The Supreme Court’s 2021 judgment in Uber BV v. Aslam has led many to consider that written terms are not relevant in determining employment status, as courts will look behind any written agreement to consider the reality of the relationship between the parties. However, in Ter-Berg v. Simply Smile Manor House Ltd and others , the Employment Appeal Tribunal (EAT) concluded that the written terms are not necessarily irrelevant. We explore the judgment further below.
The Employment Rights Act 1996 distinguishes between employees, other workers and those individuals who work for their own business. It confers different statutory employment rights on the first two categories, such as the right to bring a claim for unfair dismissal which is available to employees but not workers.
Previous case law, most notably Autoclenz v. Belcher which was built upon by the Supreme Court in Uber BV v. Aslam, held the general rule to be that clauses which indicate a particular employment or worker relationship are void and ineffective if the other facts found by the tribunal point towards a different employment or worker relationship. For example, if a contract was created which states that an individual is self-employed, that wording may be void if it is found that the true circumstances of the relationship is one of employment. In that situation, the individual is likely to be considered an employee and the contradictory words ignored.
However, in marginal cases, written terms may be taken into account in the context of the wider facts of the case. This is seen in the Ter-Berg decision.
Ter-Berg v. Simply Smile Manor House Ltd and others – the facts
Dr Ter-Berg was a dentist and the principal of a group of three dental practices. In 2013, he sold the entire business to Simply Smile Manor House Ltd and subsequently entered into an agreement with Simply Smile to provide dental services on the standard form of contract produced by the British Dental Association. The agreement defined Dr Ter-Berg as a “performer” and Simply Smile as “the practice owner”. Dr Ter-Berg was obliged to fulfil certain performance obligations, such as providing a specified number of units of dental activity each year, and was liable to repay a portion of his licence fee if these were not met. Crucially, the agreement stated that it did not create an employment relationship. Additionally, it obliged Dr Ter-Berg to find a suitable locum to provide services in his place if he failed to utilise Simply Smile’s facilities for a period of more than 20 days. This was known as the Substitution Clause.
Subsequently the arrangement was terminated and Dr Ter-Berg brought a claim against Simply Smile and two of its directors, as well as the NHS, for unfair dismissal as a result of making protected disclosures. Dr Ter-Berg accepted that he was initially engaged as a self-employed contractor but argued this changed over the course of the professional relationship due to mutuality of obligation, full integration into the practice, exercise of control and requirement to provide personal service.
Employment Tribunal (ET) decision
At first instance, the ET rejected Dr Ter-Berg’s arguments, finding that none of the elements of an employment contract were present and that the professional relationship had not changed over time, save for the fact that the Substitution Clause had not been invoked.
Dr Ter-Berg’s appeal was largely dismissed. The EAT clarified the decision in Uber BV v. Aslam and confirmed that there is no rule that the written terms can never be used to infer the true intention of the parties when employment status is in dispute. Instead, it is necessary to consider all the circumstances of the case and to apply a broad approach when assessing employment contracts. As a result, the EAT found that the ET had not erred in using the written agreement as a starting point. Additionally, the ET was entitled to make a finding of fact that the factors relied upon by Dr Ter-Berg did not indicate a change in employment status and the law had therefore been applied correctly.
Dr Ter-Berg also argued that, following Uber BV v. Aslam, the ET should have disregarded the clause which stated that the contract did not create an employment relationship. The EAT again clarified the findings of the Uber case, stating that there is no absolute principle that these clauses are always void, but will be found to be void if the wider facts indicate that an employment relationship was created. In this case, the wider context indicated that this clause did reflect the true intention of the parties.
However, the final ground of appeal was successful. This was based on the ET’s interpretation of the Substitution Clause, which it had found meant the personal service requirement of an employment contract did not exist. As the ET’s finding relied on an erroneous understanding of the clause, its conclusion could not stand and the case has been remitted to a new tribunal for consideration of the correct construction of the clause and determination of its impact on employment status.
This case offers a helpful clarification of points in the Uber judgment, confirming that written agreements will not automatically be disregarded when considering employment status. While written terms are not determinative, they are also not necessarily irrelevant when determining whether an individual is an employee.
We can therefore expect to see tribunals continuing to adopt a purposive approach, considering all relevant facts as to the genuine intention of the parties when creating a potential employment relationship.
If you would like advice on employment status or other points arising from this case, please contact our PRM team.