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BERR v Neufeld & Howe
Written by Rachel Billen   
Thursday, 16 April 2009 00:00
This Court of Appeal case looked at the question of whether a controlling shareholder can be an employee of a company, thereby entitling the shareholder to a statutory redundancy payment, pay in lieu of notice etc in the event of the company’s insolvency.

This case was of particular importance to the Department of Business Enterprise & Regulatory Reform (BERR) as, prior to the case, the law had been conflicting and there had been thousands of claims being made to the National Insurance Fund for these payments. 
Mr Neufeld and Mr Howe were both claiming to be employees of the insolvent companies they worked for.  They were controlling shareholders and directors of their respective companies. 

Rimer LJ considered the case-law.  He confirmed that the leading case was Secretary of State for Trade & Industry v Bottrill (1999).  The case confirmed that whether the claimant was a controlling shareholder was just one of a number of factors to consider to determine the question.  He gave three circumstances (not exhaustive) where it may be legitimate for a tribunal not to recognise what appears to be a legitimate employment contract:

(a)    where the company is a sham;
(b)    where the contract was entered into for an ulterior purpose e.g. to obtain a statutory redundancy payment;
(c)    where the parties do not conduct their relationship according to the contract.

Rimer LJ concluded that Mr Neufeld and Mr Howe were employees and the appeals were dismissed.

This Employment Law Article does not constitute legal or other professional advice and should not be relied on as such.  You should take specific advice regarding your circumstances before taking any action based on the information contained within this Article.