Autoclenz Ltd vs Belcher & Ors (2009)

Autoclenz Ltd vs Belcher & Ors (2009)

The case of Autoclenz Ltd vs Belcher & Ors progressed all the way to the Supreme Court in 2011. Thankfully, the Supreme Court fairly decided to affirm the decision made in the Court of Appeal.

The Supreme Court determined that the car valeters working for Autoclenz were entitled to backdated employment rights. For example, the car valeters were entitled to holiday pay, redundancy and unfair dismissal compensation.

The central issue in the case revolved around the ‘Right of Substitution’ which was present within the contract. Substitution is a fundamental element of determining employment status as it is the strongest way to show that you are operating as a true independent contractor as opposed to what HMRC would consider to be a ‘disguised employee’. This is due to the fact substitution ensures that a personal service is not required and therefore an employment relationship cannot be present.

The Supreme Court determined that the ‘Right of Substitution’ in the written contract was not reflective of the reality of the agreement. As a result, the terms and conditions could be disregarded since they were inconsistent with the true intentions of the parties. This argument could be further supported by the fact that Belcher & Ors had never actually had sight of the terms.

This case highlights the importance for all parties to ensure that they have visibility of the contract of services and are in agreement that it reflects the working practices. The Court stated that; only one of the parties involved need to claim that a clause in the contract does not reflect their intentions in order for the clause to be considered irrelevant.

Contractors and hirers alike, should have up to date contracts in place and agreed by all parties, especially if changes to a contract need to be made mid-way through an assignment. This is specifically important if work is gained through a recruitment business, as the contract between the contractor and the agency may not always mirror the contract between the agency and the end client.

Brookson Legal Services offer a two-fold IR35 review to determine employment status. Firstly, the contract will be assessed to ensure that it includes all the necessary IR35 clauses. Secondly, working practices will be reviewed to ensure the purpose of the contract is met and that day to day activity is compliant with the legislation.

What should a contractor bear in mind before accepting an assignment?

  • An independent contractor should be engaged to provide services that the client’s employees are unable to carry out. As a result, the contractor should not be subject to any supervision, direction or control over how the services are carried out. There should also be a degree of flexibility with where and when the services are provided.
  • The contractor should maintain an arms-length relationship with the client and should not become integrated into the business.
  • The contractor should not be obliged to accept work from the client, and in turn the client should not be obliged to provide work to the contractor.
  • All parties should recognise and accept the fundamental right for the contractor to substitute.