Tribunal Erred: Director Still Entitled to Employee Remuneration, Rules EAT
The EAT has overturned an Employment Tribunal decision, ruling that an employee's appointment as a director doesn't automatically negate their right to wages and sick pay.
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Employment Appeal Tribunal Overturns Ruling on Director's Pay
The Employment Appeal Tribunal (EAT) has ruled that an Employment Tribunal (ET) made an error in law when deciding that Mark Craven, an employee who was appointed as a director at Forrest Fresh Foods Limited, was no longer entitled to employee pay, including wages and sick pay.
The case, Craven v Forrest Fresh Foods Limited [2025] EAT 121, centred on whether Mr. Craven was entitled to salary and/or statutory sick pay (SSP) after becoming a director of the company.
Background of the Case
Mr. Craven initially joined Forrest Fresh Foods as a driver in 2009, later becoming a Business Development Manager in 2015 under a written contract. This contract outlined his job title, working hours (47.5 per week), and an annual salary of £10,600.20. In June 2016, he was appointed as a statutory director.
A dispute arose between Mr. Craven and Christopher Craven, the managing director and majority shareholder, leading to Mr. Craven being signed off work in April 2022. He was subsequently removed as a director in June 2022 and resigned as an employee in February 2023.
The Employment Tribunal's Decision
Despite acknowledging that Mr. Craven remained an employee after becoming a director, the ET concluded that all payments were made to him in his capacity as a director, not as an employee. Consequently, they dismissed his claims for unauthorised deduction of wages and sick pay.
The Appeal Tribunal's Ruling
His Honour Judge James Tayler found the ET's decision to be flawed. The EAT criticised the Employment Tribunal's focus on the way payments were made (dividends and director's loans) and stated that it was an error not to properly evaluate his duties under his employment contract once he became director. The EAT stated that the Employment Judge did not make the necessary findings of fact and did not apply the correct legal principles.
The EAT emphasised that the fact that someone is a director does not necessarily mean they are not also an employee, and should consider whethere the initial employment contract has been terminated or changed. The case has been remitted to a new Employment Tribunal for reconsideration.
Read the entire judgement here: Mark Craven v Forrest Fresh Foods Limited [2025] EAT 121
