ESM0535 - Guide to determining status: is the right of substitution genuine

The right, as opposed to the obligation, to provide a substitute is a pointer towards self-employment and if it is unqualified it is probable that the courts would consider it to be a strong pointer to self-employment or determinative of self-employment by itself.

However, a right to send a substitute must be genuine for it to be taken into account at all in deciding employment status. Where the true agreement between the parties is that the worker must undertake the work personally but a written contractual term allowing substitution exists the written clause will be ignored as a ‘sham’. Lord Justice Gibson made this clear in the case of Express and Echo Publications Ltd v Tanton (see ESM7210) where he said

’Of course it is important that the Industrial Tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham it will want to say so.’

This applies equally to other tribunals determining status, such as General or Special Commissioners. You should adopt a similar approach and be alert to the possibility that a written contractual term may be a sham. Likewise, where there is an oral contract you need to be alert to the possibility that an alleged right of substitution may not be genuine.

More detailed guidance on ‘sham’ in the employment status context is provided at ESM1003 onwards. Those instructions explain that the Commissioners and Courts will accept a written contractual clause unless they have evidence that it does not represent the true agreement between the parties. This means that if we are to dispute such a clause the onus is on us to demonstrate that it is a sham (or has been varied by an agreement subsequent to the contract being signed).

As explained above it is the right of substitution that is important. The fact that substitution has not actually occurred during a contract is not necessarily relevant. Workers with such a right are of course entirely free to carry out the work themselves if they wish. We may want to consider claims that there is a right of substitution critically if substitution does not occur over a long period of time. However, we should not automatically assume, in such cases, that this means that there is no real right of substitution.

A house builder might want a bricklayer to lay all the bricks on a particular plot and agree to pay the worker engaged a specific sum to carry out the work – with payment being made only on satisfactory completion of the task. In such a situation the engager may have little interest in who carries out the work (payment will only be made for satisfactory work). A contract, which allowed for substitution in such a case, would not be surprising. On the other hand, the same builder may want to ensure the bricklaying (for example, for show homes or a specific one off project) is to an extremely high standard and may want to hire a particular bricklayer whose skills are known to carry out the work.