the Court of Appeal that the ET was entitled to hold that the claimants were workers because they were working under contracts of employment within the meaning of regulation 2(1) of each of the NWMR and the WTR..
The case also centered on the sham substitution clause similar to the same sham one the ADC diving contracts the member companies hand to their diving personnel.

Throughout the court hearings various judges have stated the following:

One Judge said:” In my judgment these claimants are employees. I do not think it can be said that Mr Huntington and his colleagues are businessmen in business on their own account. They have no control over the way in which they do their work. They have no real control over the hours that they work, save and except that they can leave when their share of the work on site has been completed. They do not have any real economic interest in the way in which the work is organised, other than the fact that the more work they do the more they earn. They cannot source materials for themselves. They are subject to the direction and control of the respondent’s employees on site. They work in teams and not as individuals. It crossed my mind that each team might constitute a partnership, but it has never been suggested that these claimants are partners running businesses together and, whilst the makeup of each team seems to be fairly static, they can be adjusted to meet the respondent’s needs. The claimants have no say in the terms upon which they perform work, the contracts which are placed before them are devised entirely by the respondent and the services they provide are subject to a detailed specification”.
“Accordingly, I find that the claimants entered into contracts under which they provided personal service, where there were mutual obligations, namely the provision of work in return for money, that these obligations placed the contracts within the employment field and that the degree of control exercised by the respondent in the way that those contracts were performed placed them in the category of contracts of employment.”

Another Judge said: “the tribunal had been entitled to disregard the terms included in the written agreement between the parties on the basis that the documents did not reflect what was actually agreed between the parties”.

Another Judge said: “Employers, and their advisers, cannot draft their way out of employment status if that does not accord with the reality of the relationship.
It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee”.

Sound familiar to the way the diving industry works.

So what happens now? I should think nothing for now immediately, but HMRC will be using this case to justify putting workers on PAYE.
The RMT will add this important case to the other 14 case laws (some used in this case) that show workers in the inland inshore diving industry are employees to pursue cases through HMRC against those diving contractors who refuse or delay payment to diving members without just cause or who undertake unsafe diving practices. After HMRC have finished the RMT will pursue for members, backdated holiday pay, pension entitlements and other entitlements.

It’s up to the workforce which way they want to go but they now have a choice, I know some want to remain self employed under the CIS scheme as it suits them and if that is the case providing the contractor and individuals are happy with the arrangement and the contractor is paying on time, then let sleeping dogs lie.

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