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Is The Absence Of An Umbrella Contract Relevant When Assessing Whether Someone Is An “Employee”?

The Court of Appeal in Secretary of State for Justice v Windle and Arada has held that the absence of mutuality of obligation between engagements (i.e the absence of an “umbrella contract”) was an indicator that the Claimants were not “employees” for the purposes of the Equality Act 2010.

The Claimants, Mr Windle and Mr Arada, were on the National Register of Public Service Interpreters, meaning that they were available to be selected by Her Majesty’s Courts and Tribunals Service (HMCTS) to assist litigants and witnesses who did not speak English as their first language.

Mr Windle and Mr Arada’s written terms of service for HMCTS provided no guarantee of work and there was no obligation on them to accept work when offered it. They were treated as self-employed for tax purposes and did not receive holiday or sick pay.

Mr Windle and Mr Arada brought race discrimination claims under the Equality Act 2010 against the Secretary of State for Justice, arguing that they were treated less favourably than British sign language interpreters.

An individual can bring a claim under the Equality Act 2010 if they are in "employment under a contract of employment, a contract of apprenticeship or a contract personally to do work". This includes employees in the traditional sense, workers and, in some cases, self-employed individuals. However, a self-employed individual will only be protected by the Act if they are contractually obliged to perform their work personally (i.e, they are not permitted to send someone else to do the work in their place, such as a sub-contractor or employee). There are other factors to consider when assessing whether an individual is an “employee”. For example, it is important to consider whether there is mutuality of obligation, i.e whether the employer is obliged to provide work and the individual is obliged to accept it. Other relevant factors include whether the individual is paid holiday/sick pay and whether they are obliged to provide their own tools/equipment.

Mr Windle and Mr Arada accepted that they were not employees in the traditional sense; however, they argued that they were employed “under a contract personally to do work”, meaning that they were entitled to bring a claim of discrimination under the Act.

The Employment Tribunal (ET) refused to allow the claims to progress. The ET held that, although the Claimants were obliged to perform each assignment personally (i.e they were engaged “under a contract personally to do work”), there was no mutuality of obligation between engagements; that is to say, there was no "umbrella contract".

The Claimants appealed to the Employment Appeal Tribunal (EAT). The EAT overturned the ET’s decision and held that the absence of an umbrella contract was an irrelevant factor to consider when deciding whether the Claimants were “employees” for the purposes of the Equality Act 2010.

The Secretary of State for Justice in turn appealed to the Court of Appeal. The Court of Appeal restored the original decision of the ET and held that the Claimants were not entitled to pursue discrimination claims because they were not “employees”. The Court of Appeal held that, although mutuality of obligation between assignments is not strictly necessary to establish “employee” status under the Equality Act 2010, it can be a relevant factor in establishing the nature of the employment relationship.

It is not always clear whether an individual is an “employee” or not, and the wording of any contract is not always decisive. It is important to establish at the outset of each relationship what the status of the parties will be, although it should be borne in mind that a Court will not always agree with the parties’ assessment of the employment relationship.

This bulletin is for general guidance purposes only and should not be used for any other purpose.

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