Peter Stringfellow is no doubt heaving a sigh of relief this week as the Court of Appeal overturns a decision of the Employment Appeal Tribunal and holds that a former lap dancer at one of his clubs was not an employee for the purposes of claiming unfair dismissal. In a case which gives an interesting insight into the world of the “Cabaret of Angels”, the Court judged that there was not sufficient “mutuality of obligation” to establish employment status, and therefore the original decision of the Employment Tribunal should be reinstated. If Miss Quashie, the claimant, had established that she was an employee, this would have set a dangerous precedent for Stringfellow and for other organisations who engage individuals for work on a similar basis.
Employment status is important as employees have far more rights than individuals who are self-employed including the right to claim unfair dismissal (after one or two years of qualifying service) and the right to be paid statutory redundancy pay after two years’ service. Employment status is also important for tax purposes. Determining whether an individual is employed or self-employed (e.g. an independent contractor) is far from easy and a Tribunal or Court will consider a number of factors in coming to its decision. The most important factor in establishing employment status is whether or not there is mutuality of obligation (i.e. whether the organisation is obliged to provide work and the individual is obliged to carry it out). Other factors include the degree of control that the organisation exerts over the individual, whether income tax is paid via the organisation’s PAYE, whether the individual uses the organisation’s equipment and whether it is the organisation or the individual who takes the financial risk.
In the Stringfellow case, the company had no obligation to pay the dancer anything at all. Indeed, she had to pay a “House Fee” in order to dance in the club and then negotiated her own fees with customers for dances and “sit downs” (when a customer would invite her to sit down and chat). While the dancer was subject to a degree of mutuality of obligation and control by Stringfellow (she had to work to a roster and her fees were deducted if she was late for work), she also had to pay the “House Mother” for services such as ironing outfits, repairs, hairdressing and make-up. This meant that on some occasions the dancer would make no money at all because the House Fee and House Mother Fee were more than the fees she made from customers. Thus the dancer bore all of the financial risk rather than Stringfellow. The Court of Appeal held that, on balance, the dancer was not an employee, adding that it would be unusual to find an employment relationship where an individual is paid exclusively by third parties and takes on all the financial risk. This was reinforced by the contract that the dancer was working under, in which she accepted that she was self-employed.
For more information on employment versus self-employment status or any other employment law issues, please get in touch.