Substiution Clauses And The Status Of A ‘Worker’

In Archer-Hoblin Contractors Ltd. v MacGettigan, the Employment Appeal Tribunal (EAT) considered the effect of a substitution clause in determining whether a person is a worker within the meaning of Section 2(1)(b) of the Working Time Regulations 1998 (WTR) and therefore entitled to paid holiday.

Mr MacGettigan worked under contract for Archer-Hoblin as a steel fixer. His contract stated that he did so as a self-employed subcontractor and it contained a substitution clause which provided that:

‘You have the right to send someone with similar experience and qualifications in your place. You will be paid for the work they do and must arrange to pay the substitute yourself. You must notify the Contractor of the substitute for security and Health and Safety purposes.’

The Employment Tribunal (ET) found that Mr MacGettigan was a worker within the meaning of the WTR. Whilst the substitution clause in his contract was not a sham, if one examined the reality of the situation he had performed all the work under the contract himself, working on a daily basis for five months, and believed that he would lose his job if he sent a substitute. His claim for holiday pay therefore succeeded.

Archer-Hoblin appealed against this decision.

The EAT noted that whilst an unqualified power of substitution is inconsistent with the status of a worker under the WTR, a limited power to provide a substitute is not. However, the ET had erred in taking into account whether Mr MacGettigan actually performed work or services personally rather than determining the issue by reference to the terms of the substitution clause. The latter gave him an unqualified right to delegate the work so was inconsistent with a contract to perform any work or services personally. Unless the substitution clause was a sham, Mr MacGettigan was not a worker within the meaning of the WTR.

In the EAT’s view, the ET should have considered whether the unfettered substitution clause in Mr MacGettigan’s contract with Archer-Hoblin accurately represented the intention of the parties and then based its decision as to whether it was a sham on that finding. Whether or not the substitution clause was a sham could not be ascertained with sufficient certainty from the ET’s findings and so it was not possible for the EAT to determine whether or not the ET’s decision that the clause was not a sham was perverse.

The EAT therefore set aside the ET’s findings and remitted the case for rehearing to a different ET.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , October 2009

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