In recent years, many employment status cases have turned on the practical reality of day-to-day working arrangements even where this differed from the written contract. However, in Partnership of East London Co-operatives Ltd v Maclean, the Employment Appeal Tribunal (EAT) reminded tribunals that written terms must be given proper weight unless there is evidence to contradict them.
Background
The claimant was a qualified nurse engaged by the Partnership of East London Co-operatives Ltd (PELC). PELC engaged permanent employees, bank staff and self-employed contractors. The claimant worked for PELC from 2018 to 2023 on the basis that she was self-employed, invoicing through her own Personal Service Company (PSC). When the relationship ended, she brought claims for unfair dismissal, whistleblowing detriment and holiday pay. Employees can pursue all of these claims while workers can pursue whistleblowing detriment and holiday pay but not unfair dismissal.
At a preliminary hearing, the Employment Tribunal found that the claimant was an employee. It relied on the following:
- The contract was, in reality, between PELC and the claimant personally and not her PSC.
- Although there was a contractual right of substitution, this was impracticable in practice and the claimant always carried out the work herself.
- Mutuality of obligation existed. Despite there being no guaranteed shifts, the tribunal inferred that the parties expected a reasonable level of ongoing work.
The EAT judgment
PELC appealed on all three findings. The EAT agreed the contract was with the claimant personally. However, it upheld the appeal on substitution and mutuality of obligation, finding that the tribunal had not identified sufficient evidence to support its conclusions.
On substitution, the EAT held that simply finding substitution impracticable was not enough to conclude the contract required personal service. A clear contractual right of substitution was in place and evidence indicated a pool of already vetted nurses who could in principle act as substitutes. A conditional right of substitution, such as one limited to suitably qualified individuals, can still be genuine. The question was whether substitution was a realistic option even if it had never been used.
On mutuality of obligation, the tribunal had relied heavily on the claimant’s regular work over several years. However, the documentation stated that PELC did not have to offer shifts, and the claimant did not have to accept them. Shifts were bid for each month, were not guaranteed and the claimant did not always bid or receive her requested shifts. Being obliged to work a shift once allocated was not, on its own, enough to establish ongoing mutuality.
What can employers learn?
This case highlights the importance of clear and robust contractual documentation that accurately reflects the intended working relationship. Written terms will not be disregarded unless there is evidence that they are a sham or do not reflect reality. Tribunals must engage with the contractual position and explain why they depart from it if they do.
At the same time, organisations cannot rely on paperwork alone. As many decisions over the past decade show, if day-to-day reality diverges from the written terms, tribunals may still find that the true nature of the engagement is different. Employers should consider both the contractual terms and how the relationship will operate in practice, both at the outset and as it evolves.
