Craven v Forrest Fresh Foods Ltd [2025] EAT 121 – Director-Shareholder Employment Status

1st September 2025

The Employment Appeal Tribunal (EAT) has clarified an important point on the status of individuals who hold dual roles as both statutory directors and employees.

This appeal, argued by Lee Bronze, considered whether a claimant who entered into a written employment contract as a Business Development Manager continued to be entitled to salary and sick pay after later becoming a statutory director and shareholder.

The Issue

At first instance, the Employment Tribunal held that although the claimant technically remained an employee, all payments had been made in his capacity as director, dismissing his claim.

On appeal, the EAT found the Tribunal erred in law by treating all remuneration as director’s pay. The key question was whether appointment as a director automatically ends employment rights under an existing contract.

The EAT held that the existence of a written employment contract meant the claimant could remain both a director and an employee. The Tribunal should have examined whether that contract had been terminated or varied.

The EAT’s Findings

The judgment confirmed that:

A statutory director can also be an employee if a valid contract of employment exists.
Employment status is highly fact-specific, requiring consideration of all circumstances.
The form of payment (salary, dividends, or loans) is relevant but not decisive.
Control, contractual duties, and the practical reality of the relationship are central.

Practical Implications

The decision underlines the importance of:

Documenting any changes to employment status clearly and expressly.
Recognising that appointment as a director does not, by itself, remove contractual rights.
Ensuring remuneration structures reflect the underlying relationship.

It also reinforces the proper purpose of embargoed judgments: limited strictly to correcting typographical errors, not re-arguing issues.

Caselaw Context

The EAT’s reasoning drew upon established authorities, including:

Folami v Nigerline (UK) Ltd [1978] – managing directors may also be employees.
Secretary of State v Bottrill [1999] – controlling shareholding is relevant but not decisive.
Neufeld and Howe [2009] – directors with significant control may still be employees.

Together, these confirm that director/employee status must always be determined by the facts.

Looking Ahead

While not a radical shift, this decision:

Reinforces existing principles.
Provides tribunals with a concise summary of relevant law.
Reminds businesses and advisers to align contractual terms with working reality.