What makes an Employee an Employee? The Lap Dancer and the Nightclub…

The question of what makes an employee an employee is a very important one as employees have statutory rights and protections that other workers and those genuinely in business on their own account do not have.  Arguably, the most important of these statutory protections is the right not to be unfairly dismissed which arises after 1 year’s continuous employment (or 2 years for people engaged after 6 April 2012).

The recent EAT case of Quashi v Stringfellows Restaurants Ltd examined this question in detail and in this article I set out the salient points which came out of the Judgment.  In this case Ms Quashi had been working as a lap dancer at Stringfellows.  At the time of her engagement both parties believed that the agreement being entered into was a contract for services – i.e. the dancer would be self-employed – as that was what was stated to be the case in the contract which was entered into between them.   However, as time went on Ms Quashi began to question the validity of this and, when she was ultimately dismissed, she claimed unfair dismissal, arguing that she had, in fact, been an employee of the Club for almost two years.

The case also dealt with the issue of “umbrella contracts” as Ms Quashi had several breaks between periods of work.  The EAT considered whether, despite these breaks, Ms Queshi maintained the continuity necessary to found an unfair dismissal claim on the basis that she argued that there was an overreaching contract of employment which governed the entire period that she worked at the Club.

What are the essential ingredients for a contract of employment?

A  Tribunal is required to look at the whole picture to determine whether an individual is employed under a contract of employment or is self-employed.  Whilst the written agreement entered into between the parties is an important document for consideration, it is only one factor to be taken into account.  Just because a contracts states that it is a contract for services not a contract of service is not, of itself, determinative.

There are three elements which MUST be present in any contract of employment:

1.  There must be an obligation on a person to provide work personally.

2.  There must be mutuality of obligation between the parties.  Mutuality of obligation arises in any contract, whether that is a contract of employment or otherwise.  The mere existence of a contract (which consists of an offer, acceptance of the offer and “consideration” (normally payment) ) is sufficient to show mutuality of obligation.

3.  There must be sufficient control over the person engaged to perform the work by the person doing the engaging.

In this case, Stringfellows conceded that there was a contract in place between the parties on each occasion that Ms Quashi danced at the Club and therefore the EAT Judge held that there was de facto mutuality of obligation.  Ms Quashi was also required to attend personally to perform at the Club.  She was not allowed to send a substitute if she was sick or on holiday.  As such, the first condition of the test was also fulfilled.  The final question, therefore, was whether there was sufficient control over Ms Quashi in how she performed her work.  In examining the evidence, the Judge found that there was.  Ms Quashi was subject to strict rules and regulations in the performance of her duties.  For example, she was obliged to turn up for work when she appeared on the rota and was fined if she didn’t turn up or was late.   She was also required to attend weekly meetings (for which she was not paid) and, again, would be fined if she didn’t attend.  There were strict standards of dress and grooming and, in fact, there was a company handbook which set out in detail the expectations placed on individuals working at the Club.

The EAT therefore held that the Tribunal had been entirely wrong in finding that there had been no contract of employment in place and it therefore substituted its finding for that of the original Tribunal.  However, the Claimant was not yet home and dry as, in order to found her claim, she had to show that she was employed under a contract of employment for at least 12 months continuously.  In order to do this, she had to establish that there was an “umbrella contract” which governed her employment between periods where she actually performed work.

In this case, it was specifically found on the facts that there was an expectation on both sides of continued engagements.   There was a rota which Ms Queshi was given which informed her when she was next expected to work and, if she didn’t turn up, she was fined.  In addition she was expected to attend weekly meetings even during weeks where she did not perform work and, again, was fined or could be “dismissed” if she didn’t turn up.   In light of this expectation, the EAT held that there was, indeed, an umbrella contract of employment and that, as such, Ms Queshi had sufficient continuity of employment to found a claim of unfair dismissal.

This case is an important reminder of the importance, not only, of the words contained in any contract but also of the factual nexus which governs the relationship between the parties.  If an “employer” wishes to ensure that an employment relationship is not being created then it must be very careful to ensure either that it doesn’t exert any real control over the person engaged to do the work or that it allows a substitute to be provided if the worker is unavailable to perform the work for any reason.

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About Belinda Lester
I am the managing director and founder of Lionshead Law a specialist employment law and HR consultancy company.

One Response to What makes an Employee an Employee? The Lap Dancer and the Nightclub…

  1. This case has subsequently been to the Court of Appeal which overturned the Judgment of the EAT which had held that Ms Quashie was an employee.

    Whilst Ms Quashie worked under a contract, and there were mutual obligations of some kind in place when she was actually working, Elias LJ found that she had not been engaged under a contract of employment. This was because the manner in which Ms Quashie had been paid made it clear that Stringfellows had been under no obligation to pay her anything at all. The principle evidence for the conclusion was that Ms Quashie negotiated her own fees with clients and took the economic risk of being out of pocket on a particular night.

    Elias LJ concluded by saying “It would, I think, be an unusual case where a contract of service is found to exist when the worker takes the economic risk and is paid exclusively by third parties.”

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