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HMRC internal manual

Employment Status Manual

Case Law: Massey v Crown Life Insurance Company

[1978] 1 WLR 676

Point at issueThis case involved a claim for unfair dismissal under the Trade Union and Labour Relations Act 1974. Mr Massey could only have succeeded if it was found that he was employed under a contract of service.

FactsMr Massey was the manager of a branch of the Crown Life Insurance Company of Canada (“the company”). From 1971until 1973, he was an employee of the company. It paid him wages from which it deducted tax, NICs and graduated pension contributions. He also made contributions to the firm’s pension scheme.

In 1973, by mutual consent, the company engaged him on a self-employed basis under a new agreement. His duties under this new agreement were almost identical to those under his previous contract of service. The only real differences were that he no longer made pension contributions and the company paid him gross without any deductions for tax etc.

This arrangement continued until 1975 when the company dismissed him. Mr Massey then claimed unfair dismissal.

Decision The Industrial Tribunal decided that Mr Massey was not employed under a contract of service and therefore could not claim unfair dismissal. The EAT upheld this decision, as did the Court of Appeal.

CommentaryIn giving the leading judgment of the Court, Lord Denning M.R. stated:

“The law, as I see it, is this: If the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it…On the other hand, if their relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true relationship between them.”Lord Justice Lawton commented similarly. He stated:

“It is clearly established that the parties cannot change a status merely by putting a new label on it. But if in all the circumstances of the case, including the terms of the agreement, it is manifest that there was an intention to change status, then in my judgment there is no reason why the parties should not be allowed to make the change.”This case illustrates that the label the parties put on their relationship does not determine the employment status. However, where the factors point equally to a contract of service and a contract for services, the mutual intention of the parties will be decisive.

Lord Denning’s view was adopted by Lord Justice Stephenson in the later case of Young and Woods Limited v West (1980) IRLR201 to show that a false label had been used in Mr West’s engagement as a sheet metal worker.

As a general rule the Courts have attached greater significance to an expression of intention where they have confidence in the bona fides of the parties than they have where there is suspicion of concealment or misrepresentation.

When all the facts have been gathered, it is then necessary to stand back and look at the bigger picture. If the case is borderline, it is then, and only then, that the intentions of the parties are considered. Where there is mutual intention for a contract of service or for a contract for services, that will determine the status of the worker.