Franchisee or Employee – the UK perspective

Natalia LewisHamilton Pratt

Franchise House

3A Tournament Court

Tournament Fields

Warwick, CV34 6LG

United Kingdom

Vicarious Liability = strict no fault liability arising, historically, only in the context of an employment

relationship.

Other relationships? Only when the relationship is so close in character to employer/employee relationship that it is just and fair to impose liability.

Are franchisees employees?

What is vicarious liability?

Assessing Status of an Individual

Ready Mixed Concrete v Minister of Pensions and National Insurance:•Remuneration in return for personal service

– Mutuality of obligations– Personal service – right to provide a substitute

•Control: What? How? When? Where?•Other factors:

– Ownership of tools– Financial risk– Benefit of profit– Other contractual provisions

Autoclenz v Belcher and Others

• Quick Facts:– Contracts? Independent sub-contractors– Provided with equipment– Paid weekly but paid own national insurance & tax– Inland Revenue’s assessment: self-employed

… valeters claimed they were workers.

Autoclenz v Belcher and Others cont.

Who is a worker?

“Worker” means:• (a) employee or • (b) an individual who has entered into or works under any other contract … whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual

Autoclenz v Belcher and Others cont.A person is an employee when:•Employer has undertaken to provide work for pay•Employee has undertaken to perform work for pay•Personal performance•Subject to control of the employer

A person is a worker when:•There is a contract•Personal performance•Status of the other party – not a client or customer

Autoclenz v Belcher and Others cont.

• Employment Tribunal employees but in any event workers

• Employment Appeal Tribunal workers but not employees

• Court of Appeal workers and employees• Supreme Court workers and employees

Autoclenz v Belcher and Others cont.

• Analysis – starting point is the contract clear?

Yes No

Q 1: personal service? Step 1: what are the contractual terms?

No personal service = Contractual terms v reality

Not worker, not employee Once the terms are identified

Q2: client or customer?If yes, then not worker, not employee

Autoclenz v Belcher and Others cont.

Court of Appeal’s conclusion:1. Valeters agreed to perform the services in return for pay

2. Mutuality of Obligations

3. Personal performance

Therefore next question…. Status of Autoclenz?

Autoclenz was not a client or customer …therefore…

Valeters = Workers

Next element of control Valeters = Employees

Are Franchisees Employees?

Autoclenz case is a “one off”