The employment status of carers funded through direct payments

In some cases, a court or tribunal may imply a contract of employment where there is no written agreement between the parties. This only happens where it is necessary to give effect to the reality of the working relationship – known as the common law test of necessity.

In Scully v Northamptonshire County Council, the claimant provided care to his adult brother, who had a learning disability. The care was funded through direct payments made by the local authority under the Care Act 2014. Those payments were managed by the brother’s family and used to pay the claimant. There was no dispute that the claimant was working under a contract of employment – but the issue was who employed him. The claimant argued that the council was effectively his employer and brought claims for race and disability discrimination, as well as unpaid wages.

He also argued that his brother may have lacked capacity to enter into a contract, and that any employment arrangement with him was invalid. On this basis, he said the council should be treated as the employer. The employment tribunal rejected his claims, and the claimant appealed to the EAT.

EAT's decision

The EAT dismissed the appeal. It found that there was no legal basis for implying a contract of employment between the claimant and the council. The tribunal had been entitled to conclude, based on the evidence, that the claimant was employed by his brother or by his mother acting on his brother’s behalf.

Key facts supported this conclusion:

• The claimant’s payslips named his brother as the employer.
• His mother, not the council, arranged holiday cover and dismissed other carers.
• The family sourced staff using a directory provided by the council, but the choice and management of carers remained with them.
• The council did not provide training, appraisals, or instructions to the claimant.
• There was no evidence that the council exercised control over the claimant’s work.

The EAT also confirmed that a possible lack of capacity on the brother’s part did not mean the contract was void or that the council must be treated as the employer. At most, the contract would have been voidable, and no medical evidence had been presented to establish a lack of capacity. The tribunal had therefore been right not to draw any conclusions on this point.

Learning points for employers

This case reinforces that a contract of employment will not be implied unless it is necessary to explain the working arrangement; it is not enough that the local authority funds the care through direct payments. Where direct payments are used, it is vital to ensure clarity over who the employer is. Good documentation, including payslips, care agreements, and clear lines of responsibility, can help avoid disputes.

Where capacity is a concern, medical evidence and appropriate legal authorisation (eg under the Mental Capacity Act) will be essential to ensure that care arrangements are legally robust.

Rory Jutton is a Solicitor at VWV.