Taking On Staff? Doing So Prematurely Can Have Serious Consequences

Taking on staff is often a necessary precursor to setting up a new business. As an Employment Tribunal (ET) decision showed, however, entering into any form of binding employment relationship is a serious step and doing so prematurely can have grave financial consequences.

The case concerned an entrepreneur who set up a security company with a view to providing lucrative services to a high net worth individual who intended to visit the UK. Two days after its incorporation, the company entered into an employment contract with an acquaintance of the entrepreneur. He was taken on as a trainee close protection driver at a gross salary of over £2,000 per week.

The high net worth individual, however, decided not to use the company’s services and its business never got off the ground. As a result, the employee had been offered no work and had not been paid. He complained to an ET that unlawful deductions had been made from his wages.

Upholding his claim, the ET noted that he had left his previous job in order to join the company. He had neither resigned nor been dismissed and therefore remained the company’s employee. The fact that he had done no actual work for the company did not affect his contractual entitlements. The company was ordered to pay him £44,352, that sum representing 22 weeks’ salary.