Claimant v Phasor Electrical Limited (Creditors in Voluntary Liquidation)
Outcome
Individual claims
The tribunal found the claimant had not discharged the burden of proving he was an employee of Phasor Electrical Limited at the date of insolvency. The contract of employment was not genuine or was not operative at the date of insolvency, given erratic payment patterns, absence of tax and NI contributions, earnings below minimum wage, and the claimant's 100% controlling shareholding.
The notice pay claim failed because the tribunal found the claimant was not an employee within the meaning of s.230 ERA 1996. Without employee status, there could be no contractual entitlement to notice pay.
The holiday pay claim failed because the tribunal found the claimant was not an employee. Only employees are entitled to holiday pay under the statutory scheme for payment from the National Insurance Fund.
The arrears of wages claim failed because the tribunal found no genuine contract of employment existed at the date of insolvency. The erratic payment patterns and other evidence suggested no mutual obligation between the parties.
Facts
The claimant was a director and 100% shareholder of Phasor Electrical Limited, which went into voluntary liquidation on 30 June 2022. He claimed redundancy pay, notice pay, holiday pay and arrears of wages from the National Insurance Fund. He produced a contract of employment dated February 2006 stating his role was Operations Manager with a salary of £95,000. However, at the date of insolvency he claimed he was earning £12,491.86 annually (£1,041 per month) and receiving monthly dividends of £1,200. Bank statements showed erratic payments to the claimant that did not consistently match payslips. The claimant did not pay tax or national insurance and his earnings were below national minimum wage.
Decision
The tribunal found the claimant had not discharged the burden of proving he was an employee at the date of insolvency. The absence of a written contract reflecting the terms at insolvency, the erratic payment patterns, the failure to pay tax/NI, earnings below minimum wage, and his 100% controlling shareholding all pointed against the existence of a genuine contract of employment with mutual obligations. All claims were dismissed.
Practical note
A written contract of employment dated years before insolvency may be insufficient to prove employee status for NIF claims where payments are erratic, tax/NI not paid, earnings below minimum wage, and the claimant holds 100% shares — the tribunal will look to conduct under the contract at the date of insolvency.
Legal authorities cited
Statutes
Case details
- Case number
- 3200734/2023
- Decision date
- 6 March 2024
- Hearing type
- full merits
- Hearing days
- 1
- Classification
- contested
Respondent
- Sector
- construction
- Represented
- No
Employment details
- Role
- Operations Manager / Managing the business
- Salary band
- Under £15,000
- Service
- 16 years
Claimant representation
- Represented
- No