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13-05-2014

C was the only shareholder and Managing Director of a company from the date of its incorporation until the day it ceased trading some 10 years later. In the last two years of the company's trading, C did not draw salary so that other employees and creditors could be paid. Following the Company's insolvency, she applied for a redundancy payment from the Insolvency Service.

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In dismissing the Secretary of State's appeal against the judgment in the C’s favour the EAT made the point that whether or not an individual is an employee of a company is a question of fact.

As such, it was not perverse of the Tribunal to find that:

  1. the C was an employee of the company;
  2. there was no lack of mutuality or of consideration, and;
  3. the C had not discharged or varied her contract of employment by not taking a salary for the last two years. She had simply decided not to enforce her right to salary in order to keep the company afloat.

C’s entitlement to a redundancy payment of £7,296 from the Insolvency Service would therefore stand.

C had been able to produce an unsigned contract of employment and various P60’s in support of her claim that she was genuinely an employee of the Company.

See Secretary of State for BIS v Knight UKEAT/0073/13/RN

Sarah Rushton (srushton@moonbeever.com)

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information.

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