Mr R West v RJW Retail Ltd and Secretary of State for Business and Trade: 8002099/2024
EMPLOYMENT TRIBUNALS (SCOTLAND)
Case No 8002099/2024
Between
Mr R WestClaimantRJW Retail Ltd and Secretary of State for Business and TradeRespondent
Before
Employment Judge A JonesDate 3 April 2025
JUDGMENT
The claimant was not an employee for the purposes of section 230 Employment Rights Act 1996 and therefore his claim fails.
REASONS
[1]The claimant lodged a claim on 11 December 2024 claiming that he was an employee of the first respondent and that the second respondent had been in error by refusing to pay him payments for which had applied on the insolvency of the first respondent. A bundle of documents was lodged and the respondent lodged a bundle of authorities to which I was referred in submissions. I heard evidence from the claimant and parties made submissions on the conclusion of that evidence.
Issues to be determined
[2]The Tribunal was required to determine whether the claimant was an employee for the purposes of section 230 of the Employment Rights Act 1996. Findings in fact[3]Having listened to the evidence, considered the documentary evidence to which reference was made and the submissions of the parties, the Tribunal found the following material facts to have been established.[4]The claimant set up the first respondent company in 2011. The company initially sold phone cases and then moved to printing, designing and manufacturing these and other personalised gifts.[5]The claimant was a 100% shareholder in the company when it was incorporated in April 2011.[6]A Ms West became a director of the company on 1 April 2014 until her resignation on 12 April 2023. During that time, she had a 50% shareholding in the company.[7]Between around 2013 and 2015 up to 5 employees were employed by the first respondent. They were all issued with contracts of employment by the claimant and reported to him. Staff were paid either at or above the prevailing national minimum wage rates.[8]At no time was the claimant issued with a written contract of employment nor were any terms of employment discussed with any other person.[9]The claimant was furloughed during the COVID pandemic. This was a decision taken by him and he applied for and received funds from the government in relation to the furlough schemes.[10]The claimant did not report to anyone and worked such hours as were determined by him. He worked irregular hours which latterly could be from 12 to 16 hours a week.[11]The claimant received P60s every year and reported to HMRC that he had been paid £800 wages per month.[12]The claimant was not always paid £800 per month and would himself determine whether to take money from the business by way of wages. The claimant’s hourly rate of pay was below the prevailing national minimum wage rate.[13]The claimant decided when he would take annual leave, depending on how busy the business was at any time.[14]The first respondent had a business current account. The claimant regularly paid for personal expenditure, such as grocery shopping and meals in restaurants with funds from the business current account. The claimant would report such sums at the end of the year and account for these sums by repaying them.[15]The first respondent’s business continued to decline after COVID and due to that and his personal circumstances, the claimant decided to place the company into creditors voluntary liquidation on 25 October 2024.
Relevant law
[16]Section 230 Employment Rights Act 1996 provides that 1) In this Act “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment. (2) In this Act “contract of employment” means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing. 17.Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance 1968 All ER 433 set out factors which must be considered in determining whether there is an employment relationship between parties.[18]Various tests have been identified in order to determine these issues such as the control test, the integration test and economic reality tests. In addition, the multiple factor test as set out in Ready Mixed Concrete (above) remains relevant. The irreducible minimum requirements of a contract set out in that case was confirmed by the Supreme Court in Autoclenz Ltd v Belcher and ors 2011 ICR 1157, SC. Determining whether a contract exists can be considered by reference to the answers to the following questions: Did the worker agree to provide his or her own work and skill in return for remuneration? did the worker agree expressly or impliedly to be subject to a sufficient degree of control for the relationship to be one of employer and employee? were the other provisions of the contract consistent with its being a contract of service?[19]The cases of Clark v Clark Construction Initiatives Ltd 2008 ICR 635 and Secretary of State v Neufeld 2009 EWCA Civ 280 concerned circumstances where a director of a company also sought to argue that they were an employee of that company.[20]It is clear from those cases and subsequent cases which make reference to them, that there is no reason in principle why someone is a shareholder and director of a company cannot also be an employee and that ultimately it is a question of fact for the tribunal to consider. While lack of a written contract of employment is likely to be an important factor to be considered in that context, it is not likely to be determinative. Equally payment of ‘salary’ with payslips will be relevant but not determinative. Discussion and decision[21]In the present case, the claimant was the only person carrying out any work for the company and had been for around 9 years. He set up the company on his own and maintained a 100% shareholding in the company other than the period in which he was a 50% shareholder. He did not report to anyone. He had no written contract of employment. He did not discuss the terms on which he might be employed with anyone. He decided when he worked and when he would take holidays. He decided whether he would take ‘wages’. He used the company account for his personal expenditure. There was no degree of control carried out by anyone else in relation to how he worked. When he took ‘wages’ these were calculated below the minimum wage rate even though when the company employed employees they were paid at or above the minimum wage.[22]While the claimant was furloughed during COVID, that was a decision he took. The claimant suggested in submissions that this factor and the existence of P60s and wage slips was sufficient to demonstrate that there was a contract of employment in existence. The Tribunal did not accept that submission.[23]The Tribunal concluded taking all the facts of the case into account and having regard to the guidance which can be gleaned from the authorities referred to, that there was no contract of employment either express or implied between the claimant and the first respondent and that he was not an employee at the point at which the company went into insolvency. His claim therefore fails.