In Protectacoat Firthglow Ltd v Szilagyi Mr Szilagyi claimed unfair dismissal by Protectacoat. Protectacoat argued that Mr S. was a partner and referred to a written partnership agreement. Mr S. however argued that as far as practical arrangements were concerned (for example his company vehicle and tools and the company control over his work) he was in fact an employee. The Employment Tribunal held that the "partnership agreement" was a sham and that Mr S. was an employee.
The Court of Appeal clarified the principle that the question is always what the true legal relationship between the parties is. Normally the contractual document shows this, but it is up to the court to decide whether this reflects the true relationship. Additionally the written document does not have to been intended to deceive in order for it to be held to be a sham.
The important lesson from this is that employers must have clear and lawful legal relationships with their employees. A written document that does not reflect the true relationship is no protection where rights have been infringed.
