Right of Substitution – Franchisees Neither Employees Nor Workers

What is the contractual agreement between the two parties?

In 2013, two ODFs entered into DPD’s Standard Model Franchise Agreement regarding the provision of package delivery and collection services – known as the agreement. They were also given a non-contractual operating manual – known as a manual.

The agreement requires the ODF to provide a driver (which can be the ODF or someone else) to perform the Services. According to the guide, if the ODF needs to hire a replacement driver, they will need to provide a copy of the proposed driver’s driver’s license and complete the application form, for the DPD to authorize the replacement. The agreement emphasized that the Overseas Personnel Office’s responsibility is to ensure replacement drivers are trained in accordance with DPD procedures and policies.

ODF status

A dispute arose between the two parties, which led the OFDs to claim in court that they had employee or worker status. The court opposed, and EAT has now upheld the court’s decision.

ODFs functional status shifted to right of substitution in the agreement. The court correctly found that the agreement represented the true nature of the relationship between the parties. The fact that ODFs tended to use cover drivers who were ODFs or other drivers of other ECOs does not undermine the broad contractual right to use an alternative of their choice. It was reasonable for the DPD to check the qualifications and training of the replacement driver, and this does not detract from the broad right of substitution. On this basis, the EAT considered ODFs to be self-employed franchisees.

Best practices for employers

This case highlights the importance of ensuring that the terms written between the parties reflect the true nature of the business relationship. Here, the right of substitution was real and could not be unreasonably restricted by the DPD. So there was no requirement to provide personal service under the agreement, meaning that ODFs were not considered employees or workers.

Organizations setting up their own self-employment agreements should consider the extent of the right of substitution they feel they are able to allow. If this right of substitution is to be restricted in any way, there may be implications for the other party’s employment status and the rights they can assert in court if a dispute arises.

For more information or advice, please contact Mark Stevens in our Labor Law team at 0117314 5401, or complete the form below.

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