Tribunal guidance on Contracts of Employment

16 June 2014

The Employment Tribunal has ruled on whether an express contract of employment can exist in the absence of an agreement to remunerate the individual for work provided to the company.

We are grateful to Daniel Barnett for this summary of the EAT decision in Ajar-Tec Ltd v Stack.

Mr Stack, a shareholder and director of Ajar-Tec, provided work to the company under no formal employment arrangement and for no remuneration. The Employment Judge held that there was an express agreement that Mr Stack would do work for the company and an implied term that he would be paid a reasonable amount for that work. He concluded that Mr Stack was both an employee and a worker.

Allowing the appeal, the EAT (HHJ Birtles presiding) held that an express agreement that the claimant would do work for the company does not amount to a binding express contract if there is no consideration for such a promise, of which there was none in this case. The employment tribunal failed to apply Tilson v Alston Transport to determine whether, in the alternative, an implied contract of employment existed. In the absence of either an express or implied contract of employment, it was an error of law to find an implied term as to remuneration.

The case was remitted to a fresh employment tribunal to determine whether a contract of employment could be inferred on the facts.