- MS G DAWSON (CAB) FOR THE v - Mr P Soni (lay Representative) — 2025

The tribunal heard a preliminary issue on whether Mrs Cullingford and Mr Cullingford were employees of Cullingford Carpets Ltd at the date the company entered administration in November 2023. The claimants said they had become employees when the business incorporated in 2005 and relied on written director service agreements revised in 2012. The Secretary of State accepted insolvency but disputed that either claimant was an employee, which was decisive because the payments sought from the National Insurance Fund depended on employee status under ss.166 and 182 ERA 1996 and s.230 ERA 1996.

Employment Judge Cadney applied the usual employment-status authorities, including Ready Mixed Concrete, and considered personal service, mutuality of obligation and control, together with the later cases cited in the judgment on director/shareholder status. The judge accepted that the written contracts were genuine and did not find them to be a sham, but concluded that they did not reflect a genuine employment relationship in practice. The evidence showed that both claimants had historically run the business as partners, that remuneration was split between salary and dividends, that salary was set below National Minimum Wage levels if all hours worked were treated as employment hours, and that holiday was not usually taken in full.

The tribunal found that Mr Cullingford controlled the business and that no one exerted practical control over him. It held that the arrangements were, in substance, a legal device to maximise tax-efficient remuneration rather than evidence of genuine employment. Mrs Cullingford was in a slightly different position because she did not handle finance or accounting, and the tribunal accepted there was at least potential disciplinary control, but it nevertheless concluded that her role also did not amount to employment. As a result, both claimants were found not to have been employees of the first respondent at the relevant date.

Because employee status was not established, the claims for a statutory redundancy payment, notice pay, unpaid wages, unpaid holiday pay and a protective award were all dismissed so far as they depended on liability of the Secretary of State under ss.166/182 ERA 1996. The judgment records the claimants' evidence as honest and reliable and notes the sympathy of the case, but the tribunal held that sympathy could not displace the legal analysis. No monetary award was made.