In a recent appeal hearing in the case of Ter-Berg v Malde and another, the Employment Appeal Tribunal (EAT) gave guidance on the distinction between the tests for worker and employee status, following its consideration of an earlier decision by the Employment Tribunal (ET).
Background
The claimant, Dr Mark Ter-Berg, was a principal dentist for a group of three dental practices. On 1 April 2013, he sold the business to Simply Smile Manor House Ltd. and entered into an Associate Agreement to provide dental services at their specified premises, which contained a clause stating that nothing in it created an employment relationship.
The Agreement also required Dr Ter-Berg to use his best endeavours to find a locum to provide dental services in his place if he failed to utilise the dental facilities "through ill health or other cause" for a continuous period of more than 20 days.
In November 2018, Dr Ter-Berg brought a claim in the ET for detriment and dismissal on the grounds of having made protected disclosures and unpaid holiday pay. He alleged that he had been an employee of Simply Smile, or alternatively a worker, which was denied by the respondents in this case.
Applicable law
Case law has found the following three factors as most relevant in determining whether a contract of employment exists and are commonly referred to as the "irreducible minimum":
- Personal service
- Control
- Mutuality of obligation
Separately, the following three elements must be satisfied to demonstrate worker status:
- There must be a contract between the worker and the putative employer, whether express or implied.
- The contract must require personal service.
- The other party to the contract must not be the customer or client of any business undertaking or profession carried out by the individual.
Case law has found that a right to provide a substitute without restriction is not consistent with personal service. However, a conditional right to provide a substitute only, such as when the contractor is unable to carry out the work, is consistent with personal service, subject to "exceptional facts".
Employment Tribunal decisions
The ET decided that Dr Ter-Berg was not an employee, finding that none of the elements of the "irreducible minimum" of a contract of employment contract were present.
Following Dr Ter-Berg’s appeal against that finding, the Tribunal reconsidered the decision in respect of the limited circumstances in which the substitution clause would apply but again found that Dr Ter-Berg was not an employee, as it considered there were "exceptional facts" that meant the substitution clause was inconsistent with a requirement for personal service. Specifically, the Tribunal held that the clear intention of the parties had always been that Dr Ter-Berg should not be an employee.
A separate preliminary ET hearing took place to decide the question of worker status. That Tribunal also found that Dr Ter-Berg was not a worker, concluding that to find otherwise would be inconsistent with its earlier finding in respect of employee status. Dr Ter-Berg appealed to the EAT.
EAT decision
The EAT allowed the appeal and the case has been remitted to a fresh ET. The EAT was of the view that consideration of both employee status and worker status should have been dealt with together, given the overlap between the components of the two legal tests and the likely overlap in relevant evidence. It also found that:
- The Tribunal erred in its decision on the "personal service" element of worker status test on the basis that it was bound by its earlier decision on employee status, which did not actually determine the issue of personal service in respect of the worker test. On the facts, the EAT considered that the tribunal should have held that the personal service element of the test was satisfied.
- The Tribunal erred in concluding that a finding of worker status would be inconsistent with its previous decisions. While the Tribunal's earlier finding that the nature or extent of control was insufficient for the purposes of employee status might potentially be relevant, it did not necessarily determine the issue of worker status, which has a "lower pass mark".
- While the provisions of a written agreement concerning status can be a relevant factor when considering whether a claimant was intended to have, or did have, worker status, in this case, the EAT found that the Tribunal had made an error. It wrongly treated its earlier findings about the significance of the parties' intentions regarding employment status as a reason to conclude that Dr Ter-Berg had worker status.
Comment
Christine Jamieson, Senior Paralegal in our Employment team, comments:
“Whilst this case provides some helpful guidance on the key factors to consider when deciding whether a working relationship is that of employee, worker or self-employed, it also highlights the significant complexities of establishing which status applies in any particular working arrangement, regardless of contractual terms agreed.
“The Labour government has indicated an intention to simplify employment status by creating "a simpler two-part framework" to establish: (a) a single status of worker (including employees and workers) and (b) the genuinely self-employed. However, there is no indication as to when, or if, those plans will come into effect.
“It will be interesting to see how the fresh Employment Tribunal considers these matters and whether any further decision may provide more clarity.”
Published 16 April 2025
