A finding of employment status has meant that an individual, claiming to be engaged as a consultant for tax purposes, has lost his rights to IP created during his engagement.
In Sprint Electric Ltd v Buyer's Dream Ltd and another  EWHC 1924 (Ch), 30 July 2018, an individual was engaged through a personal service company to write codes and algorithms for the client. The personal service company retained possession of the "source code", only making "object codes" available to the client as required. When disputes arose between the individual and the client, the individual took a computer (belonging to the client) and asserted that he (and/or his personal service company) owned the source code. The client company brought legal action.
In assessing this case, the court considered whether the individual was in fact a consultant or whether he had acquired employment status. Amongst other things, the court considered that the individual had become very integrated in the business of the client (he became a shareholder) and that he was required to provide a personal service. On that basis, the court found that an employment relationship did exist. As such, the IP created during that relationship would be treated accordingly – i.e. it belonged to the client.
This is another reminder to both individuals and businesses of the importance of ensuring that your contractual arrangements accurately reflect the true nature of the relationship to avoid unexpected consequences. For more information on employment status, please contact Claire or Rebecca in our employment team.
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