BLOG: Is it really possible to be your own boss?

By Ben Schofield on Apr 7, 09 01:53 PM

Jon Bloor.jpg

Jon Bloor, from Lees Solicitors, contemplates if it's ever possible to be your own boss.

LAST WEEK the Court of Appeal published a judgement that may be of particular interest to small business owners.

The judgement in the case of Secretary of State for Business, Enterprise and Regulatory Reform -v- Neufeld & Another clarifies whether an individual who is a majority shareholder and director of a private company can also be an employee of that company.

Unfortunately this is very relevant in the current economic crisis, because it may come into play on the insolvency of such a company.

In this situation the question of whether or not someone is an employee will be relevant to their entitlement to protection under section 182 of the Employment Rights Act 1996.

This may allow them to claim certain arrears of salary, notice payment, unpaid holiday pay and other amounts from the National Insurance Fund in the event that the employing company is unable to make the payments.

The Court of Appeal confirmed that there is no reason in principle why a majority (or even sole shareholder) and director of a company cannot also be an employee provided that they have a genuine contract of employment with the company.

This need not be in writing, but it will be necessary to show that there is a genuine contract which satisfies all of the requirements for a contract of employment.

It is also critical that the so-called employee has acted as an employee on a day-to-day basis.

If he has simply acted as an owner of the business and the purported contract of employment is only a "sham" then he will not be entitled to be treated as an employee.

The judgement is interesting from a legal perspective, not least because it is not immediately obvious how an owner who controls the company and cannot be dismissed can genuinely be said to be an employee.

However, the unfortunate fact is that in the current climate it may be of more relevance from a financial perspective to directors of failed companies.