Industrial Tribunals Northern Ireland Decisions

THE INDUSTRIAL TRIBUNALS

CASE REF:   7366/09

CLAIMANT:                      Robert Stephenson

RESPONDENTS:              1. Street Play Leisure Limited (In Administration)

                                        2. Redundancy Payments Service

DECISION

The decision of the tribunal is that the application be dismissed.

Constitution of Tribunal:

Chairman (sitting alone): Mr Davey    

Appearances:

The claimant represented himself.

The second named respondent was represented by Mr P McAteer, BL, instructed by the Departmental Solicitors Office.

REASONS

1.              The claimant, in his originating application, sought a redundancy payment and other monies, such as notice pay, arising out of employment with the first named respondent over a period of some 8-9 years.  The issue for the tribunal was whether the claimant was an employee of the first named respondent or not. 

2.              The claimant had been employed by a company engaged in the same business as the first named respondent in which a management buyout had been proposed.  The claimant and a Mr Callaghan, on the advice of their solicitors subscribed to a new company in which they each held a 50% share holding to commence their own business.  The claimant was a Director of the company and his title was Operations Director.  The company grew significantly, to such an extent as to make it desirable to free up the claimant and Mr Callaghan to do more in the business and to travel more.  The claimant’s wife, after discussion with the claimant, stopped working.  She became a Director and performed some tasks for the company.  Mrs Callaghan also became a Director, though she did less.  Both the claimant’s wife and Mrs Callaghan received payment of approximately the same amount as the claimant and Mr Callaghan though the level of contribution, and the time element of that contribution, was wholly unequal.  There was no formal contract between the claimant and the respondent company; there was no statement of terms and conditions of employment.  Nor was any memorandum setting out the conditions of employment as required by the Companies Act prepared. The Directors remuneration, including all payments made by the company to the claimant and Mr Callaghan were dealt with separately and distinctly from wages and salaries in the company’s accounts. The claimant operated a loan account with the company on foot of which he owed the company money.  He also provided a personal guarantee in respect of the company’s liabilities to the company’s bankers.  The claimant accepted that for all practical purposes the standard terms and conditions of employment applicable to other employees did not apply to him.  He was not wholly prepared to accept that he could not be removed without the consent of the shareholders but was unable to point to any circumstances in which his removal could be effected.  The claimant stated that he regarded himself as an employee and so described himself as a matter of practice in dealing with other employees. 

3.              It is now established that the mere fact that the claimant held a large part of the share capital of the company or the fact that he guaranteed its obligations are not determinative as to whether or not a contract of employment exists between a claimant and a company with which he is involved.  An owner, or a part-owner, of a company will commonly do things on the company’s behalf and the fact that he does so does not necessarily show that he cannot be an employee.  However, in this case there are some features in which it was not so much a matter of the claimant doing things for the company but the company doing things for him.

The financial arrangements for the claimant and Mr Callaghan and their respective wives seemed designed to ensure minimum taxation rather than to reflect the amount of work carried out for the company.  The claimant’s loan account was negative from the company’s point of view.  The treatment of the remuneration and emoluments of the claimant and Mr Callaghan as a separate item distinct from wages and salaries is, in the tribunal’s view, not insignificant.  The claimant did suggest that this practice had not been adopted from the beginning of the company’s life but there was no hard evidence to show this.  The only evidence before the tribunal was that the matters were treated separately.  There was no formal contract of employment nor were the provisions of the Companies Act complied with.  In all these circumstances the tribunal considers that the claimant was not an employee of the company.  The formalities do not suggest that he was an employee and he did not behave like an employee.  The tribunal finds that there was no contract of employment between the claimant and the first named respondent.  In the absence of a contract of employment the claim falls to be dismissed.

Chairman:

Date and place of hearing:         25 January 2010, Belfast.

Date decision recorded in register and issued to parties: