Employee or worker contract may exist where wages not agreed

The Court of Appeal has held that a contract between an employer and an employee or worker may exist even if the amount of wages has not been agreed between them (Ajar-Tec v Stack).

In Ajar-Tec v Stack, the claimant was a shareholder in, and director of, the respondent business, Ajar-Tec. Over time, from 2005 when the business was set up, he became more and more involved in it. No contract of employment was ever formalised, although in 2007 a draft was produced. Mr Stack claimed that in September 2009 he was constructively dismissed.

The employment tribunal dismissed his claims for unfair dismissal and deductions from wages, on the basis that he had neither employee nor worker status in relation to Ajar-Tec, because there was no valid contract of any kind in circumstances where the amount of consideration had not been agreed.

The claimant’s appeal to the EAT was upheld with the EAT (Underhill P sitting alone):

  • holding that a contract between an employer and an employee or worker may exist even if the amount of wages had not been agreed between them, but
  • remitting the case back to a new employment tribunal to decide whether the claimant was, or was not, an employee or worker in the circumstances because it could not come to a safe conclusion itself on the material before it.

Ajar-Tec appealed to the Court of Appeal, seeking to restore the decision of the employment tribunal. However, the Court of Appeal dismissed the appeal and noted that whilst the claimant would face real difficulties in establishing that a contract was in place, that possibility could not be discounted altogether.