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case Nesbitt and Another v Secretary of State for Trade and Industry [2007] within public creditors, shareholders who had employment contracts with their business. Creditors were married. In February 1985, another claimant established company vehicle for a new company to provide IT training services to businesses and institutions. In March 1986, the first claimant joined her in the business. From that day onwards, the share capital consisted of 1,000 shares issued, 529 were owned by the second creditors, and 470 held by the first claimant. One part was kept by F, mother of another creditor.
All three were members. At its height, the company had 20 employees working from four offices. Since the beginning of the creditors had written contracts with the company. These agreements were in the same form as he has done with the first staff. Creditors were also paid salaries commensurate with their role as senior management. They are not getting the compensation of Directors or dividends.
company was managed from day to day most of the creditors, although ultimately the project was commissioned. Most management decisions were made fairly informal, tables were held every six months, and other meetings were held when necessary.
Unfortunately, in 2006 the company became insolvent. On 3 July 2006 by employees, including creditors, were terminated by the liquidator. Subsequently, the claimants applied insolvency service for redundancy payments and other arrears to them under sections 166 to 168 and 182 to 186 of the Employment Rights Act 1996 (insolvency provisions).
their claims were rejected by the insolvency service on the basis that they were not employees within the meaning of the Act in 1996. Their challenge to that decision was rejected by the employment tribunal. The tribunal held, including that they could not have been employees of the company because they were in fact in all its members, so you can avoid their own dismissal. Creditors appeal.
The principal issue which fell to be determined by the court was whether the Tribunal had erred in treating the fact that the Board can determine whether the claimants had been employed by the company. The appeal was allowed.
In that case, the Tribunal had erred in treating the fact that control decisions. It was just one of many relevant factors that fell to consider when deciding the question whether the claimants had been employed by the company. Creditors had and contracts, and those contracts were equivalent to those to other employees first. They also received their salaries by salary. The fact control aside, there were no other factors pointing away from the position of employees. In such cases, when dealing with the facts the Court found one result properly open the judgment would have been that the creditors were employees. Accordingly, the claim would be referred to the court for determination of amounts due to creditors.
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© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor is it a legal advice. It is intended to highlight general issues. Always sought expert legal advice in relation to certain conditions.
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