What’s More Important:
The Contract or The Reality?

There have been two cases in recent months which have reinforced the need to ensure that your employment contract reflects the reality of the working relationship you have with your employees. We provide insight into these cases then guidance on employment contracts.

Published Categorised as Employment Law, HR Best Practice Tagged
2012-10-08 - What's More Important - The Employment Contract or Reality - Lighter HR
2012-10-08 - What's More Important - The Employment Contract or Reality - Lighter HR

1. Zero Hours Contracts

The first case looked at the area of zero hours contracts.

A zero hours contract gives an employer an opportunity to build a pool of available resources that can be called upon when there is a need.  However, there is no guaranteed work for the resource and the resource is not under any obligation to accept work when it is offered.

These contracts can be very useful to employers as they try and grow a business and are also beneficial to businesses where staff requirements are unpredictable.

In the case Pulse Healthcare v Carewatch Care Services, the situation was that the employees were on zero hour contracts but in reality they worked consistent shifts and regular hours.

A TUPE situation arose when the employer was acquired and the employees on a zero hours contracted were not transferred to the new employer.

The tribunal found that, regardless of the fact that the employees were on zero hour contracts, they worked regular hours and therefore were protected by TUPE regulations.

In this case, the tribunal placed more emphasis on the reality than on the contract.

2. Regular Hours but not Contractually an Employee

The Employment Appeal Tribunal (EAT) further reinforced this in the case Knight v Fairway & Kenwood Car Service Ltd.

In this case, the claimant, Knight, signed a contract which expressly stated that he was not an employee.  The reality was that he worked regular hours and his arrangement with the respondent filled many of the criteria used to establish an employee/employer relationship.

There was an issue between the claimant and respondent, the claimant left and bought a claim for wrongful dismissal.

The Employment Tribunal found that the claimant was not an employee and therefore there was no case to be answered.  This decision was overturned by the Employment Appeal Tribunal who found that there was an employee/employer relationship between the two parties regardless of what was stated in the written agreement.

Again, the focus is on the reality of the situation as opposed to what was written in the contract.

3. Ensure Your Employment Contracts Reflect Reality

Given this emphasis on looking at the reality of the working relationship it is very important to ensure that your contracts of employment are regularly reviewed to ensure that they have been altered to reflect any changes in circumstances.

This is good practice anyway as this process will ensure that your contracts reflect changes to employment legislation and continue to protect your business.

4. Stay Away from Obscure Contract Types

Another point we’d like to raise is that you should stay away from using obscure contract types to try and avoid the responsibilities you have as an employer.

It can be useful to use zero hour contracts or try and make claims that your employees are really self-employed but if this isn’t really the case then you are possibly creating more problems that you’re solving.

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