Parcel Delivery Franchisees ‘Self-Employed’ – Guideline EAT Ruling

A right to substitute someone else to perform your work is perhaps the most powerful indicator that you are self-employed. The Employment Appeal Tribunal (EAT) made that point in finding that franchisees engaged by a parcel delivery company enjoyed neither the protected status of an employee nor that of a worker.

The case concerned two men who entered into standard-form franchise agreements whereby they were required to provide a vehicle and driver to make collections and deliveries for the company. They asserted that the agreements did not reflect the reality of the relationship and that they were in truth either employees or workers for the purposes of the Employment Rights Act 1996 or the Equality Act 2010.

In rejecting their arguments, however, an Employment Tribunal (ET) found that the agreements reflected the true bargain that had been reached between them and the company. Pointing to their ability to substitute other drivers to perform their rounds, the ET found that the absence of an obligation personally to perform services for the company was inconsistent with either employee or worker status. The company’s argument that they were self-employed contractors prevailed.

Ruling on the men’s challenge to that outcome, the EAT noted that the agreements, amongst other things, required nominated drivers to be authorised by the company and to undergo appropriate training. Franchisees were personally liable for any breaches or non-compliance by nominated drivers with the agreements or the company’s operating manual. Nominated drivers were required to carry identity cards and to meet certain standards of dress, appearance and demeanour.

Dismissing the appeal, however, the EAT noted that the agreements did not require nominated drivers to be of a particular type or identity. There was no requirement that they come from the ranks of the company’s existing operatives. Subject to their fulfilment of certain generic minimum standards, the company was uninterested in their identity so long as their services were suitably performed.

Although the company exercised a not inconsiderable degree of control over the way in which its services were provided, the ET made no error in finding that, properly construed, the agreements did not require the men to perform their services personally. The genuine power of substitution enjoyed by franchisees was sufficiently unfettered to preclude both employee and worker status.