Nadine Quashie, 28, worked as a 'lap dancer' at Stringfellows between June 2007 and December 2008, and was treated by the club for tax purposes as self-employed and in one tax year earned over £100,000.
She had earlier brought a claim to an Employment Tribunal which was unsuccessful as the judge ruled she was not an employee. Now, she has been allowed to proceed with an appeal arguing that she was an employee and not self-employed.
Peter Stringfellow has said he will challenge this recent decision.
If Quashie's appeal succeeds it will have ramifications for Stringfellows and the nightclub sector in relation to their legal obligations to dancers and other entertainers and potentially to all businesses using self employed workers.
Irrespective of the final outcome, the case serves as a reminder to all businesses of the important differences between employed and self-employed status and the financial consequences which result.
If someone is employed they have a multitude of legal rights including: minimum wage levels; minimum periods of paid holiday; minimum periods of paid notice and maternity pay.
Self-employed individuals however have none of these rights. Importantly, neither do they have the right not to be unfairly dismissed.
If an employee has more than a year's service and they are dismissed, they can claim unfair dismissal. Their employer then has to prove that it had a fair reason for dismissal and that it acted reasonably in dismissing them for that reason. If the employer can't prove its case it can potentially owe up to £80,000 in compensation.
The number of legally fair reasons for dismissal is limited - common examples are misconduct and redundancy. Even if there is a fair reason to dismiss an employee the dismissal can still be unfair if the right procedures as expected by an Employment Tribunal aren't followed. The procedures needed are different for each fair reason and the emphasis within each procedure can change from time to time. Professional guidance is essential to reduce risk and such procedures take time - meaning heavy burdens on businesses in terms of costs and commitment.
The Government intends to raise the threshold at which employees qualify for these rights from one year's service to two years' service in April 2012. Such changes may reduce unfair dismissal claims but there is still the issue of employment status.
Genuinely self-employed individuals can work when they like, can choose how they do the work and they do not have to work if they do not want to.
Employment Tribunals will not rely on a simple description of someone as self-employed as conclusive, nor will they rely solely on how the worker is paid. Instead, Employment Tribunals will look at the whole picture and, in particular, will look at factors described by judges and lawyers as "mutuality of obligation" and "control".
There is mutuality of obligation if the employer has to provide work which the employee has to do. Control is also a fundamental part of an employment relationship as the employer will usually tell the employee what to do, when to do it and how to do it.
Quashie had satisfied an Employment Tribunal that Stringfellows had control over her work but not that there was any mutuality of obligation. However, because there was a rota in place to ensure that there were enough dancers at the club each night, that there was a fixed pattern of work and an obligation to turn up and be paid when rostered the Employment Appeal Tribunal judge found this was enough for the issue of Miss Quashie's employment status - and the subject of mutuality - to be looked at fully on appeal.
The same legal issues are directly relevant to casual workers, consultants, freelancers and interns. To avoid employee status, businesses using such individuals must be able to clearly demonstrate - usually through carefully worded contracts and working patterns - that there is no mutuality of obligation. This is something Stringfellows may find out to its detriment.
David Jepps (pictured), consultant solicitor, Keystone Law
