The Employment Appeal Tribunal (EAT) has overturned an earlier decision by the Employment Tribunal (ET) about a contractor’s employment status.
In this case, the contractor was providing services through their own limited company – often called a personal service company (PSC). The ET had decided that the contractor was not an employee and worker of the company they were doing the work for.
However, the EAT disagreed. It ruled that the contractor was not an employee or worker of that company.
In simple terms, this means that the business that received the contractor’s services –sometimes called the end user – was not legally the contractor’s employer. The end user is simply the company that benefits from the contractor’s work, even though the contractor is hired through their own company.
The case, Partnership of East London Co-operatives Ltd v Maclean [2025], raises important points about mutuality of obligation, personal service, and substitution rights in employment status disputes.
Background
Ms. Maclean, a qualified nurse, worked as a ‘clinical streamer’ at community urgent treatment centres operated by Partnership of East London Co-operatives Ltd (PELC Ltd) between August 2018 and March 2023. She carried out initial clinical assessments of patients and invoiced for her services through her PSC. Upon termination of this arrangement, she brought claims for unfair dismissal, whistleblowing detriment, and holiday pay. To pursue these claims, she needed to establish employee or worker status.
The ET concluded that Maclean was both an employee and a worker of PELC. It highlighted that the contract was between PELC Ltd and Maclean personally, rather than her PSC, and noted that although the written contract included a clause allowing her to send a substitute, the reality was that Maclean personally performed all the work and never used substitutes. The ET also found elements of control, integration into the organisation, and mutuality of obligation sufficient to establish employment status.
EAT’s findings
The EAT upheld the ET’s conclusion that the contract was with Maclean personally, rather than her PSC, as key documents described payments to the PSC as “discharging sums owed to her personally”. However, the EAT found the ET’s reasoning on employee status problematic.
Specifically, the EAT questioned the ET’s inference of mutuality of obligation – a key element in establishing employment status – despite documents stating that there was no obligation on PELC to offer, or Maclean to accept, shifts. The EAT also found the ET’s treatment of personal service and the right of substitution insufficiently reasoned, leading to the conclusion that the ET’s findings that Maclean was a worker and an employee were flawed.
Implications for employers
This case highlights the necessity for employers to carefully consider the reality of the working relationship, rather than relying solely on contractual terms or tax status, to determine an employment status. Employers should ensure that contractual terms accurately reflect the true nature of the relationship and be aware that tribunals will scrutinise the actual working practices. This is particularly pertinent in cases involving intermittent or bid-based work, where mutuality of obligation and personal service are critical factors in status assessments.
The EAT’s decision serves as a cautionary reminder that what matters most is the reality of the working arrangement, not just how it is described in the contract. Employers must therefore ensure that contractual terms genuinely reflect how the relationship operates in practice.
For expert legal guidance on contractual terms for employees, contact our Employment team.
