Court of Appeal Rules that Lap Dancer was NOT an Employee

Many employment rights - including the right to claim unfair dismissal - are confined to employees. However, deciding just who is and who is not an employee has long proved something of a challenge for the law, with different courts and tribunals reaching radically different conclusions on the same set of facts.

Take, for example, the recent case of Stringfellows Restaurants Ltd. v. Quashie. Q worked as a lap dancer at Stringfellows. She was paid in what was described as "Heavenly Money " (!) - namely, vouchers paid to her by customers which Stringfellows later redeemed for real money minus deductions. Those deductions included commission payable to Stringfellows, a "house fee" and fines. Dancers were fined for such things as being off rota or late for a shift or stage dance. Dancers were also required to pay a set fee to the "House Mother", who was responsible for ensuring that the dancers were well turned out and for looking after the dancers' general wellbeing. Q's earnings came entirely from the customers. On any particular night, it was possible that her earnings might be less than the amount she had to pay out, with the result that she would earn nothing for that night.

When Stringfellows terminated Q's contract over drug dealing allegations, she sued for unfair dismissal. However, Stringfellows argued that Q was not an employee and therefore had no right to claim unfair dismissal. The Employment Tribunal accepted that argument and ruled that Q was not an employee. The Employment Appeal Tribunal (EAT) allowed Q's appeal. In the EAT's view, the Employment Tribunal had focused too narrowly on the "wage/work" bargain. Q had been obliged to turn up for work in accordance with the rota. She was not entitled to send a substitute. The imposition of fines or deductions by agreement implied an ongoing relationship. According to the EAT, Q was an employee.

The Court of Appeal did not agree. Allowing Stringfellows' appeal, the Court of Appeal ruled that the EAT had been wrong to interfere with the Employment Tribunal's decision. For the Court, a key point had been the Employment Tribunal's finding that Stringfellows had not been obliged to pay Q anything at all. Q had negotiated her own fees with the customers and had taken the risk that on any particular night she might be out of pocket. Stringfellows had only paid Q monies received from customers after deductions. It had not employed Q to dance; rather Q had paid Stringfellows for the opportunity to earn money by dancing for customers. The fact that Q had taken the economic risk had also been a very powerful pointer against the contract being a contract of employment. In the Court of Appeal's view, it would be an unusual employment contract where the employee took the economic risk and was paid exclusively by third parties. Finally, both parties had intended that Q should have self-employed status and Q had conducted her affairs on that basis.

What lessons, if any, can be drawn from this case? Whether or not an individual is an employee will always depend on the facts of the particular case. Employers need to appreciate that an Employment Tribunal will always look at the substance, or reality, of the situation. It will not be bound to accept the particular label which the parties have chosen to put on their relationship. Even an individual whose contract clearly states that he or she is not an employee may, in fact, be an employee in law and have all the rights of an employee. What mattered in the Stringfellows case was not clever drafting. It was, rather, a question of what had been the true bargain which the parties had made.

To find out more, please contact Nick Crook or Gareth Pobjoy.

Filed: 14/05/2012 09:07:07