ESM1008 - Detailed guide to determining status: contracts - what are the differences?

Where the contractual terms differ from what happens in practice, the reasons for this will in some cases be obvious but in others will not. The following examples illustrate this.

Example 1

The written contract states the worker is taken on specifically to plaster the inside of three houses for a fixed sum of £1,500 - but in practice the worker works for eight weeks at a wage of £500 per week and undertakes all sorts of plastering work. There is clearly a difference between the written contract and what happens in practice.

Example 2

The written contract states the worker can - entirely of his own choosing - send a substitute, whom he pays, to do the work. In practice a substitute is not sent. This may be because in reality the parties have agreed there is no right to send one, in which case the term would have been varied or would be a sham. However, it may be because the worker just chose not to exercise his right to send one, in which case the written contract is genuine in this respect. It is not easy to differentiate here.

If you find that a worker in this situation wanted to send a substitute on one occasion but the engager refused to accept the substitute this would suggest a difference between the written term and the true agreement. The reason for the difference will be a question of fact. For example, it may be because the term is a sham. Alternatively, the engager may have failed to keep to his side of the contract and the worker has chosen not take action to enforce his rights.

If a worker and other similar workers with the same engager have never sent a substitute that will not necessarily mean there is not a genuine underlying right to send one. But this fact may convince the Commissioners that the term does not reflect reality where, for example, there is clear evidence that some other terms are a sham and substitution seems inherently unlikely in the context of the particular engagement.

Example 3

The written contract states that the worker will be liable for loss or damage caused by his own negligence. If in practice there has been no such loss or damage caused by the worker it is difficult to say whether the contractual term is genuine or not.

If you find this situation in practice you should check whether any liability arose under this clause. If it did, who paid? If not the worker why not? You should also check whether the worker carries appropriate insurance. If not, why not? If, in addition, the engager insures against this risk (at no cost to the worker) these two facts together would suggest (but not prove) the true position was different from that stated in the contract.