No, said the Employment Appeal Tribunal in the case of Ajar-Tec Ltd v Stack.

This meant that the individual was not an ’employee’ or a ‘worker’ under the Employment Rights Act 1996 and therefore not able to pursue his tribunal claims.

Background

Mr Stack was a shareholder and director who performed part time work for the company. There was no formal written employment agreement in place and he worked without pay for at least three years.

When Mr Stack’s position was terminated, he brought claims for constructive unfair dismissal (on the basis that he was an employee) and unauthorised deductions from wages (on the basis that he was a worker) in an employment tribunal.

The Employment Appeal Tribunal said that, whilst it was clear that there was an agreement for Mr Stack to do work, it did not mean this was a binding contract if there was no consideration (i.e., a wage or other remuneration).

The Employment Appeal Tribunal said that before a tribunal could decide whether a term about pay should be implied into a contract, it had to establish first whether there was a binding contract in place. In this case, there was none.

Implications for businesses

This case is a reminder of the importance of formalising employment relationships and ensuring that there are written contracts in place.

Regrettably, for the parties in this case, doubts about Mr Stack’s employment status have resulted in long and costly proceedings which could otherwise have been avoided.

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Updates: For employers: Tribunals | For employees: Tribunals |

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