Law

In the conduct of the employment of an individual, the compliance to laws both for the employed and the employee govern the relationship between the two entities. Much of the laws implement certain guidelines that the employer and the employee as they relate to tenure and security of the employment of the employee. In instances where the employee is relieved or is terminated from the company, what remedies does the

Case for unfair dismissal
In the aforementioned case Protectacoat Firthglow Ltd vs. Szilagyi IRLR 2009 365, the issue of fraudulent contracts was taken up by the Employment Appeal Tribunal (EAT) on the 26th of April 2008 that dismissed but not en toto the appeal of appellant Protectacoat Firthglow Ltd (Protectacoat) from the ruling of an employment judge. Protectacoat is engaged in the business of the application of protective shields to the outer walls of homes (British and Irish Legal Information Institute).  The claimant in the issue, Mr. Miklos Szilagyi, had accomplished two separate documents, one is a deed that stated for the creation of a partnership agreement with one Glen Nesbit, Szilagyis assistant, naming the partnership business partnership as MG coatings pursuant to the statutes under the 1890 Partnership Act, the other document being a service agreement with Protectacoat that states that the M  G will undertake services for the company. Following a disagreement between claimant and the company on the provision for a scaffolding or the task can be safely accomplished with the use of ladders, Protectacoat undertook measures to rescind the contract with the claimant.

M  G bought a legal action against the company on grounds of unfair dismissal as stated in the provisions of s 111 of the 1996 Employment Rights Act under the title of employee as laid out in s 230 of the same law. Finding merit in the litigation, the employment magistrate held that the tribunal had sufficient legal basis to hear the claim and the claimant fit into the definitions of an employee under the law (Law Reports) .

The questions posed before the appellate court were the determination on whether the agreements forged by the two parties can be considered fraudulent and whether the professional relationship between Mr. Szilagyi and Protectacoat fit into the tenets of an employee and employer. In applying the test for qualification for fraud, the Court of Appeals took the questions and framed them into the parameters of employment law. The determination of the real relationship in the employee-employer status, whether this is the true relationship of the two parties, are found in the wording of the contract. In essence, terms of employment and the determination of the two are mutuality of obligation, performance of that obligation, and a degree of control of the employer over the employee. In the ruling of the Court of Appeals, the Court decided that the written covenants did not represent the real motives or expectations in the case. In short, the partnership accord was not the real motivation or relationship it was that  of the employer and employee that really governed the relationship between Protectacoat and Szilagyi (Stephen Ravenscroft and Abigail Attwood, 2010) .

In the case of Autoclenz Ltd v Belcher  Ors 2009 All ER (D) 134 (Oct), is worthy to note since the case deals with the ruling of the appellate court that the determination of ones employment status is not influenced by the categorizations in HM Revenue and Customs (Ravenscroft, Attwood, 2010). In the facts of the case, Autoclenz washed cars intended to be out on auction. The company (Autoclenz) provided the equipment for cleaning the vehicles at a flat rate to valeters. The valeters were paid on a per piece basis, gave invoices to the company on a weekly basis for payment, paid their own taxes and signed written agreements that indicated that they were sub contractors who were self-employed (Pearson and Hinchliffe, 2009).

The written agreements between the valeters and British Car Auctions stated that the valeters, one of which became the claimant in the case, Mr. Belcher, were independent contractors, under sub contract with BCA. Under the provisions of the agreement, the contract permitted the valeters to contract others to perform valeting for them, and that there would be no responsibility for the valeters top accept work if the tasks were given to them nor on Autoclenz to offer work if such work was open. In the latter part of 2007, the valeters lodged a legal action with the employment tribunal stating that they were actually workers hired by Autoclenz, and requested that an order be issues to the company to compensate them under the provisions of the National Minimum Wage Act and holiday pay due them under the 1998 Working Time Regulations Act (Jane Elgar, 2009) .

In the ruling of the ET, the judge rules that the true relationship of the two parties were not reflective of the state of the status between the valeters and A Ltd. In addition, the judge discovered that the degree of control of A Ltd over the valeters were found to be sufficient as that of an employer on the employees, this making them full employees and not just independent contractors of the company. In the alternative, the judge ruled that if he was in error with regard to employment status that the valeters were workers since they offered a personal service and did not have the capacity to send someone to substitute for them (Elgar, 2009).

The issue of substitution clauses was dealt with in the case of Archer-Hoblin Contractors Ltd v. MacGettigan 2009 All ER (D) 88 (Aug). In the ruling of the Employee Appeal Tribunal, a clause, unless it is a fraud, that gives a person with an undeniable right to delegate or substitute the services that he offers to another in the context of the contract is an infringement on the rights of a worker within the ambit of the 1998 Working Time Regulations Act.  In the case, the court must perceive the clause in its literal form, that if the clause is free of ambiguity, the definition and effect should be adduced by viewing the rights and responsibilities that are created by it. In the facts of the case, Mr. MacGettigan, a steel worker who  performed work for Archer-Hobgoblin for a period of five months. In MacGettigans contract, it is stated that he as a self employed sub contractor, possessed a substitution clause and was not entitled to any holiday or sick leave benefits (Ravenscroft, Attwood, 2010) .

In his argument before the  court, MacGettigan stated that he was a worker in the context of the Working Time Regulation Act and therefore should be given holiday and sickness benefits. In determining the case of MacGettigan, the court said that was prevalent in practice constituted important evidence whether the intention of the parties were truly reflected in the substitution clause in the contract, meaning whether the provision in the contract can be considered as a sham, but not pertaining to the rights and responsibilities that were created by the contract, which is of primary importance. In practice, substitution clauses are helpful tools to attain self employment status. But it is also very rare for two parties to agree with the intention for the clause to be used.  If such is the intended desire, then the two parties must documents such intentions to negate the possibility that the clause was indeed fraudulent (Ravenscroft, Attwood, 2010) .

The Case of Protectacoat Unfair Dismissal
In the case at hand, the claimant in the case, Miklos Szilagyi, worked for Protectacoat,  argued that he was unfairly dismissed by the company. Arguing against the case of Szilagyi,  the company argued that the claimant was a partner in the company and not an employee as the claimant states. This flaw in the argument of Szilagyi, in the opinion of the company, imperiled his case before the court. The Employment Tribunal (ET) held that the partnership covenant entered into by Szilagyi was a sham and that Szilagyi was in fact an employee of the company (Wright, Johnston and MacKenzie LLP, 2009) .

First let us deal with the issues concerning a case for unfair dismissal. In the case of unfair dismissal, in the context of the 1974 Trade Union And Labour Relations Act, as amended by the 1978 Employment Protection Act and the 1996 Employment Rights Act, employees can contest the act of the employer regarding hisher dismissal from their jobs. There are two elements in a case for unfair dismissal. One, the conduct of the dismissal must be considered equitable, that the tribunal must be satisfied that the actions  of the employer must be conceived as reasonable and fair to the employee in every aspect of the proceedings. The court will adduce this fact according to the merits of the case and in the interest of fairness. Second, under the tenets of the 1974 law, there are various reasons that the employee may be dismissed if the conduct of the dismissal is seen as equitable. They are

Redundancy,
Health issues, an inadequacy in capabilities, or insufficient qualifications for the tasks in which the  employee is undertaking for the company
Misconduct, as this may require a dismissal in one case or be a series of lesser cases taken collectively to warrant dismissal of the employee
Instances where the employee cannot continue performing the task assigned by the company without infringing on the law, and
Other significant reasons that will warrant the dismissal of the employee from their present position in the company (Shaun Tyson, Alfred York, 2000).

Other reasons that an employee can cite to challenge what they perceive as an unfair dismissal from their positions is a refusal of the individual to affiliate themselves with a specific trade union organization. The protection can also be applied in the context that the employee refuses to donate to a particular charity in lieu of paying union fees. But employers are also prohibited from initiating any action that falls short of a dismissal to force employees to affiliate with a particular labour organization and should not choose persons to be subject to redundancy proceedings on account of their being members of another labour group (Tyson, York, 2000).

Under the tenets of the 1996 law, an employer cannot act to harm an employee with regards to their employment if the employee reported an unsafe action by the company (Tyson, York, 2000). In the case of Mr. Szilagyi, the company had unfairly dismissed him as a result of his refusal to work in what he termed as an unsafe working environment. Also, Protectacoat alleges that the claimant had filed his claims against the company beyond the time that the law allowed. Included in the argument of the company was the reiteration that the claimant was only an independent contractor of the company and not employed by them (British and Irish Legal Information Institute, 2009).

Prior to the enactment of the 1996 statute, the prevailing statute with regards to disciplining and dismissing employees was the 1978 Employment Protection (Consolidation) Act. In 1996, when the law came into effect, it consolidated the provisions contained in the 1978 law with several other pieces of various labour laws, such as the 1986 Wages Act, The 1994 Sunday Trading Act and the 1993 Trade Union Reform and Employment Rights Act. Further changes were incorporated in the 1999 Employment Relations Act and the 2002 Employment Act (John Gennard, Graham Judge, 2004).

Once the employee has determined that they were indeed dismissed by the company, the proof of burden is now placed on the shoulders of the employer to justify the dismissal of the employee. If the employer does not provide a reason why the employee has been dismissed, then  the dismissal is deemed unfair since the statutory proof has not been accomplished. Also, if the reason for the dismissal of the employee is concocted by the employer with the goal of dismissing the employee as the true reason for doing so is unacceptable, then the employer will fail to discharge this duty as the reasons fall beyond the ambit of section 98  (1) or (2) of the 1996 ERA. But for the employer to give false reasons is not fatal to the case of the employer,as the duty to ascertain the true reasons fall within the duties of the tribunal that drove the employer to dismiss the employee (David Lewis,  Malcolm Sargeant, 2004).
Protectacoat Firthglow v Descombes

Prior to the hearing, lawyers for the company communicated with Szilagyi and asked him to give reasons on why he should be considered as an employee of the company. Szilagyi drew the companys attention to the case of Protectacoat Firthglow v Descombes 2004 UKEAT 0916_03_1901. In that case, the company was the subject of two claims bought before the tribunal by Messrs. Simon Descombes and Roderick Lamont, the two cases herd as one by the court. Both claimed for unfair dismissal, illegal deduction of wages and damages for breach of contract. In this case, the company averred that the two were not employees of the company, the same argument made against Szilagyi. The court ruled that they had acquired jurisdiction and issued an alternative that the two had fit the requirements of workers under section 230 (3) of the 1996 law, which were challenged by the company  (United Kingdom Employment Appeal Tribunal, 2004).

As earlier mentioned in the paper, the company specializes in the spraying of protective coatings to the external walls of houses, and the work mainly comprised work schedules of one or two days. Firthglow stated that these jobs were done by teams that were engaged as sub contractors by the company. As the company did not wish to recognize these contractors as employees, the company concocted the scheme of getting two people to enter into partnership agreements with each other first and then the company would engage the services of the partnership to carry out the tasks. In the determination of the court on the merits of the case, the court investigated whether each of the workers was actually an employee of the company. The court found that the company usually advertised for personnel in the local job markets, and that Firthglow provided training and required documentation, was more similar to an employer looking for an employee rather than a company who was on the lookout for sub contractors (Employment, 2004).

Also, the working time of the company and the structure of the work did not meet the criteria set for independent contractors. They had no viable choices in the start of their work, the sub contractors had to report to the yard of the company and were provided the tasks that were available for the day, the materials and the data necessary to complete the work. As such, the company had a significant amount of control over the amount of time that each worker put in. Not only did the company exercise a significant amount over the time of the contractors, but also over the process and the system of the work to be done. No member of the teams provided any input on the quotations for the projects or conducted assessments or inspections on the projects to be done (Employment, 2004).

Along with other factors, the tribunal ruled that all of these elements taken together can be construed as an employer exercising a significant amount of control over the employees and the work process. The finding of the court was buttressed by the fact that all the subcontractors were provided training by the company in all the procedures and the particulars of the tasks. The tribunal also discovered that the contractors were provided with vans that bore Firthglows company logo and company details. All the tools such as the scaffolding, spraying equipment, hard hats and other pieces of equipment were also provided by the company, pointing strongly to the existence of a employer-employee relationship rather than the subcontractor-contractor relationship being argued by the company (Employment, 2004).

In the hearing, Szilagyi, appearing before the tribunal in person, began his testimony on the circumstances  that led to his being allegedly employed by Protectacoat in March of 2006. In his statement, he said that he saw a Protectacoat van parked at Tescos and inquired of the driver if there were employment opportunities at the company, which the driver answered by handing him a business card of the company. He then proceeded to the Crawley yard of the company where he met Mr. Simon Squires, the manager of the depot. Squires interviewed Szilagyi if was familiar with health and safety jobs, which Szilagyi said no. But still Squires asked the claimant to sign a safety and induction form at the depot (England and Wales Court of Appeal (Civil Division), 2009).

After filling up the card, Szilagyi boarded a van with two other men to learn the rudiments of the job. Szilagyi and the two other men learned the basics of the job and received cash for a period of two to three weeks. In the statement of Mr. Foxwell, attorneys for Protectacoat, averred that the two were subcontractors hired by the company to train Szilagyi. In the hearing, apart from the other items mentioned earlier in the paper to allege Szilagyis claim of employment with the company,  Szilagyi also averred that he had come into a contract of employment with Firthglow. In his words, the documents he had signed did not truly reflect the real status of the relationship between himself and the company, calling the documents a sham, or fraud. Szilagyi aver that the real relationship of the two were not actually reflected in the contracts (England and Wales, 2009).

Sham Contracts
But in the case of Protectacoat, the main point of contention in the appeal is the contention of the employment judge that the documents entered into by Szilagyi and the company were to be construed as sham contract. In effect, the judge ruled that the true nature of the relationship of the two parties in the appeal was that of employee-employer rather than that of company with an independent contractor. In the ruling, the judge stated that there were facts that pointed to the existence of a sham contract between the two. One, the company had advertised that the personnel sent to the work sites were employees of the company  rather than contractors, but the company argued before the tribunal that the opposite was the truth. Second, in ruling on the services contract purportedly between the contractors and the company, the contract was fraudulent in that no fees were charged by the company to the contractors (England and Wales, 2009).

Sham contracting is the practice of an employer trying to conceal the true relationship between him and his employee and trying to mask the same with a fictitious arrangement that the employee is only an independent contractor who is self employed. This practice is conducted that the employee will not be able to avail of the benefits and other dues that they will acquire with the attainment of employee status (Fair Work Online). In a recent ruling by a Federal magistrate court in Australia,  the International Labour Organization declared that self employed persons and self employment is a legitimate enterprise, and called for the abolition of the practice of establishing sham contracts. Enacted in the provisions of the Australian 2009 Fair Work Act, which prohibits an employer from pursuing the following activities
Conceal an employer-employee relationship, possible or existing, and construe the same as an independent contracting relationship
Remove or threaten to remove an employee and then contract their services as an independent contractor, and

Concoct a lie with the intent to coerce the employee to become an independent contractor (Fair Work).

In the Australian case for sham contracts, CFMEU v Nubrick Pty Ltd 2009 FMCA 981 (7 October 2009), a manager had contracted the services of two employees in a brick making factory as independent contractors, or in the case of the ILO, as self employed individuals. The manager and the the workers were of the belief that having their own Australian Business Number (ABN) had in fact secured their status as self employed individuals. But in the ruling of the judge, the two were found to be employees of Nubrick (Ken Philips, 2010). In the case of many companies, they engage a host of workers under different types of contract. They can be direct employees of the company, contractors that are engaged by the company or private individuals who offer their services to a company for the purposes of taxes or through a managed service contract and agency temps that are engaged through the services of a third party (Law Society of Scotland, 2010).

As a common practice, persons that are not directly hired as employees by a certain company will be given written agreements that state they are to construed as self employed individuals that are engaged in the context of service agreements with a particular company.  The question as to the status of the individual crops us in the context of the termination of the contract and that the employer ends the contract by which the person was hired or the employer does not to retain the services of the individual for an extended period beyond the time of the contracts tenure. In the latter context, the party may feel an injustice may have been committed against them and is considering legal options against the company. This may take the from of unfair dismissal proceedings, constructive dismissal and redundancy claims (Law Society, 2010).

In the case of Mr. Szilagyi, the employment judge ruled that the relationship of the two were concealed and that the true relationships were made to appear as a contractor and an engaging company for whom Szilagyi had come to a contract for services, and not as a direct employee. Apart from the aforementioned factors that weighed heavily on the decision of the judge to rule that the contract and the agreements were a sham, the judged also discovered that the).  company also mandated the procedures by which Szilagyi would conduct and the tasks he was supposed to accomplish. The mere fact that the claimant had to report to the companys yard constituted that the claimant was under direct supervision and control of the company (England and Wales, 2009).

The barometer case in the case for contractors as employees is found in Ready Mixed Concrete (South East) Limited v. Minister of Pensions and National Insurance 1968 2QB 497. In the case, the tribunal had to determine whether the driver who was also the owner of the same for the purpose of delivering the companys ready mixed concrete products was contracted under a contract of service or a contract of services. In the facts of the case, the appellant was engaged in the business of manufacturing and selling ready mixed concrete.  Ready Mixed Concrete (RMC) had contracted an independent hauler to deliver their products to their customers (HM Revenue and Customs).

The contract with the hauler was discontinued and instead of re-engaging another hauling company, RMC decided to create a policy that will have the companys products to be delivered to their customers with the use of drivers who owned their trucks working under contracts given by RMC. The drivers the entered into a hire purchase accord with Ready Mix Finance Limited to acquire a lorry, the mixing equipment mounted on the lorry to be considered as the property of RMC. In the mid 1960s, the company had asked the Social Security Minister to adduce the employment status of one these owner-drivers, a certain Mr. Lattimer. In the decision of the Minister, he concluded that Lattimer was employed under a contract of services. On appeal, the appellate ruled that the driver was in fact a businessman and not an employee of the company (HM).

But the crux of the contention is the existence of a sham contract between Szilagyi and Firthglow and was the real relationship of the two is actually that Szilagyi was an actual employee of the company and thus claim unfair dismissal. Szilagyi contended before the tribunal that he had indeed entered into such an agreement with the company.