melonfool wrote:No, indeed it does not allow for two or more employees. But here there are no employees?
The discussion had moved from this specific case to whether or not a company with two directors who were both also employees needed ELI. Hopefully, I've now established that it does.
But you're quite right to remind me that the original question was whether or not the directors in this particular case were employees.
My provisional view is they could well be, even though they are only being paid expenses. This is because although they aren't actually receiving any remuneration at present there is probably an
expectation that they will do so once the company has enough money to pay them.
This was pretty much the situation in the 2015 case of Stack v Ajar-Tec Ltd, which went to the Court of Appeal, and is therefore a very powerful authority.
The basic facts were that Mr Stack and two others had set up Ajar-Tec Ltd. They were all directors and shareholders, but Mr Stack never received any remuneration. They fell out and Mr Stack's appointment as director was terminated.
He made a claim against the company, alleging unfair dismissal. The Employment Tribunal confirmed that he was an employee of the company as there had been agreement that he would work for the business and they considered it was common sense that he would be paid for the work that he did. A term regarding payment was therefore implied into his contract.
The company appealed, but the Court of Appeal also agreed that Mr Stack was an employee and that there had been an agreement between Mr Stack and the other two directors prior to starting the Company that they would all receive payment.
The fact that the parties had not expressly agreed a term about remuneration did not mean that there was no contract between them and the Tribunal had therefore been quite correct to imply a term that a director would be paid a reasonable rate into the contract between Mr Stack and the company.
I suspect that it's a very similar situation in this case, namely that although the two directors aren't receiving any payment at present they are nevertheless expecting to do so, and that there is therefore an implied term in their appointment as directors that they will receive payment at some stage. If so, then they are probably both employees, and it follows that, strictly speaking, ELI is a legal requirement.
If I'm wrong, and they are genuinely just giving their services for free with no expectation of payment then I would accept that they are probably not employees, in which case there would be no need for ELI.