Commercial/Employment UPDATE

Issue No.3 October 2004

Self employed workers- they have rights too!

By virtue of the Working Time Regulations 1998 (“the Regulations”), “workers” are entitled to a minimum of 4 weeks’ paid holiday each year.

There has been ongoing debate about whether a contract (whether of employment or self-employment) can provide that holiday pay is included in normal salary, so that there is no need to pay additional pay when holidays are taken. The Court of Appeal in the case of Clark [2004] decided that this is permissible provided that the contract identifies a specific sum that is apportioned towards holiday pay.

In the case of Canada Life [2004] self employed consultants had been engaged for many years before their contracts were terminated. Even though they had never indicated that they wished to take paid holiday leave, they successfully claimed back-dated holiday pay from the introduction of the Regulations. This amounted to a payment of approximately £50,000 for each self-employed consultant.

You should be aware that the holiday entitlement of the Regulations applies to all “workers” within the definition of the Regulations, not only to employees. You should immediately seek legal advice if you are concerned that you may have engaged such workers and you do not currently provide them with 4 weeks paid holiday.

Agency Temps- who is the employer?

The case of Dacas v. Brook Street Bureau (UK) Limited [2004] related to a cleaner who was registered with Brook Street Bureau, an employment agency under a “temporary worker agreement”. That agreement provided that its provisions “shall not give rise to a contract of employment between Brook Street and the temporary worker, or the temporary worker and the client”.

For a number of years, Mrs Dacas was seconded to Wansdworth Borough Council, although the agency set her rate of pay, paid her wages and dealt with holidays and sickness absences. Following her dismissal, Mrs Dacas brought an unfair dismissal claim in the employment tribunal on the basis that she was either an employee of the agency or of the council. The Court of Appeal decided that she was not an employee of the agency but that she might be an employee of Wandsworth Borough Council. The Court of Appeal suggested that an employment contract might be implied between an agency worker and the agency’s client based on the conduct of the parties and the work done.

Many businesses engage agency staff assuming that such staff are not their employees and therefore that the relevant obligations and potential liabilities are avoided. There is now considerable doubt as to whether this is the case and you should seek legal advice if you are considering engaging agency staff for any substantial length of time.

Directors and employees- binding the Company

The board of directors of a company would normally have wide powers under the Articles of Association to conduct the company’s business and affairs. Those powers may be delegated by the board of directors to individual directors and such directors are said to have “actual authority” to act on behalf of the company in relation to those powers. So called “apparent authority” is the authority of a person as it appears to others and it can operate to enlarge the actual authority of a director or to create authority for a director, employee or other agent of a company where no actual authority exists. For apparent authority to arise, the person must have been “held out” as having actual authority by someone with actual authority. “Holding out” can consist solely of the fact that the company has invested a person with a particular office e.g.”managing director” and has permitted them to act in that capacity.

It is common practice for companies to invest people with the title “director” where they are not in fact directors of the Company. You should be aware that investing people with titles in this way may give them “apparent authority” to act in accordance with the powers that a person with that office would normally have.

Note:

Please note that this newsletter is not intended to be a comprehensive statement of the law and should be used for guidance purposes only. If you require specific legal advice please contact Mark Machray or Edward Bond or by telephone 020 7493 2903.