The Claimant was employed under an employment contract in 2015 and was paid around £10,600 per year. In 2016 he was made a director and received further payments in the form of dividends and director's loans. In 2023, the Claimant resigned as employee and director. He claimed unlawful deductions relating to unpaid holiday pay and sick pay, arguing that the remuneration he had received were due to him being an employee rather than a director. The Respondent argued that the Claimant had ceased to be an employee when he was appointed as director. The ET held that the Claimant remained as an employee after being made a director but that, because all payments were made because he was a director, he was not entitled to any salary or sick pay. The Claimant appealed.

The EAT allowed the appeal. The ET was required to make findings of fact about the Claimant’s duties and his agreed remuneration, whatever the manner of its payment, immediately before he became a director. Because there was an employment contract in existence at the time the Claimant became a director the Employment Judge had to consider whether it was terminated, which he does not appear to have concluded was the case; or varied and, if so, how and what the variations were. Consideration should then have been given to any additional duties the Claimant undertook once he became a director and whether he performed them as part of his duties under his contract of employment, or on some other basis. The Employment Judge did not make the necessary findings of fact, did not apply the correct legal principles and reached a decision that was perverse.