The legal impact on employers where there is a sham element in contracts with their workers.
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As a consequence of recent legal decisions particularly, those over the last three years an employer that introduces a clause into his contracts (or enters in contractual relations with his workers) needs to ensure that the clause or contract is genuine and operates in practice as it states that it intends to. Otherwise, as the title of this article suggests there might be serious legal implications for an employer. The clause (usually a substitution clause) or the type of contract entered into must not simply be a device to circumvent the correct application of the law in other words perpetrate a sham. The recent development of legal rules that can invalidate sham clauses or bogus contracts in employment have proven beneficial to workers. In particular those workers that want to be treated as employees. As will be seen when a court or tribunal has a reasonable suspicion that the clause (or the contract itself) is a sham that is designed, for example, to exclude employee status (to those persons working under a contract with an employer) they may decide to ignore it and treat the contract as a contract of service. The affected worker will then have entitlement to the full range of employment rights available to an employee. This article will consider relevant legal decisions from all areas of employment law that have a bearing on this topic. They will be analysed fully for the first time.