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Independent contractor ‘sham’ documents will not work
The Court of Appeal in the case of Protectacoat Firthglow v Szilagyi has looked again at the question of when contract documentation should be regarded as a ‘sham’.
Construction worker Szilagyi had signed documents stating that he and others were partners and independent contractors to an employer. The Employment Appeal Tribunal found the documents were a ‘sham’ and declared the claimant an employee. The employer appealed and this appeal has now been dismissed.
In doing so, the Court of Appeal has confirmed that whilst lower courts must always look at what the parties intended judges must also consider the circumstances in which the contract was made, and how it worked in practice. In this case the ‘partners’ had no common assets; no joint bank account and were paid directly into their individual bank accounts. In all the circumstances they were employees.
Comment: Employment issues can arise in matters of health and safety. Where there is no serious expectation that contract clauses will be activated the written contract will not be effective in creating a sub-contractor relationship and the worker remains an employee.