Claimant v Nikki Marks Ltd
Outcome
Individual claims
The tribunal found that before the sale of shares on 22 September 2023, the claimant was not an employee within the meaning of the Employment Rights Act 1996. She was operating under a contract for services rather than a contract of service, essentially running the business on her own account as controlling shareholder and director. Without two years' qualifying service as an ERA employee, she cannot bring an unfair dismissal claim.
The claim for statutory redundancy payment was dismissed for the same reason as the unfair dismissal claim. The claimant was not continuously employed as an ERA employee for a period of not less than two years, which is a prerequisite for entitlement to a statutory redundancy payment under s.155 ERA.
The tribunal found that as the claimant was not an ERA employee before the sale, she was only entitled to one week's statutory notice under s.86 ERA based on her service from 22 September 2023. She received that one week's notice and therefore had no claim for wrongful dismissal based on insufficient notice pay.
Facts
The claimant founded and ran a beauty salon company from 2008, becoming sole shareholder/director in 2020 (later 50:50 with her husband). She worked as therapist and manager but was paid below minimum wage for hours worked, taking modest dividends instead. In September 2023 all shares were sold to a company owned by Miss Jeffrey, and the claimant signed a new employment contract. She was dismissed for redundancy in January 2024 after approximately four months under the new contract. The claimant argued she had been an employee since 2008, giving her over two years' service and rights to claim unfair dismissal and redundancy pay.
Decision
The tribunal found that before the share sale, the claimant was not an employee within the meaning of ERA 1996 but was instead operating under a contract for services, essentially running the business on her own account. Key factors included payment below minimum wage, voluntary unpaid work, minimal tax/NI payments by design, taking dividends, lack of meaningful control by the company over her work, and absence of typical employment contract terms. There was no TUPE transfer as she was not an ERA employee beforehand. All claims were dismissed for lack of qualifying service.
Practical note
A controlling shareholder-director who works in their own business is not automatically an employee even if paid through PAYE; tribunals will examine the economic reality, including whether pay reflects genuine employment terms or tax planning, whether the individual exercises control rather than being controlled, and whether the relationship is consistent with a contract of service or for services.
Legal authorities cited
Statutes
Case details
- Case number
- 3303643/2024
- Decision date
- 23 January 2025
- Hearing type
- preliminary
- Hearing days
- 1
- Classification
- contested
Respondent
- Name
- Nikki Marks Ltd
- Sector
- healthcare
- Represented
- Yes
- Rep type
- in house
Employment details
- Role
- Senior Beauty Therapist / Salon Manager
- Salary band
- Under £15,000
- Service
- 15 years
Claimant representation
- Represented
- Yes
- Rep type
- barrister