England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL
		Friday 13 December 2002

Peter Gibson L.J.:

1. The employer, Marks and Spencer plc ("M&S"), appeals from the order of the Employment Appeal Tribunal ("the EAT") on 6 March 2002. By a majority the EAT allowed the appeal of the employee, Mrs. Cheryl Curr, from the decision, sent to the parties on 30 August 2000, of the Employment Tribunal sitting at Ashford ("the ET"), who dismissed Mrs. Curr's claim that she had suffered an unlawful deduction from her wages. What she complained about was that when she was made redundant by M&S, her redundancy payment had been calculated on the basis that she had been continuously employed only from 28 August 1994, whereas she claimed that she had been continuously employed from 3 March 1973 and that a period during which she was on a Child Break Scheme was a period of continuous employment. The appeal to this court is brought with the permission of Mummery L.J. who considered the application of M&S on paper. By a Respondent's Notice Mrs. Curr cross-appeals on the unanimous rejection by the EAT of her claim that she had a contract of employment throughout the period of the Child Break. Mummery L.J., in giving permission to appeal on that point, expressed no view on its prospects of success.
2. The dispute between the parties turns on the true construction of certain provisions of the Employment Rights Act 1996 ("the Act") and the application of those provisions to the facts. It is convenient to refer to the statutory provisions at the outset.
3. By s. 135 of the Act an employer is required to pay a redundancy payment to any employee of his if the employee is dismissed by the employer by reason of redundancy. The amount of a redundancy payment is, by s. 162 (1) of the Act to be calculated, so far as relevant, by (a) determining the period, ending with the date when the employee's employment ended, during which the employee has been continuously employed, (b) reckoning backwards from the end of that period the number of years' employment falling within that period, and (c) allowing a prescribed amount for each of those years of employment. The period of continuous employment for the purpose of the calculation is capped at 20 years (s.162 (3)).
4. Part XIV of the Act contains interpretation provisions. By s. 210 (1) references to a period of continuous employment are to a period computed in accordance with Chapter I of Part XIV (ss. 210 – 219). By s. 210 (3) in computing an employee's period of continuous employment, any question whether the employee's employment is of a kind counting towards a period of continuous employment, or whether periods (consecutive or otherwise) are to be treated as forming a single period of continuous employment, is to be determined week by week. A week which does not count in computing the length of a period of continuous employment breaks continuity of employment (s. 210 (4)).
5. S. 212 contains the provisions most material to this appeal:

"(1) Any week during the whole or part of which an employee's relations with his employer are governed by a contract of employment counts in computing the employee's period of employment.

….

(3) …. any week (not within subsection (1) during the whole or part of which an employee is –

….

(c) absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of his employer for any purpose ….

counts in computing the employee's period of employment."

6. S. 230 contains other relevant interpretation provisions:

"(1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.

(2) In this Act "contract of employment" means a contract of service …., whether express or implied, and (if it is express) whether oral or in writing.

….

(4) In this Act "employer", in relation to an employee …., means the person by whom the employee …. is (or, where the employment has ceased, was) employed.

(5) In this Act "employment" –

(a) in relation to an employee, means …. employment under a contract of employment ….

and "employed" shall be construed accordingly."

7. The ET set out with admirable clarity the facts which they found. In summary they were these. Mrs. Curr commenced employment with M&S on 3 March 1973. During her career with M&S she held various managerial and training positions. She became pregnant with her third child in July 1989 at a time when she worked in M&S's head office as a management trainer. She commenced maternity leave on 3 February 1990 and expected to return to work on 12 November 1990. About one week before she was due to return she telephoned the Personnel Department and spoke to a Personnel Manager, Sue Johnstone, to enquire about the arrangements for returning to work.
8. At that time M&S had just introduced a Child Break Scheme designed to allow mothers to take a long break from work and enjoy time with their children. The Scheme was limited to employees at management level. The substantial benefit of the Scheme for employees was that at the end of the Child Break the mother would be guaranteed a management post if she wished to return to work. There was no guarantee that she would return to the same post as that which she held prior to the Child Break but every effort would be made to give her a similar position, grade and salary.
9. Mrs. Curr had two telephone conversations with Miss Johnstone about the Scheme prior to 12 November 1990. M&S did not then have any documentation about the Scheme as it was in its very early stages, but Mrs. Curr was told that the Scheme was to be offered only to highly valued employees whom M&S wished to retain. She was not told that she would have to resign or terminate her employment, nor was she told the consequences to her statutory employment rights of agreeing to the Scheme. However she was told that during the period of the Child Break she would lose all staff benefits such as staff discounts, the option to purchase new shares and holiday pay and she was required to repay the loan she had received from M&S for purchasing her house.
10. She decided to take advantage of the Scheme and did not return to work from her maternity leave on 12 November 1990. She received two letters dated 16 November 1990 from Miss Johnstone.
11. By the first letter Miss Johnstone said:

"Further to our telephone conversation and your decision to take a Child Break following maternity leave, I am effecting your resignation on 10 November 1990. Your P45 will be forwarded shortly.

You have an outstanding balance of £3232 on your Company House Purchase loan which is now due for immediate repayment. Please let me have a cheque made payable to Marks and Spencer plc for this amount as soon as possible….The enclosed letter outlines the terms and conditions of your Child Break. Should you have any queries, do please contact me."

12. By the second letter of 16 November 1990 ("the Second Letter") Miss Johnstone said to Mrs. Curr:

"I am pleased to confirm that the Company has accepted you on to the Child Break scheme for a period of four years, which will commence 12^th November 1990 and terminate 12^th November 1994.

During this Child Break the following terms and conditions will apply:

1. On completion of your maternity leave you will resign from the Company and the normal administrative procedures for resignation will be followed.

2. The period of your Child Break will be unpaid.

3. At the end of your Child Break the Company will undertake to offer you re-employment in a management position, although this may not necessarily be at the same level or in the same function as your previous employment.

4. We will take your views into account concerning the type of job you would prefer but there can be no guarantee of such a position. If you do not accept the job being offered at the end of the Child Break period then guarantee of re-employment will lapse.

5. If you wish to return either before or after the agreed date, this request will be considered on an individual basis but with no guarantee of agreement. In the case of a later return, the Child Break cannot be extended beyond the five year maximum.

5. Prior to your return you will be required to pass a Company medical.

6. For each year of your Child Break you will be required to work for a minimum of two weeks full-time, or equivalent part-time, at a mutually convenient time and pattern of hours. The type of work will be decided each year and you will be paid for this work.

7. Contact will be maintained with you throughout your Child Break, your Line/Personnel Manager will discuss the details with you.

8. You may not undertake any form of paid employment whilst on your Child Break, without prior consultation with your Line/Personnel Manager.

9. If you wish to terminate your Child Break at any time you must notify your Personnel Manager in writing.

10. The Company reserves the right to terminate your Child Break if you:

- commit a criminal act, which is relevant to your future employment.

- fail to return on the agreed date.

- fail to meet any of the above terms and conditions.

- are unable to return to work under the Management Conditions of Employment which apply at that time the job is being offered.

11. Your Personnel Manager will discuss the effect your Child Break will have on your staff benefits.

Please confirm your agreement to these terms and conditions by signing the enclosed copy of this letter and returning it to me."

13. On 26 November 1990 Mrs. Curr signed and returned the copy of the Second Letter, indicating thereby her acceptance of the terms of the Child Break Scheme.
14. Mrs. Curr worked for considerably more than the required minimum of two weeks a year during the period of the Child Break, her total time at work amounting to 1 year 9 months and 3 weeks in 5 separate fixed term temporary stints. On two occasions she was required to sign contracts which emphasised the temporary nature of the employment. She also attended a conference each year for persons on the Child Break Scheme and was paid for her two days' attendance. She received newsletters and correspondence from M&S.
15. Mrs. Curr received a P45 in November 1990. She also received P45s at the conclusion of some of the 5 stints. Her pension was frozen at the conclusion of the Child Break. As I understand what was meant by that finding of the ET, there were no contributions made to her pension in that period and Mrs. Curr did not withdraw or transfer her pension rights.
16. Mrs. Curr ceased to be on the Child Break Scheme on 28 August 1994 when she commenced employment with M&S at its Woolwich store as a departmental manager. Her contract gives 28 August 1994 as both the date of the commencement of the contract and the "latest start date of continuous employment".
17. On 3 June 1999 she was told that she was likely to be selected for redundancy. On being informed of the amount of the redundancy payment, she complained. She believed that "morally" her period as a temporary employee should be taken into account in calculating the redundancy payment. But M&S maintained its stance that her period of continuous employment only began on 28 August 1994. Her employment ceased on 17 July 1999.
18. Mrs. Curr presented her Originating Application on 13 October 1999. She claimed that it was her understanding from the outset that her relationship with M&S during the period of the Child Break continued to be governed by a contract of employment, and that she was misled as to the terms of the Child Break scheme when she agreed to participate. She said:

"I was not given any advice by my employers as to the full implications of the scheme, which was entered into at my employer's suggestion, and in particular I was not advised that my participation in the scheme would be treated as a waiver of my accrued continuous employment and corresponding statutory entitlements."

She said that she had not been advised to seek independent legal advice on the implications of the scheme before agreeing to participate and that had she been fully aware of the implications, she was quite certain that she would have refused to participate. She claimed that she was continuously employed for more than 20 years prior to her redundancy.

19. M&S resisted her claim on the basis that the redundancy payment formula was based on years of continuous service and for Mrs. Curr her period of continuous service commenced on her return from the Child Break.
20. The ET in their decision held that, contrary to the argument of Mr. Preston, counsel for Mrs. Curr, in accepting the terms of the Second Letter she resigned from her employment and commenced the Child Break on that basis. They found that there was a contract between M&S and Mrs. Curr on the terms of the Second Letter but held that that was not a contract of employment. They said (in para. 20):

"Such a contract as is stated in Clark[v Oxfordshire Health Authority [1998] IRLR 125] cannot exist in the absence of mutual obligations subsisting over the entire duration of the relevant period. There is an obligation to provide work at the end of the period but during the course of the period the obligation is for the Applicant to work for a period of two weeks. It is not specified as to what type of work she is to do, it does not say when the work is to be carried out, where the work is to be done or what pay will be made. We agree with Mr. Choudhury [Counsel for M&S] that these provisions are far too vague to constitute any proper form of Contract of Employment."

21. The ET continued (in para. 21):

"However we would go further and say that even if the Child Break Agreement could be construed as an agreement for the Applicant to work under a contract of service for 2 weeks per year then there is nothing in the agreement which provides any continuity between the separate periods of two weeks. At best they can be looked at as separate fixed term contracts for two weeks each year with no other continuity."

22. The ET then turned to the argument of Mr. Preston that there was an arrangement under which Mrs. Curr was regarded as continuing in M&S's employment. The ET referred to the decision of the EAT in Booth v U.S.A. [1999] IRLR 16 as laying down that in advance of the period when there was no contract of employment there must have been some discussion or agreement to the effect that the parties regarded the employment relationship as continuing despite the termination of the contract of employment. The ET said that there was little in the Second Letter to suggest that the parties regarded the employment relationship as continuing. The ET concluded that the contract as set out in the Second Letter was not an arrangement whereby Mrs. Curr was regarded as continuing in her employment within the terms of s. 212 (3)(c).
23. On appeal by Mrs. Curr, the EAT unanimously agreed with the ET in rejecting the claim for her that throughout the period of the Child Break her relations with M&S were governed by a contract of employment. His Honour Judge Wilkie Q.C., in giving the judgment of the EAT, said that the ET did not err in rejecting that claim on the ground of an absence of mutuality of obligation. He said:

"Although there is an obligation upon the employee to perform a minimum of two weeks' work a year, if so required, there was no obligation on the respondent to offer a minimum of two weeks' work. Furthermore, the obligation upon the employee was only to arise if it were at a mutually convenient time and pattern of hours. In our judgment this falls considerably short of the requirement of mutuality of obligation in respect of the provision and performing of work, which is the necessary precondition for a contract of employment to arise. The fact that the document of 16 November 1990 contained other obligations imposed on one or other party, and accordingly did contain mutual obligations, does not in itself make it a contract of employment."

24. The EAT did not find easy the question whether there was an arrangement by which Mrs. Curr was regarded as continuing in the employment of M&S for any purpose and were divided.
25. The majority concluded that the Child Break scheme did amount to such an arrangement. The majority's reasoning was expressed in this way:

"12 …. The starting point is that section 212(3) only bites where there is no contract of employment in existence. Thus, the fact that the applicant was required to, and had, resigned and had suffered all the incidents of the cessation of her contract of employment is not determinative. What we have to do is to look at the terms of the agreement, as evidenced by what was said and written at the time, as the primary source of evidence as to what the parties regarded as the case during the period when it was envisaged there would be no contract of employment in existence.

13 The view of the majority is that it is clear that the parties envisaged that there would be some relationship between them during that period. Furthermore, the relationship related to her employment at the end of the break. She was to keep her hand in by working at least two weeks a year for the respondent. She was to sustain her position of good faith towards them by not seeking alternative employment without first consulting them. The respondent undertook to contain to maintain contact with her throughout the break. Furthermore, throughout the break the agreement envisaged that the applicant would have allotted to her a Line or Personnel Manager, who would be available to discuss matters which might arise during the break. It seems clear to the majority that this set of arrangements had a purpose, namely to facilitate the smooth re-engagement of the applicant into a management role at the conclusion of the break. It is the judgment of the majority that these manifestations of continuing obligations and contacts can only sensibly be described as continuing the employment relationship throughout the period of the break for the purpose described, notwithstanding the fact that the relations between the parties were not governed by a contract of employment."

26. The view of the minority member was expressed thus:

"The minority member, however, is of the view that the fact that the scheme specifically requires the employees to resign and forego all her existing terms and conditions of employment, including the requirement to repay the loan and the loss of all staff discounts, coupled with the provision of her P45 and the requirement that she undergo a medical examination before being re-engaged at the end of the break, are very strong factors pointing to the fact that the parties did not regard the employment as continuing for any purpose. He regards the obligations to maintain contact as no more than good personnel practice applicable to those who have ceased to be employed, as much applicable to retirement as by virtue of a Child Break Scheme, and there is nothing in the obligations imposed on the employee in respect of a requirement to work two weeks a year, or not to seek alternative employment without consultation, which amounts to evidence supporting a conclusion that at least one of the parties regarded the employment as continuing. On the contrary, he regards the primary obligation that the contract of employment be terminated as being conclusive against such a view especially as the applicant received and accepted several documents which expressly refute continuity. In particular she formally signed on 25 November 1990 her acceptance of the unambiguous termination arrangements within the terms and conditions of the scheme and she also omitted to question or challenge the revised start dates for her continuous employment of which she had been formally notified in writing on more than one occasion."

Arrangement

27. Miss Slade Q.C. for M&S submits that the majority of the EAT misapplied or misconstrued s. 212 (3)(c) in that they considered whether there was a continuing employment relationship rather than considering, as the statute requires, whether there was an arrangement whereby Mrs. Curr was regarded as continuing in the employment of the employer for any purpose. She points out that "employment" by s. 230 (5)(a) means employment under a contract of employment, and she likened s. 212 (3)(c) to a deeming provision under which an ex-employee with no contract of employment is treated as being in employment if the conditions of that paragraph are satisfied. She argues that the reasoning of the majority is internally inconsistent in that having found that the relationship between M&S and Mrs. Curr related to her employment at the end of the Child Break and that the purpose of the arrangement was to facilitate her reemployment at that point, they nevertheless found that the arrangement had the effect of continuing the employment relationship throughout the period of the Child Break. Miss Slade also submits that the majority wrongly interfered with the ET's conclusion on the facts that this was not an arrangement within the meaning of s. 212 (3)(c). She says that the decision of the ET was not perverse, none of the terms of the Second Letter supporting the conclusion that Mrs. Curr was to be regarded as continuing during the period of the Child Break in the employment of M&S for any purpose.
28. Mr. Langstaff Q.C. for Mrs. Curr supports the conclusion of the majority on s. 212 (3)(c). He criticises M&S's arguments as failing to focus on the section as a whole and on its policy of protecting people whose relationship with their paymaster pursuant to an arrangement, outside a contract of employment, is such that continuity either expressly applies or should do so. He says that the policy is that it should do so where for any purpose the original relationship continues, even though it is no longer governed by nor constitutes a contract of employment. He drew our attention to the remarks of Lord Johnston, giving the judgment of the EAT in G F Sharp & Co. Ltd. v McMillan [1998] IRLR 632 at para. 21. There a passage from the judgment of the National Industrial Relations Court given by Sir John Donaldson in Marshall v Harland & Wolff Ltd. [1972] ICR 101 at p. 109 was cited. Sir John Donaldson was making an obiter observation that where employers are anxious in the case of long-term sick employees about liability for redundancy payments they can instead of dismissing such employees outright transfer them to a holding department where the employees cease to be employed in any legal sense but there is an arrangement whereby the employers would do their best to provide work as soon as the sick employees are fit. Lord Johnston said:

"Thus it can be seen that the learned judge recognises that there can be in existence an arrangement falling short of a contract of employment, albeit under the umbrella of 'employment'. This position is strengthened or fortified by a further examination of s.212(3)(c) in the context of continuity of employment, where precisely the arrangement contemplated by Sir John Donaldson is expressly recognised as being relevant to the question of continuity of employment in the very important context within the statutory provisions that brings that provision only into play if a contract of employment is not already in existence."

29. Mr. Langstaff pointed to what he called four features of the former contract of employment:

(a) permanent employment: Mrs. Curr was given a guarantee of employment in 4 years' time;

(b) a requirement for her to perform an intermittent minimum of work at M&S's request;

(c) the same line management relationships were to apply, and there was an obligation to maintain contact between the parties during the Child Break;

(d) Mrs. Curr could not work for third parties without first consulting M&S.

He described these features as part of a continuing employment relationship between the parties. When asked for what purpose by the arrangement Mrs. Curr was regarded as continuing in the employment of M&S Mr. Langstaff replied that she was so regarded for the purposes of the four features, viz. for the purpose of reengagement, for the purpose of work in the period of the Child Break, for the purpose of line management and for the the purpose of restraining Mrs. Curr from taking up employment in the interim.

30. Attractively though these submissions were made by Mr. Langstaff, I am not able to accept them. The clear purpose of s. 212 (3) was to extend what was meant by continuous employment under a contract of employment to include certain periods where there was no employment under a contract of employment if the specified conditions were satisfied. Thus if an employee during a week not within s. 212 (1) is incapable of work in consequence of sickness or injury or is absent from work on account of a temporary of cessation of work, that week is nevertheless to count in computing the employee's period of employment (s. 212 (3)(a) and (b)). Similarly a week in which the conditions of para. (c) are satisfied will so count. But the ex-employee (who is included in the definition of "employee") must, by arrangement (which can, but need not, be a contract) or custom, be regarded by both the employer and the ex-employee as continuing in the employment of the employer for any purpose in that week. The parties might, for example, agree that for pension purposes the ex-employee is to be treated during the Child Break as continuing in the employment of the employer. But there must be a mutual recognition by the arrangement that the ex-employee, though absent from work, nevertheless continues in the employment of the employer. Without there being a meeting of minds by the arrangement that both parties regard the ex-employee as continuing in that employment for some purpose, s. 212 (3)(c) will not be satisfied. Further, unless in every week of the Child Break the ex-employee is so regarded there will be a break in the continuity of employment.
31. With all respect to the EAT in the case of G F Sharp & Co. Ltd., it is surprising to find the example given by Sir John Donaldson in the Marshall case utilised as an illustration of the applicability of s. 212 (3)(c). Sir John's suggestion was expressly directed at providing a way whereby employers, worried about exposing themselves to an unintended liability on redundancy some time after sick employees have left the active list, could help those employees and avoid that exposure. At the time provisions identical to s. 212 (3)(c) were in operation (see para. 5 (1)(c) Sch. 1 to the Contracts of Employment Act 1963). In any event the remarks of the EAT were obiter, the question of the applicability of s. 212 (3)(c) not arising in that case. Whether or not a particular arrangement satisfies s. 212 (3)(c) must depend on the precise terms of the arrangement.
32. I do not think that it adds to clarity to refer to the test of s. 212 (3)(c) as involving consideration of whether an employment relationship continues, even though that was the language used in the Booth case: that is not the statutory test. I appreciate that in s. 212 (1) the test is of an employee's relations with his employer being governed by a contract of employment, but that is not reproduced in s. 212 (3)(c). Nor does it assist that there are features of the employment prior to the Child Break which continue to apply. Assume for example that pursuant to para. 7 of the Second Letter the letters which the ET found were sent to Mrs. Curr during the Child Break were always sent to existing employees of M&S and so to that extent were a feature of that employment and a continuation of the employment relationship. It could not sensibly be suggested that that made each week of the Child Break one in which by arrangement Mrs. Curr was regarded as continuing in the employment of the employer for the purpose of keeping contact with her. All it shows is that contact was to be, and was, kept with her; it does not establish that she was regarded as continuing in employment.
33. The question whether Mrs. Curr was regarded as continuing in the employment of M&S for any purpose falls to be answered by a consideration of all the circumstances, and in particular the terms of the two letters of 16 November 1990 and what she was told by Miss Johnstone before agreeing to accept the Child Break. I, of course, accept that s. 212 (3) proceeds on the basis that there is no contract of employment for any week in question, but that does not remove the force of the clear emphasis on the bringing to an end of the previous employment. Mrs. Curr was required to resign and that carried all the financial consequences of such cesser of employment. She was given her P45. She even had to repay her house purchase loan forthwith. Whilst para. 11 of the Second Letter refers to the Personnel Manager discussing the effect the Child Break would have on her staff benefits, we know from the ET's findings that she was told that she would lose all staff benefits during the Child Break, and we know that her pension was frozen.
34. In my judgment by the agreement constituted by Mrs. Curr accepting the terms and conditions of the Child Break she was not regarded as continuing in the employment of M&S for any purpose. The terms and conditions conferred on her the option to be reemployed in a management post at the end of the Child Break, provided she satisfied the specific conditions (such as passing a medical examination), and many of the provisions of the Second Letter are directed to facilitating that reemployment. But it was only an option, which she was free not to exercise. During the Child Break it was expressly provided that she was to be unpaid. True it is that she was required to serve a minimum of 2 weeks a year and was entitled to be paid for such service, but that was subject to the qualification that the time and pattern of hours had to be mutually convenient. It was not specified where she would work or what her work or her pay would be. It is also true that contact would be maintained through her Line/Personnel Manager, but that manager was not given any power of control over her. The prohibition against undertaking any form of paid employment was made subject to prior consultation with that Manager. It was not a prohibition against so undertaking in the absence of consent from the Manager, and so long as Mrs. Curr consulted the Manager she was free to work elsewhere.
35. The majority of the EAT do not appear to have recognised that the emphasis in the terms and conditions of the Second Letter on reemployment at the end of the Child Break serves to show that she was not regarded as continuing in employment during the Child Break. I therefore cannot accept that the option conferred on Mrs. Curr to be reemployed shows that she was regarded as continuing in employment for the purpose of reengagement. Nor can I accept that it was for the purpose of working in the interim that she was regarded as continuing in employment. On the contrary: provision was made for her to work a minimum of two weeks each year, but until that happened and only while it happened would she be in temporary paid employment. Otherwise the period of the Child Break was to be unpaid. As for the purpose of restricting Mrs. Curr from taking up other employment, it was not an effective restriction and I do not understand how an attempt to restrict her entails the conclusion that she was mutually regarded as continuing in the employer's employment.
36. Accordingly on this aspect of the appeal I reach the clear conclusion that the ET was fully entitled to find no arrangement within s. 212 (3)(c) and that the majority of the EAT were wrong in their conclusion to the contrary.

Contract of employment

37. Mr. Langstaff reminded us of the often quoted and much approved statement of MacKenna J. in Ready Mixed Concrete (South East) Ltd. v Ministry of Pensions and National Insurance [1968] 2 QB 497 at p. 515C on the meaning of a contract of service:

"A contract of service exists if these three conditions are fulfilled.

(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service."

38. On the first condition Mr. Langstaff submitted by reference to the decision of this court in Nethermere (St. Neots) Ltd. v Gardiner [1984] ICR 612 that an essential requirement of a contract of employment is an obligation by the employee to serve the employer and that there must be a quid pro quo for that obligation. He relied on the statement by Stephenson L.J. at p. 626D that an obligation to accept work offered by the employer would imply an obligation to offer it. He also referred us to the Clark case in which Sir Christopher Slade (with whom Beldam and Schiemann L.JJ. agreed) said that all that is required is some mutuality of obligation, whether in the form of providing work or paying the employee ([1998] IRLR 125 at p. 130 para. 41). He submitted that in the present case Mrs. Curr was required to work for a minimum of two weeks and M&S promised to pay her for it; further an obligation on M&S to provide work for that period can be implied. Although it might have been argued that the term in para. 6 of the Second Letter as to work was too vague or amounted to an agreement to agree and that in consequence there was no contract at all, it is common ground that there was a contract. For my part, I see no answer to Mr. Langstaff's submissions on mutual obligations and to the extent that the ET and the EAT reached their decision on s. 212 (1) on want of mutuality, I respectfully disagree with them.
39. Miss Slade argued that there was no control of the work which Mrs. Curr was required to do. But I see insufficient indication of that in the Second Letter. There is nothing to indicate that the work which she would do would not be controlled by M&S.
40. The real difficulty for Mr. Langstaff, as it seems to me, is in satisfying the third condition of MacKenna J.'s statement of the irreducible minimum for a contract of employment to exist. The terms of the Second Letter are quite unlike a contract of employment that I have ever seen. Mrs. Curr was not told when or where she was to work or how much she was to be paid. Even the obligation to work for a minimum period each year was qualified by the stipulation that the time and pattern of hours had to be convenient to both parties. It was not stated what would happen if the parties could not agree. Plainly it was envisaged that there would be contracts of temporary employment if they did agree, but that does not make the contract on the terms of the Second Letter a contract of employment to which s. 212 (1) applies.
41. Mr. Langstaff submitted that there was no difference in principle between a contract which provided for four weeks' holiday per year to be taken by mutual arrangement and one which provides for four weeks' work to be performed each year, the exact weeks to be by mutual arrangement. But it does seem to me that there is a very real difference between a contract of employment which provides what work will be done by the employee at what pay and at what location for 48 weeks of the year, merely leaving the timing of the holiday of a defined length to be mutually agreed and a contract containing the terms of the Second Letter which are all Mrs. Curr knows of the core obligation to work for the employer until a contract of temporary employment is agreed.
42. I conclude that the contract on the terms of the Second Letter was not a contract of employment within s. 212 (1), though for reasons somewhat different from those of the ET and the EAT.
43. I would therefore allow this appeal, set aside the order of the EAT and restore the decision of the ET.
44. I cannot conclude without expressing my disquiet at the way Mrs. Curr has been treated by M&S. I have already set out in para. 9 the limited information provided to Mrs. Curr when she was persuaded to agree to take the Child Break, and the expression of her complaint in para. 18, which seems to me to have considerable substance. Although to a lawyer the implications of the Child Break may be apparent, good practice should surely have required that an employee in Mrs. Curr's position was informed, before agreeing to the Child Break, of the serious implications for her in respect of her statutory rights of doing so, or, if M&S was not prepared to explain those implications, that she was urged to take legal advice. Unhappily that did not happen. I would hope that even now M&S would recognise its responsibility for the fact that Mrs. Curr participated in the Child Break scheme without her fully informed consent.

Lord Justice Clarke:

45. With some regret, I have formed the view that the conclusion reached by Peter Gibson LJ on the first point is correct. I confess that I was sorely tempted to accept the submissions made by Mr Langstaff which Peter Gibson LJ has summarised in paragraphs 28 and 29 of his judgment. However, I have been persuaded by the reasoning in paragraphs 30 to 36 of his judgment that Mr Langstaff's submissions cannot be accepted. I also agree with his conclusion that the child break contract was not a contract to which section 212(1) of the Act applies.
46. It follows that I agree, with some reluctance, that this appeal must be allowed. I also strongly agree with the views which Peter Gibson LJ has expressed in paragraph 44. I do not know whether the failure on the part of M&S to explain the implications of agreeing to the child break contract gives Mrs Curr any legal rights because that question is not in issue in this appeal. I hope it does but, whether it does or not, I too hope (in Peter Gibson LJ's words) that M&S will recognise its responsibility for the fact that, on the findings of the ET, Mrs Curr participated in the child break scheme without her fully informed consent.
47. Finally, we were not told what the position is at present with regard to those offered participation in such a scheme, if it still exists, but I hope that the experience of this case, and perhaps others, has persuaded M&S of the importance of explaining the implications of the scheme as fully as possible to prospective participants.
48. Since writing the above I have seen a draft of Scott Baker LJ's judgment, with which I also agree.

Lord Justice Scott Baker:

49. I agree that this appeal should be allowed, although I have found the true construction of Section 212(3)(c) of the Employment Act 1996 far from easy. I have considerable sympathy for Mrs. Curr who, although having given many years loyal service to her former employers, now finds that the first 17 of them do not count for redundancy purposes. In consequence her redundancy payment was calculated on the basis of just under 5 years service rather than the maximum permitted 20.
50. The starting point for construing Section 212(3)(c) is Section 212(1). The focal point of that subsection appears to be the employee's relations with his employer. If those relations are governed by a contract of employment the relevant week counts in computing the employee's period of employment.
51. Subsection (3) is in effect a deeming provision. It brings into qualification certain other weeks that do not qualify under subsection (1). Three different situations are envisaged, weeks or part weeks during which an employee is –

(a) incapable of work in consequence of sickness or injury,

(b) absent from work on account of a temporary cessation of work, or

(c) absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of his employer for any purpose.

52. Each of the three situations envisages absence from work. By definition there is no longer a contract of employment or the situation would be governed by subsection (1). In the present case it is plain that Mrs. Curr's contract of employment came to an end with her resignation in November 1990 immediately prior to joining the Child Break scheme.
53. Subsections (a) and (b) cover specific situations. Subsection (c) is more general and catches any circumstances where, as a result of some arrangement (or custom), the employee is regarded as continuing in the employment of his employer albeit the employee's relations with his employer are not governed by a contract of employment.
54. The word 'continuing' requires one to look at what has gone before. Mrs. Curr's contract of employment had just come to an end and one looks next therefore to the arrangement, that is the agreement between the parties, to see whether it can truly be said that as a result of it Mrs. Curr is to be regarded as continuing in the employment of M & S for any purpose. I agree with Peter Gibson L.J that 'regarded' means regarded by each of the parties.
55. Did the arrangement (agreement) of 16 November 1990 provide for continuity of employment for any purpose? Certainly it was intended that there should be some continuing relationship between Mrs. Curr and M & S, but that in my judgment is insufficient for the purposes of the subsection. I agree that reference to a continuing employment relationship does not help because it is not the statutory test. What one has to look for is continuity of employment for some purpose. In my judgment none of the four features of the former contract relied on by Mr Langstaff in his able and persuasive argument meets the test. The guarantee of employment in 4 years time refers to the future. Mrs. Curr's existing employment has been clearly and unequivocally brought to an end. The requirement for Mrs. Curr to keep her hand in by working for short periods at the request of M & S lacks the required element of continuity. Any break in continuity is fatal. The requirement to maintain contact with a line manager is a feature that one would expect to find in an employment relationship, but it is equally consistent in this case with M & S obtaining best advantage from Mrs. Curr if she decides to return in 4 years time; it does not evidence continuity of employment in the meantime. As to not working for third parties without first consulting M & S, there was no complete embargo, merely an obligation to consult before doing so.
56. The reality of the November 1990 arrangement is that Mrs. Curr was given an option to take up a post at the end of her Child Break that was similar to the one she held before she resigned. The quid pro quo was that she met certain obligations such as keeping in contact with M & S during the Child Break and keeping her hand in by working for a minimum of 2 weeks each year at mutually agreed times. The fact that by condition 5 she is required to pass a medical examination before a permanent return to work emphasises the lack of continuity of employment for any purpose.
57. In my judgment the type of situation at which subsection 212(3) is aiming is where, for example, it is agreed that pension or some other rights are to continue to accrue notwithstanding a contract of employment no longer governs the employee's relationship with his employer.
58. I am unable to find any purpose for which Mrs. Curr and M & S regarded her as continuing in their employment as at 16 November 1990. For the reasons I have outlined as well as those of Peter Gibson L.J, whose judgment I have read in draft, I agree that this appeal should be allowed.
Order: Appeal allowed, cross-appeal dismissed. Order as per draft order. (Order does not form part of the approved judgment)