T&Cs: Written terms which are inconsistent with the real terms may be disregarded

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Posted on 10 Aug 2011

In Autoclenz Ltd v Belcher the Supreme Court was asked to consider whether the terms contained in an employee’s written contract should be disregarded where they were not an accurate reflection of the terms which the parties had agreed by custom and practice.  Autoclenz operates a car valeting business.  Mr Belcher and others were engaged by Autoclenz under agreements in which they were described as sub-contractors.  The terms of the agreements were typical of a contract for services in that they stated that there was no guarantee of work, no obligation for the individuals to provide their services and that a substitute could carry out the work.The valets brought claims against Autoclenz in respect of unpaid wages and holiday pay.  At first instance an employment tribunal decided that the contracts did not reflect the reality of the work arrangement between the valets and Autoclenz.  They found that in practice the valets were required to attend work every day and do the work provided and that no substitute had ever been allowed to carry out the work in the place of any of the valets. It was therefore determined that the valets were employees of Autoclenz and subject to its control.Autoclenz appealed the decision and the Employment Appeal Tribunal upheld the appeal and referred to an earlier decision in Snook v London and West Riding Investments Limited which said that a tribunal may only look beyond the written terms of a contract where both parties intended to deceive a third party.The EAT decision was then appealed to the Court of Appeal who referred to another decision in Firthglow Limited v Szilagyi which said that tribunals are required to consider whether or not the words of a contract of employment accurately represent the true intentions of the parties or whether the parties have impliedly or expressly varied the agreement since the written document was created.Ultimately the matter was decided by the Supreme Court who said that a court may disregard the written terms where they were created to deceive a third party but these were not the only circumstances in which a court or tribunal could disregard the written terms where there is evidence that they are not an accurate reflection of reality.What does this mean for you?Employers rarely seek to create a fictitious agreement or contract with the intention of avoiding an employment relationship.  However, this case is now authority for the position that courts and tribunals will have to look beyond the wording of any written agreement and ascertain the true terms governing the relationship.  This case should also serve as a reminder that written contracts are not necessarily conclusive in the event of a dispute as to the proper terms of the employment relationship and that terms may be varied during the course of the employment relationship e.g. by custom and practice. 

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