Unpaid Company Director found to be Employee

employed

In Stack v Ajar-Tec Ltd [2015] EWCA Civ 46, the Court of Appeal considered whether a shareholder and director who performed work for a company for at least three years without pay, was its employee and worker.

Stack was one of three shareholders who provided work for ATD Ltd for 80% of full time but continued working for his other business. No employment contracts were completed or signed. When relations between the directors deteriorated in 2009, Stack’s directorship from the company was termination.

Three points to note were:

  1. Stack was never paid for his work;
  2. Stack never sought payment;
  3. The company’s accounts reflected no liability to pay him.

Stack lodged claims for constructive unfair dismissal and unauthorised deductions from wages in an employment tribunal. There was a protracted dispute over his employment status.

The case went to the Court of Appeal; it found that it was open to the employment tribunal to imply a term that the director would be paid a reasonable rate from a reasonable starting date in order to give business reality to the arrangements.

This case underlines the difficulties of establishing the most fundamental concept of employment law: employment status, in the absence of a formal agreement. It further demonstrates that, provided that there is a legal obligation on the employer to pay them, directors or shareholders will not necessarily need to have received pay in order to be employees.

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