Mills v Stephensons: Can a Consultant Be An Employee?

This case considers whether a solicitor who was engaged by a firm as a consultant can be classified as an employee or worker of the firm. The full judgment can be found here.

The Facts

The claimant (Mr M) was employed by a law firm, Stephensons (the Respondent), between 1 April 2009 and 14 February 2022 as a solicitor. Mr M signed a letter terminating his employment with the Respondent due to redundancy on 14 February 2022. On the same day, the parties entered into a consultancy agreement whereby Mr M would be engaged as an independent contractor to provide personal injury-related services. The consultancy agreement remained in place until the matters were completed on 26 September 2024.

The Claim

In the Employment Tribunal (ET), Mr M claimed unfair dismissal, holiday pay, and breach of contract and/or wrongful dismissal, arguing that he was a worker and/or employee of the Respondent during the consultancy agreement. Mr M alleged that the redundancy was a sham and that he had been pressured into signing the redundancy letter. Mr M argued that the consultancy agreement formed part of a continuing contract of employment rather than establishing an independent contractual relationship with the Respondent.

The Key Arguments

• Did Mr M’s employment terminate on 14 February 2022, or did the employment relationship continue until 26 September 2024?
• If Mr M’s employment terminated on 14 February 2022, was he a worker and/or employee, or was he a self-employed independent contractor after this date?

When Was the Effective Date of Termination?

The ET found that the Respondent informed Mr M in writing that his employment was terminated on 14 February 2022, evidenced by the signed letter and acceptance of the redundancy payments. The ET accepted that Mr M may have experienced commercial pressure to sign the letter, but held that Mr M understood the effect of signing the redundancy letter, given that he was an employment solicitor.

Was Mr M An Employee of the Respondent During the Consultancy Agreement?

To determine the unfair dismissal claim, the ET had to establish whether Mr M was an employee of the Respondent between 14 February 2022 and 26 September 2024. Mr M relied heavily on an outcome of the HMRC Check Employment Status for Tax (CEST) tool, indicating that he was employed. However, the ET attached limited weight to this, noting that the tool is designed specifically for assessing employment status for tax purposes, and the outcome is not binding when considering employment status under section 230 of the Employment Rights Act 1996.

An employment relationship exists if the following conditions set out in Ready Mixed Concrete are satisfied:

1. The individual must agree to perform work or services personally in return for remuneration.
2. The individual agrees that in performance of the work or services, he or she will be subject to a sufficient degree of control by the other party.
3. The other provisions of the contract are consistent with a contract of service.

Mutuality of Obligation (MOO)

The ET found that mutuality of obligation (MOO) existed once Mr M accepted work on the agreed matters. During those periods, he completed the work, and the Respondent was required to pay him. However, there was no obligation on the Respondent to offer continuing work once the project ended, and Mr M was under no obligation to accept any further work.

Personal Service Alone Does Not Determine Employment Status

The Tribunal accepted that Mr M provided the services personally, as he had no contractual right of substitution and carried out the work himself. However, the ET emphasised that a positive obligation to provide personal service alone is not determinative of employment status, particularly in professional consultancy arrangements.

The Employment relationship

Regarding control, the ET held that this was minimal because Mr M provided his services largely autonomously and therefore inconsistent with an employment relationship. The ET concluded that all of the other factors were overwhelmingly inconsistent with an employment relationship. Some of these included the following:

• Mr M bore significant financial risk, with remuneration dependent entirely on successful outcomes.
• Mr M was not entitled to holiday pay, pension contributions, or employee benefits.
• On integration, administrative and regulatory facilities, such as occasional access to the office and memberships were provided to Mr M. However, the ET held that he was not integrated into the Respondent’s organisational structure during the consultancy period.

The ET concluded that the overall relationship was inconsistent with an employment relationship and rejected Mr M’s claims for notice pay and unfair dismissal.

Was Mr M a Worker of the Respondent During The Consultancy Agreement?

The ET considered whether Mr M was a worker to determine the claim for holiday pay. The question was whether, during the consultancy period, (a) Mr M undertook work personally for the Respondent and (b) whether the Respondent was a client or customer of a profession or business undertaking carried on by Mr M.

Why Mr M Was Not a Worker

The ET accepted that Mr M was required to provide personal service under the arrangement. However, during that period, Mr M was operating as a professional undertaking, and the Respondent was a client of that undertaking. Consequently, Mr M was not a worker and his claim for holiday pay was rejected.

Conclusion

Ultimately, the ET dismissed Mr M’s claim for worker and employment status, finding that the consultancy agreement between the parties accurately reflected their relationship. This is a reminder that Employment Tribunals place limited weight on HMRC’s CEST tool outcome for employment status. Tribunals will assess the working relationship by applying legislation and the established legal principles to the overall arrangement between the parties.

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