Franchisee or Employee – the UK perspective Natalia Lewis Hamilton 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? YesNo Q 1: personal service?Step 1: what are the contractual terms? No personal service = Contractual terms v reality Not worker, not employeeOnce 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”