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Company Director entitled to pay in the absence of express agreement

06 March 2015

In an interesting decision (Stack –v- Ajar-Tec Ltd) the Court of Appeal has upheld an Employment Tribunal’s decision that a Company Director and Shareholder who worked for three years without pay was an employee and worker entitled to historic “wages” and compensation for future losses arising from his constructive unfair dismissal.

Mr Stack was, along with two colleagues, a Shareholder and Director who spent 80% of his time working for Ajar–Tec Ltd and 20% for his other businesses. No contracts of employment were signed but it was agreed between the shareholders before the Company had been incorporated that Mr Stack would work for the Company with the hours to be agreed at some time in the future. The three co- director shareholders fell out with each other and Mr Stack was removed as a Director. He brought claims of constructive unfair dismissal and unlawful deduction of wages. The Employment Tribunal found, and the Court of Appeal agreed, that he was an employee and a worker. Once the Company came into being there was an implied term in the contract that he would be paid “a reasonable amount” for the work he had done from a “reasonable starting date”.

David Ludlow
Partner - Employment