Trouble brewing

When deciding whether someone is an employee, a worker or self-employed contractor, tribunals have to balance a number of factors which include the extent to which the person is integrated into the business. In Exmoor Ales Ltd and anor v Herriot, the Employment Appeal Tribunal (EAT) held that someone who was paid £1,000 quarterly in return for an “exclusivity arrangement” was an employee. 

Basic facts

Ms Herriot provided accountancy services since 1990 to Exmoor Ales Ltd through the auspices of a partnership that she ran with her husband. From April 2011 the brewery made quarterly payments to her of £1000 in return for an exclusivity arrangement whereby she did not work for anyone else. Although the brewery later denied that it had asked her to work exclusively for them, she did indeed stop working for other people from that point onwards. 

In 2015, the brewery moved to new business premises where Ms Herriot was allocated a work place. In the same year, the two parties agreed on a temporary “cap” to the amount that Ms Herriot would invoice at a time for the work she did in order to avoid any adverse effect on the brewery’s cash flow.

In May 2016, the relationship between Ms Herriot and the brewery began to deteriorate. On 27 January 2017, Ms Herriot lodged tribunal claims for unfair dismissal, age discrimination, holiday pay, failure to provide a statement of written particulars of employment, harassment and victimisation. Four days later, the relationship between the two parties ended.

The brewery argued that as Ms Herriot was a self-employed accountant, the tribunal did not have jurisdiction to hear any of her claims.

Tribunal decision

The tribunal agreed that Ms Herriot was an independent contractor, but only until April 2011 when there was a “fundamental change” in the employment relationship and she became an employee. The tribunal found not only was she “fully integrated” into the brewery’s business from that time, but there was mutuality of obligation between the two parties in that she had to provide her services personally (with no substitutions allowed) and the brewery had to provide her with work.

The brewery appealed on the basis that the tribunal had not weighed up all the factors which indicated that she was self-employed. Ms Herriot had chosen to provide her services through a partnership, she had not taken shares in the business, she had drafted employment contracts for others and she accounted to HMRC on a self-employed basis for her own tax, national insurance and VAT.

EAT decision

Rejecting the appeal, the EAT held that the tribunal judge had made “unassailable” findings which he was perfectly entitled to do in the circumstances.

As such, he had clearly decided that the combined effect of the exclusivity obligation in return for a quarterly payment, the requirement for Ms Herriot to provide her services personally (as opposed to allowing a substitute), along with the findings on integration and mutuality of obligation and the high level of control that the brewery exercised over Ms Herriot’s work were all indicative of her status as an employee.

The judge was also “well aware” of Ms Herriot’s tax arrangements, that she had drafted contracts for others but not herself and that she had not received any allocation of shares in the business. These were all points from which the judge had been invited to draw the inference of self-employment but he had not done so “in the face of his findings in relation to integration, mutuality of obligations, control and non-substitutability”.