Mr Szilagyi worked for a building firm with whom he had a written partnership agreement. However, when he lost his job he took his case to an Employment Tribunal, claiming unfair dismissal. His ex-employers argued he had no such right because he was a partner, not an employee. Mr S countered this by pointing out that they had provided him with tools and a van, that he wasn’t free to work for any other firm and that the general degree of control they had over him had made him an employee. The tribunal accepted this argument and found the partnership agreement was a sham.

The Court of Appeal has since set out the test for establishing whether or not a contract is a sham:

Lady Smith said
“The question is always what the true legal relationship is between the parties.” This contradicts the commonsense approach which says paperwork is king. She goes onto state “if there is evidence to show that the contract doesn’t paint a true picture, the court or tribunal needs to look behind what’s in writing, to find the truth. Whether the document was intended to deceive or mislead or even where there is no deliberate intention to deceive, what is important is what is happening in reality on a daily basis. It is this “truth” that will decide whether a person is really an employee or a self-employed worker.

So the lesson is, if your paperwork is contradicted by the daily reality, Beware!

As I keep saying on this issue, “if they look like an employee in terms of their work activities, there is a risk they’ll be deemed to be an employee no matter what all-singing, all dancing, self-employed contract the two parties sign.