In the recent IR35 case of Autoclenz Ltd v Belcher, the Supreme Court has endorsed the approach of lower courts in looking behind the written contract in employment cases to see what was actually going on. In this case some car valeters were held by Autoclenz to be self-employed, although they never worked exclusively for Autoclenz. They were found in fact to be employees. The court said that the ‘contract for services’ which they had signed did not reflect reality.
Courts have always been able to go behind the written contract where they have suspected a sham. However what are new here is the endorsement of the Supreme Court and justification given for it, which goes somewhat wider than before. They say that “the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed, and the true agreement will often have to be gleaned from the circumstances of the case, of which the written agreement is only a part”.
This case does have some very specific characteristics and always looked weak. They were even contradicted by their own chief witness. The result, though, is likely to be that courts will start looking into all ‘the circumstances of the case’ in instances that are much less clear cut, with many more findings for a status of employment. This reinforces Orange & Gold’s view that it is imperative that the characteristics of the contract reflect the written contract if you are to successfully defend IR35.