The Employment Appeal Tribunal (EAT) has dismissed an appeal by a home improvement company against the decision of an Employment Judge that one of its window installers had been an employee of the company for the purposes of the Employment Rights Act 1996 (Launahurst Ltd. v Larner).
 
Mr Larner had worked for Launahurst Ltd. since 1995. There was nothing in writing to govern the employment relationship until December 2004, when the two parties entered into a ‘Contract Supply Agreement’, which contained an ‘entire agreement’ clause. In September 2008, Launahurst dispensed with Mr Larner’s services and he brought a claim of unfair dismissal. Launahurst claimed that he was not an employee but a supplier of services to the company.
 
Mr Larner worked for Launahurst on a daily basis, five days a week. The company decided what work he was to do and supplied the windows and doors etc. for installation, although Mr Larner provided his own tools. He was also provided with a company van. Initially, he was paid a percentage value of each contract but was not required to submit invoices for work done. This then changed and he was remunerated on a ‘more or less fixed sum’ of £610 a week, but there was no finding as to whether the change took place before or after the 2004 agreement. Income tax was not deducted from his pay as Mr Larner was registered under the CIS scheme and at all times paid his own NICs. He was not paid for any period that he took off work as holiday.
 
The Employment Judge found that there had been no material change in the pattern of Mr Larner’s work following the signing of the 2004 contract. As well as the entire agreement clause, this stated that the company was under no obligation to provide work and the service provider was under no obligation to accept a particular assignment. It also stated that Mr Larner was permitted to provide a substitute for his services provided the company was notified of this in advance. However, this situation never arose.
 
Examining all the circumstances, the Employment Judge held that Mr Larner was an employee of the company. In the Judge’s view, the entire agreement clause in the 2004 contract was a sham. The contract did not reflect the reality of the working arrangements between the parties and had only been introduced as a result of the approach taken by HM Revenue and Customs to the taxation of self-employed contractors.
 
Launahurst Ltd. appealed on the grounds that the Employment Judge had erred in ruling that the entire agreement clause was a sham and contended that there was not mutuality of obligations between itself and Mr Larner. The company argued that he was free to work elsewhere and was free to decide what hours he worked. He was permitted to use an approved substitute and the company did not exert sufficient control over his work to make it his ‘master’. He was also responsible for his own tax and NICs.
 
The EAT dismissed the appeal. Whilst the terms of the 2004 contract taken in  isolation suggested that Mr Larner was not an employee but a provider of services, the Employment Judge was entitled to look at the whole picture in order to ascertain the true working arrangements and it was clear that he found that there was mutuality of obligation between Mr Larner and Launahurst. He had weighed up all the factors for and against Mr Larner being an employee and was entitled to reach the conclusion he did.
 
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