Mr L Hannagan v DNXB Group Limited — 2021

Mr L Hannagan and Mr Xiong set up DNXB Group Limited together in July 2016 as equal shareholders and directors. The tribunal found that, at the outset, there was no agreement on hours, holidays or salary, and that the claimant was acting with Mr Xiong to build the business rather than under a contract of employment. After the Shareholders’ Agreement was signed on 24 November 2017, the tribunal found there was a contract under which the claimant would be paid as managing director only if profit was made, but that the arrangement was still not a contract of employment. On the facts, the claimant supplied his own equipment, worked from home, took financial risk, and was not subject to meaningful day-to-day control.

The tribunal held that the claimant was not an employee for the purposes of unfair dismissal, wrongful dismissal or breach of contract, so those claims were dismissed. It found that the disciplinary process begun in October 2019 and the dismissal letter of 13 November 2019 arose out of the wider dispute between the two founders, particularly over bank control and expenses, rather than a genuine misconduct dismissal. The tribunal accepted that the claimant remained a shareholder and director after dismissal, and rejected the argument that the respondent’s use of employee terminology in the disciplinary documents altered the underlying legal status.

The tribunal nevertheless found that, from 24 November 2017, the claimant was a worker for the purposes of the Working Time Regulations 1998, the Employment Rights Act 1996 and the National Minimum Wage Act 1998. On the holiday pay claim, it found his leave year ran from 7 July to 6 July, that 135 days of the final leave year had elapsed by termination on 18 November 2019, that no leave had been taken, and that his weekly pay should be calculated by reference to 20 hours at £8.21 per hour. It therefore awarded £340.06 under regulation 14 of the Working Time Regulations 1998.

On unlawful deductions from wages, the tribunal found the claimant performed unmeasured work at 20 hours per week and had not been paid the national minimum wage for nearly all of the period from 24 November 2017 to 18 November 2019, subject to the two-year limit in section 23(4A) ERA 1996. It accepted that £1,050 was paid in August 2019 and £600 in October 2019 as ancillary revenue, but found no shortfall for August 2019, a recalculated shortfall of £138.00 for October 2019, £458.24 for 1 to 18 November 2019, and £12,983.14 for the remaining recoverable period, making a total award of £13,579.38.