FAIR EMPLOYMENT TRIBUNAL

CASE REF:  00343/04FET
02254/04

CLAIMANT:		Conn Lavelle

RESPONDENTS:		1.  Billy Thompson
2.  Colin Reed
3.  British Bakeries Limited

DECISION ON A PRE-HEARING REVIEW

The unanimous decision of the Tribunal is that claimant was not an employee within the meaning of Article 3 of the Employment Rights (Northern Ireland) Order 1996 and his unfair dismissal claim (Case Ref: 2254/04) is therefore dismissed.

Constitution of Tribunal:
Chairman:		Mrs Ó Murray
Members:		Mr G Bradley
			Mr J Collins

Appearances:
The claimant was unrepresented but appeared accompanied by his wife.
The respondents were represented by Mr P Bloch of the Engineering Employers’ Federation.

1.	The claimant’s claims were for unlawful discrimination contrary to the Fair Employment and Treatment (Northern Ireland) Order 1998 as amended and he claimed that he was unfairly dismissed contrary to Article 126 of the Employment Rights (Northern Ireland) Order 1996.

2.	The issue for the Tribunal at the pre-hearing review was:

	“Whether the Tribunal has jurisdiction to entertain the claimant’s complaint of unfair dismissal in view of the provisions of Article 3 of the Employment Rights (Northern Ireland) Order 1996 with regard to the definition of “employee” contained therein”.

3.	The Tribunal heard evidence from the following witnesses for the claimant: the claimant and Mr David McDowell.  The Tribunal heard evidence from the following witnesses for the respondent: Mr Colin Reed, Mr David Mills and Mr Billy Thompson.  Bundles of documentation were submitted by both the claimant and the respondent and further documentation was produced during the course of the hearing by the claimant.

4.	The Tribunal found the following facts relevant to the issue before it.

	4.1.	The claimant had worked for Ormo Bakery for eight years as an employed van sales driver engaged in the delivery of bread and related products to their customers, when he was approached by British Bakeries in the form of the Mother’s Pride organisation to be a “franchisee salesman”.  David Mills of Mother’s Pride, had recommended the claimant because he knew he was a good bread man.  There were discussions and negotiations between the claimant and Billy Thompson in the presence of David Mills relating to the claimant starting as a franchisee driver.  The company proposed a “Van” which is a list of specified customers on a specific route and the claimant negotiated the addition of an extra customer on that route thus adding to the value of the Van.

4.2	There were two categories of salesmen providing work for the company namely franchisee drivers and employed salesmen.

4.3	Employed salesmen were engaged by the company in a different way to franchisees in that they would answer an advertisement for a post, would lodge an application form, be interviewed and then taken on.
	
4.4.	The claimant started working for British Bakeries, Mother’s Pride, in May 2001 and worked for two weeks as an employee in order to learn the ropes.  At the end of that period he received a P45 and then started to work as a franchisee driver until May 2004 when he left.

	4.5.	Following the negotiations between the claimant and the company the franchisee agreement was agreed in that the number of calls on the van were agreed and a 7½% commission rate was agreed.  The commission was broken down into two parts:  a 3½% “handling allowance” and a 4% “settlement allowance”.  The Tribunal finds that the claimant disingenuously averred in evidence to the Tribunal that the percentages agreed included a 1% stales allowance.  The Tribunal does not find this to be the case.  The Tribunal finds that employed salesmen, in contrast to franchisee salesmen, received this 1% stales allowance.

4.6	The claimant had to provide his own vehicle which he bought from Mother’s Pride in instalments but he could have bought his van from anyone.  He was obliged to maintain the van.  He had to put the company logo on the van and paint it.  He had to pay tax, national insurance and PSV.  The claimant had to pay for his own fuel.  The company allowed him discounted diesel although not at cost price so the company were making a profit out of that.  He was not obliged to use their diesel.  In contrast the employed drivers had to use company diesel.  If the vehicle broke down the franchisee would usually ring the company to get the vehicle towed in and the company would provide another vehicle to ensure that the run was completed.  In this event the company would charge the franchisee for the use of the replacement vehicle.  Such a charge would not apply to an employed salesman in the same predicament.

4.7	The agreement was subject to termination on notice by either side.

4.8	The company supplied the following equipment to the franchisee:  a computer terminal; a telephone line if he worked from home; baskets; handling equipment and promotional stickers. 

4.9	There was a uniform which the claimant wore but the company did not insist on him wearing it.  

	4.10	The claimant agreed that there was a disciplinary procedure which applied to employees.  The Tribunal finds as a fact that the disciplinary procedure did not apply to the claimant although it did to employees.  The disciplinary procedure applicable to employees was formalised and consisted of verbal warnings; written warnings; ultimately dismissal with or without notice; and the Human Resources department would be involved at all stages.  In contrast, with franchisees the only sanction available was termination of the agreement.  Other than that the company had to persuade the franchisee to address a problem or the company could have removed a call from the Van in order not to lose a customer’s business.

	4.11	The claimant was not paid a wage whereas an employee was paid a wage.  The employed driver’s remuneration was 70-75% wages and the rest commission.  The claimant’s remuneration was wholly commission-based and he was subject to different incentive and bonus schemes when compared to an employed salesman. The claimant effectively bought the product from Mother’s Pride and delivered it to the customers.  In contrast employees did not buy the products but simply delivered them.  The claimant as a franchisee driver was not in the company pension scheme in contrast to the employed drivers. 

	4.12	The claimant made the case that the documentation which he would have received when making deliveries was not sufficient for him to give instructions to his accountant in order to do accounts and that this pointed towards him being an employee.  The Tribunal does not accept this point and finds that the documentation namely the customer statement document, the sales invoice and the credit note together with any delivery documents which the claimant could have printed out would have given him a picture of the sales and returns on his van.  The claimant did not pay tax under Schedule E but was liable to pay his own tax and national insurance.

4.13	The claimant took his holidays as and when he wanted unlike an employee who was obliged to take the minimum number of weeks’ holidays in order to comply with the Working Time Directive.  The claimant did not take many holidays over his period working with Mother’s Pride.  It was the claimant’s responsibility to arrange and pay for cover during any holidays he might take.

	4.14	The franchisees generally used substitutes extensively that is when they were off for any reason they were free to send someone in their place.  While the claimant did not take many holidays he did take holidays on one occasion when a substitute who had been arranged by him let him down at the last minute and he had to provide another substitute.  When the company got to know who the substitute was they were not happy with the person but the claimant insisted that the substitute proceed.  It was not a question of the claimant putting the substitute’s name forward for approval.  On other occasions the claimant did not take holidays because he could not get cover.  The Tribunal therefore finds that the claimant could use substitutes for holidays and illness and there was no restriction by the company on the amount of time he could take off by using a substitute.  The claimant was responsible for paying for the substitute; the company took no part in this.

	4.15	Franchisees were free to take double deliveries on a Friday to get the Saturday off for example.  Whilst the company did not like this practice it could not stop it.  The risk was on the franchisee because if he delivered more bread on a Friday to cover the Saturday, the risk was that the bread would go stale and be returned and he would therefore lose out financially because he was liable for all returns.  

	4.16	The franchisee ran a degree of financial risk because he was responsible for all returns.  An exception to this was if the company wanted to run a promotion of certain products.  The company would recommend a certain layout of products in the shop and arranged that a specific amount of those products be carried on the van.  In this instance the claimant would not lose out because the company would take back any unsold promotion items.  Whilst there was an indirect potential loss in that the promoted items might displace some of the regular items on display, in fact the claimant made the point that he was the only one who gained because the shop would sell these as a loss leader as did the company but the claimant was credited with the full price of the goods even though they were being sold at under price.

	4.17	It was opened to the claimant to sell other goods from his van although he could not sell competitors’ goods that is bread products from other companies.

	4.18	The claimant was able to do “cash calls”, that is, orders which he generated and organised separately from the orders compiled by the company.  The claimant did add a cash call to his Van thus increasing his profit.

	4.19	The claimant could push different lines by using promotions and by returning to the shop in the afternoon to tidy his shelves and present the products in the most advantageous way in order to maximise sales.

	4.20	In January 2004 the company told the claimant that they were going to change his Van.  This was following a merger between Mother’s Pride and Ormo which meant that there were two bread salesmen working the same route in some instances and the company had to take measures to integrate two systems into one delivery system.  Whilst the respondents’ witnesses contended that the changes to the Van were agreed, the Tribunal finds that the changes to the Van were effectively imposed on the claimant although the claimant negotiated the retention of one customer and the provision of a helper paid by the company.  The changes to the Van meant that the claimant had a loss of trade of £300 to £400 per week.  The company were trying to minimise overlap between different Vans but they effectively told the claimant on a “take it or leave it” basis about the changes.  Whilst this change was imposed the Tribunal does not find that this meant that the company exerted a level of control over the claimant in relation to the job so as to make the relationship one of an employee particularly as the claimant was able successfully to negotiate changes to the proposed arrangement:  rather, the Tribunal regarded it as akin to a large company being the only customer of a smaller supplier giving that large company a strong negotiating position vis-à-vis changes to the contractual relationship.  The Tribunal therefore finds the changes to amount to the variation of a commercial contract between two parties possessing negotiating positions of differing strengths. The company provided the helper as a one-off on this one occasion and paid for it.  This was to ease the transition during the significant change in Vans following the merger.  

	4.21	The labels used by the parties are important though not determinative of the relationship.  Both the claimant and the company called the claimant a “franchisee driver” as opposed to a “bread salesman”.  Bread salesmen were employees and franchisee drivers were regarded by the company as self-employed.  The claimant described himself as self-employed at page 63 of the bundle of documents and the Tribunal finds that the claimant himself thought that he was self-employed as did the company. 

	4.22	On one occasion Colin Reed asked the claimant to agree to call back to Supervalu Carryduff in order to sign in in the afternoon, the claimant refused to do so and said in evidence that he was not prepared to be dictated to.  He objected to expending the extra time to service the shop.  The Tribunal finds this to be the action of a self-employed individual rather than an employee who would have been disciplined for failing to follow an order by his manager.

4.23	The Tribunal looked carefully at the events leading up to the ending of the relationship between the claimant and the company to determine whether the mode of termination pointed to an employment contract.  The first meeting with Colin Reed took place at or about the end of April 2004.  The claimant gave conflicting evidence over who requested that meeting.  The Tribunal finds that the claimant asked for that meeting because he was complaining about the changes which were being made to his van.  During the meeting Colin Reed put to him problems that there were with the service he was giving to the company.  Complaints had been received from customers about the poor service on the Van operated by the claimant and Mr Reed said that he would review the situation in a few weeks.  The second meeting took place on 27 May 2004.  The claimant tried to characterise this meeting as a disciplinary meeting by changing his evidence to say that the meeting had been requested by Colin Reed in order to discipline him.  The Tribunal finds that the meeting was requested by the claimant.  Whilst termination of the agreement would have been an option for the company if a franchisee driver was not giving proper service, the Tribunal finds that the termination was not the object of this meeting: rather Colin Reed’s aim was to get the claimant to improve the service that he was providing.  The company found it difficult to get and retain drivers and their aim was to improve matters rather than to seek to terminate the agreement.  The Tribunal therefore finds that the claimant was not put on four weeks’ notice at that meeting as he alleged.  

4.24	In the event the claimant ceased providing work for the company on 3 July having terminated the agreement of his own accord and started work at a new job on 13 July.  

The Law

5.	In order to pursue an unfair dismissal claim the claimant must show that he was an employee in employment at the time of dismissal.  The task of the Tribunal is, firstly, to establish the terms of the contract between the parties, and secondly, to decide whether the contract was an employment contract, otherwise termed a contract of service. 

6.	The relevant parts of Article 126 and Article 3 the Employment Rights (NI) Order 1996 are as follows:

	“126.-(1)	An employee has the right not to be unfairly dismissed by his employer.

3.-(1)		In this Order “employee” means and individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
	
(2)	In this Order “contract of employment” means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.

(5)	In this Order “employment”-

(a)	in relation to an employee, means (except for the purposes of Article 206) employment under a contract of employment … and “employed” shall be construed accordingly.”

7.	The law is discussed in Harvey on Industrial Relations and Employment Law, Division A under the heading Categories of Workers, paragraphs 1-80.

8.	The approach outlined in the seminal case of Ready Mixed Concrete (South East) Ltd -v- Minister of Pensions and National Insurance [1968] 1 All England Reports 433 is to ask three questions.

	(a)	Did the worker undertake to provide his own work and skill in return for remuneration?  This is the “personal service” requirement and involves an examination of whether the worker had a power to appoint a substitute and whether that power to appoint a substitute was fettered to such a degree that it did not detract from the contract being one of employment.  The Tribunal was referred to the cases in this area namely Express and Echo Publications Limited -v- Tanent [1999] IRLR 367 CA; MacFarlane -v- Glasgow City Council 2001 IRLR 7 EAT; Staffordshire Sentinel Newspapers Ltd -v- Potter [2004] IRLR 752.  The matter to be examined is whether the power to appoint a substitute was a general power exercisable at the individual’s will or a limited power to delegate in specific circumstances for example illness or other incapacity.

	(b)	Was there a sufficient degree of control to enable the worker fairly to be called a servant?  This is the control test and involves the Tribunal examining the level of autonomy the claimant had in organising himself and in the performance of the work.

	(c)	Where there any other factors inconsistent with the existence of a contract of service?

9.	The approach in the Ready Mixed Concrete case was approved by the court of appeal in the Hall (Inspector of Taxes) -v- Lorimer case 1994 IRLR 171.  The judge in that case described the correct approach as follows “the objective of the exercise is to paint a picture from the accumulation of detail… it is a matter of evaluation of the overall effect of the detail which is not necessarily the same as the sum of the individual situation”.

Findings

10.	Having applied the legal principles to the facts found, the Tribunal finds that the claimant was not an employee.

11.	Generally the Tribunal found the claimant to be an unreliable witness in relation to matters which went to the heart of the relationship between the parties.  The claimant changed his evidence in several key respects when it became apparent to him that the evidence he had given was not being supported by his witnesses and was not conducive to proving the case he wished to prove.  As a consequence, where there were conflicts in the evidence, the Tribunal generally accepted the respondent’s witnesses’ version of events.

12.	The Tribunal found the unsigned franchise agreement document tendered by the respondent to be of no help at all in establishing the terms of the contract between the parties as the claimant denied ever seeing it; the respondent, at most, relied on only some of its terms; and both parties agreed that it did not reflect the terms of the agreement between them.

13.	The following facts pointed in the Tribunal’s judgement towards the claimant being self-employed:

	-	The claimant provided his own equipment, could hire his own helpers and assumed a degree of financial risk.  
	-	He had the opportunity of profiting from sound management in the performance of the task for example by maximising sales by presenting the bread in a certain way.  

	-	He was not paid wages but was wholly paid on commission which was negotiated by him at the outset of the contract.  

	-	He was not paid when he was off sick nor was he paid for holidays and the company could not and did not insist on him taking the minimum holidays as required for employees under the Working Time Directive.  

-	He was not a member of the company pension scheme and was not subject to the company disciplinary code.  

-	He was free to sell and promote other products apart from the bread products of competitors.  

-	He did not pay tax on Schedule E as an employed individual would and was responsible for his own tax and national insurance payments.  This was underlined by the fact that after the first 4 weeks as an employee of the company, the claimant received a P45 before he started as a franchisee.

-	From the evidence it was clear to the Tribunal that the parties understood the relationship to be that of a franchisee driver in contrast to its salesman who was an employee.  The labels used by both parties, whilst those labels were not determinative of the relationship, pointed, in the Tribunal’s view, towards a self-employed contract rather than an employment contract.

14.	The major issue for the Tribunal was the claimant’s unfettered power to send a substitute when he himself was not available.  He was able to do this even if the company were not happy with the substitute he had provided.  The company’s only sanction was to terminate the entire agreement and this they were reluctant to do in a business where franchisee drivers were hard to obtain and retain.  In the circumstances of this case, this largely unfettered power to provide a substitute, meant that the claimant did not satisfy the personal service requirement which is one of the minimum requirements for a contract of service.

15.	There was a clear distinction between the contractual terms of employee sales drivers and franchisee drivers and it is the Tribunal’s view that at no point during the relationship did the claimant regard himself as an employee like the employed drivers.  He was very much “his own man” negotiating to his advantage at the outset of the relationship and refusing to be influenced in important respects namely regarding the suitability of the substitute he had arranged, and in relation to his refusal to call back to a shop to sign in.

16.	Looking at the circumstances and the contractual terms as a whole the Tribunal has concluded that there was an insufficient degree of control by the respondent over the claimant and his work and thus the control test is not satisfied.  Additionally the Tribunal finds that there are terms of the contract inconsistent with a contract of service most notably the terms relating to the power to send a substitute.

17.	The Tribunal’s conclusion, therefore, is that the claimant was not an employed person within the meaning of Article 3 of the Employment Rights Order and as a consequence, his claim for unfair dismissal is hereby dismissed.

Chairman:

Date and place of hearing:	22-24 May 2006 and 8-9 January 2007, Belfast

Date decision recorded in register and issued to parties: