The status of directors who are majority shareholders has always been a complex one in employment law terms. Some issue contracts of employment and others as office holders only. Many function in both roles at the same time.
This leads to confusion at moments like TUPE transfers, insolvency, where employees have rights that workers, office holders, shareholders do not.
The Court of Appeal have just decided that there is no reason in principle why an individual who is a director and shareholder of a company cannot also be an employee. The decision indicated that tribunals would need to look at the written contract in force and at the actual arrangements and practises at the time of any event that might trigger claims based on employment status.
This is good news for many business owners who have often found that despite paying National Insurance like any other employee, they are excluded from all sorts of rights because they were ‘the boss’.
It is a good idea to make sure you have an up to date contract of employment and to make sure you understand what arrangements can bring you into employment rights, and what will keep you out.
For a free review of your contracts in complete confidence send them to firstname.lastname@example.org or fax to 08452 303060.