In our November 2011 and July 2012 updates we told you about the case of Quashie v Stringfellow Restaurants, in which Quashie, a dancer, successfully argued on appeal that she was employed by Stringfellows and had sufficient length of service to qualify for unfair dismissal protection. The tables have turned: In the latest instalment, the Court of Appeal has stripped Quashie of her victory and restored the original tribunal decision that she was self-employed.1
The bare facts were that Quashie had to pay Stringfellows an entry fee to be able to dance at their clubs. Stringfellows didn't pay Quashie a thing: all the money she earned came from the club's customers via a voucher system (the now infamous 'heavenly money'). Unless Quashie reported to the club, she was under no obligation to dance, could (in theory) dance at other clubs and could take time off as and when she wanted and for as long as she wanted without requiring permission from Stringfellows. Once she reported for work, however, there was a rota, strict rules to follow and certain obligations to fulfil, including to dance for a minimum number of nights that week. Stringfellows administered fines to dancers who failed to comply. The club deducted commission and fines from the sums Quashie received from punters: she took the remainder but was responsible for paying her own taxes. Sometimes after deductions there was nothing left.
At first instance, the tribunal agreed with Stringfellows that Quashie was self-employed and consequently had no rights to unfair dismissal protection, but this was overruled by the Employment Appeal Tribunal (EAT), which upheld Quashie's appeal and decided there was the necessary mutuality of obligation between Stringfellows and Quashie to establish an on-going employment relationship under one umbrella contract.
The Court of Appeal tore a strip off the EAT and restored the original ruling: Quashie was self-employed after all. Quashie negotiated her own fees with clients and she took the financial risk. It was possible that after the fines and fees she paid to the club she could end up out of pocket. Accordingly there was no 'wage-work bargain'. This suggested the relationship between Quashie and Stringfellows was not intended to be one of employment. The fact that Stringfellows made money by selling food and drink to the customers did not change this. The court also took into account that Quashie's contract stated that the relationship was not one of employment: while this in itself can never be conclusive proof, the court nonetheless took it as a strong indicator of what was intended, particularly when set against the practical realities of the working relationship. The naked truth was that Quashie paid the club for the opportunity to earn money by dancing for the club's customers and this, the Court of Appeal considered, was not consistent with an employment relationship. The court acknowledged the EAT's point that there were certain mutual obligations in place between Stringfellows and Quashie on the occasions when she did work, but these mutual obligations merely evidenced the parties' agreement. That there was a contract between Quashie and Stringfellows was not in dispute: it just wasn't a contract of employment.
Comment
While the facts of the case may be specific, the Court of Appeal ruling makes clear that the practical reality of the situation needs to be considered when determining whether the contract that the parties have entered into is one of employment or not. Employers can take comfort in the fact that the Court of Appeal pointed to certain traits, such as an individual paying a fee for the chance to earn money, paying their own tax or receiving payments direct from third parties, as indicators of self-employment. Nevertheless, this remains a grey area and great care should be taken when drawing up contracts intended for freelancers. Consider the facts and whether they point towards someone conducting their own business affairs or being under an employer's control. Don't be left exposed – if you're in doubt, please get in touch!
Footnotes
1 The Court of Appeal decision in Stringfellow Restaurants Ltd v Quashie [2012] EWCA Civ 1735 is available at http://www.bailii.org/ew/cases/EWCA/Civ/2012/1735.html.
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