Updated for 2013.

Last year there was an important employment law case about employment status that showed that Employment Tribunals would focus on the actual reality of working relationships when determining whether someone is self-employed or not, and not focus on what the contractual documentation actually said (Autoclenz v Belcher, see the details here).

This year there has been another important case, Quashie v Stringfellows Restaurants Ltd, to determine whether a Lap Dancer employed by Stringfellows was self-employed or an employee.

In this case the Employment Appeal Tribunal found the most important factor in determining the employment relationship was the control that the Employer had over the individual and Mutuality of Obligation was placed in a secondary position.

Details of the case

  • Ms Quashie was dismissed for misconduct involving drugs.
  • Although Lap Dancers are generally regarded as self-employed throughout the industry, Ms Quashie believed she may be an employee and therefore claimed unfair dismissal.
  • The Employment Tribunal therefore had to decide is she was self-employed or an employee (only an employee could make a claim for unfair dismissal).

Ms Quashie’s work at Stringfellows was governed by several documents:

  • A ‘Club Agreement’ (which Ms Quashie had not seen) which set out “full contract terms” and contained rights and obligations for both parties
  • The ‘House Rules (which Ms Quashie had not seen) and a ‘Welcome Booklet’ (which Ms Quashie had seen) which were very similar.
  • The Club’s licence from Westminster Council which stipulated that a minimum £10 fee should be paid to the dancer for each dance performed.
  • The agreed work rota.

From these documents Ms Quashie had the following obligations:

  • To provide her own outfits, but she paid £15 per night to a ‘House Mother’ who took care of minor repairs, ironing, hair and make-up, her general appearance and well-being.
  • Customers would buy ‘Heavenly Money’ vouchers which they gave to the dancers for their services (think Disney Dollars but for strippers).
  • Ms Quashie had a 20-25% commission deducted by Stringfellows from the total amount of Heavenly Money she earned.  Also deducted was a £65 house fee for each night she worked.
  • Also deducted were fixed fines if she was late to work, late for a dance, or had not attended work.
  • What was left was given to Ms Quashie in sterling.
  • She had to provide her work personally and could not provide a substitute.
  • The Club exercised a degree of control over the dancers who were required to keep to the house rules, which involved working two Saturdays and two Mondays a month; attending a Thursday meeting (which she was not paid for, but could be fined, suspended or dismissed for if she did not attend); being told what to do on stage.  Also if she did not work for more than 4 weeks she would need to re-audition for her job.

The original verdict on the case

The Employment Tribunal decided Ms Quashie was not an employee as they felt there was no mutuality of obligaton – the club was not required to pay the lap dancers and they were not obliged to provide work.

The appeal verdict on the case

Ms Quashie appealed and the Employment Appeal Tribunal (EAT) decided she was an employee because they found that:

  • There was mutuality of obligation when you examined all the documents and the whole working relationship.  There was a contract involving payment to Ms Quashie of money for work done and the club were obliged to convert the Heavenly Money vouchers to sterling and give this to her.
  • The club was obliged to provide work on the nights Ms Quashie was on the rota and she was obliged to perform work on those evenings as directed by the Operations Director, the House Mother and the Resident DJ.  She also had an obligation to attend Thursday meetings and could not refuse to dance for a customer.
  • There was sufficient control for the relationship to be one of employment (all the rules and fines).
  • The work had to be provided personally (she could not provide a substitute).

These 3 elements must be present for a contract of employment to exist and the EAT decided they were. The Tribunal also considered the other relevant factors, that determine employment status, such as:

  • Did she provide her own equipment
  • Was she subject to disciplinary and grievance procedures
  • Was she paid for sick and holiday leave and / or received other benefits
  • Did she have a degree of financial risk
  • Did she have a level of responsibility in the business

The EAT decided she was an employee, but then had to decide if there was an ‘umbrella’ or ‘over-arching’ employment contract covering the 80 weeks she had worked at the Club, as she had not worked continuously for the 80 weeks.

The EAT decided an Umbrella Contract was in existence because:

  • There were some short gaps, but the EAT found a fairly regular pattern of attendance (in keeping with gaps in continuity of service that are allowed in certain circumstances under S.212  of the Employment Rights Act)
  • There was an expectation on both sides of continual engagement
  • The contract existed prior to each nightly engagement, from the date of her acceptance of the rota
  • She was required to attend the weekly Thursday meeting
  • She was required to work 2 Saturdays and 2 Monday’s a month
  • She could not take a holiday without notifying the club of the start and end date, and on return was required to dance the next day (so her employment status continued during holidays)

Conclusion

This case is very fact-specific but it shows the importance of looking at all the facts in the relationship between parties when deciding someone’s employment status.

It is also important because it shows that the more control an organisation seeks to have over it’s workers, who they believe are self-employed, then the more likely it is that they will actually be employees.

However, the EAT have referred the case back to an Employment Tribunal to decide if there was unfair dismissal but also to decide if there was ‘illegality’ in the contract. Ms Quashie had represented herself as self-employed to HMRC (and also claimed tax credits and may have mis-represented her earnings and expenses when doing her annual tax returns) but now has been found an employee.

We’ll keep an eye on the ‘illegality’ issue and let you know what happens next!

In 2013 the Court of Appeal upheld Stringfellows appeal and overturned the EAT’s decision!

They found she was not an employee because:

  • Stringfellows were not under an obligation to pay Ms Quashie anything, she paid Stringfellows to dance at the club and she was paid by her customers.  She therefore took the economic risk of not being paid, which the Court of Appeal said was “a very powerful pointer against the contract being a contract of employment”.
  • She had accepted in the terms of her contract that she was self-employed and so paid her own tax and did not receive sick pay or holiday pay.

The Court found that the key factor was the lack of obligation to pay Ms Quashie and the express contractual arrangements which indicated that the agreement in place did reflect the reality of the employment relationship.

 

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Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.