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Controlling shareholder can also be an employee

Many companies have owner/employees; any prospective purchaser should clarify their employment status before transfer.

In Secretary of State for Business, Enterprise and Regulatory Reform v Neufeld and Howe [2009], two controlling shareholders of different companies made claims to the Secretary of State for redundancy and other statutory payments, on the basis that they were employees. Employees of insolvent companies can claim a number of payments from the Government – redundancy payments, notice pay, up to eight weeks’ pay and accrued holiday pay.

The Court of Appeal held that activities generally associated with owners were not relevant to determining employment status. The Court ignored the extent to which the owners controlled their companies, whether they had the final say about their own dismissals and whether they had given loans or guarantees. It held that the factors that establish whether or not an individual is an employee are:

Was the contract genuine or a sham?
Was it a contract of employment or some other type of contract?

If you need advice on contracts, please contact us – we would be pleased to talk to you.


Employment Department

Raj Dhokia: r.dhokia@fgdlaw.co.uk
Martin Fine: m.fine@fgdlaw.co.uk