Do you need to be paid to be an employee?

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Employment status is often an area of contention. Employee status is the golden ticket of course giving you the most rights and protection of all. The difference in the rights for employees and workers is the reason why so much case law has developed in this area. Employees have the right to claim unfair dismissal and the right to a redundancy payment which are not open to workers for example.

Normally, it is the employer who contests the employee status but in the recent case of Secretary of State for Business, Innovation and Skills v Knight, it was the Insolvency Service as the Claimant has sought a payment of a redundancy payment under s166 of the Employment Rights Act. The Claimant was the Managing Director and sole shareholder of her employer. She normally drew a salary but for the last two years had foregone her salary in order to try and keep the Company afloat. This however failed and the Company went under causing her to apply for a redundancy payment from the Insolvency Service. The EAT held that an employee does not need to be paid to be an employee in accordance with the Employment Rights Act 1996.

Written by
Edward Aston
12th June 2014