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
HIS HONOUR JUDGE D SEROTA QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		24th February 2006

Lord Justice Mummery

Introduction

1. An employment law point of general interest arises in this test case brought with the backing of the National Union of Teachers. The claim was for a "declaration of written particulars of employment." The purpose of the proceedings is more ambitious than the modest nature of the claim suggests: it is to establish that a teacher engaged by a local authority was entitled to be regarded as an employee throughout the 10 year period in which she was paid for her work in performing multiple individual teaching assignments of varying duration under a succession of separate contracts.
2. Complex patterns of contracts for work are by no means confined to the staffing practices of local education authorities. They are common in many public sector and private sector workplaces, which are increasingly populated by intermittent and occasional staff working alongside full time employees.
3. The true legal character of the contracts and of the legal relationship created by them is a matter of serious concern to the parties, as the scope of statutory employment protection depends on whether a person performs work under a contract of service or under some other kind of arrangement. An "employee" is defined in the Employment Rights Act 1996 (the 1996 Act) as an individual who has entered into or works under a contract of service: section 230(1) and (2). The focus in this dispute has been on the "irreducible minimum mutual obligation necessary to create a contract of service", which the Council contends was missing from the contracts and the relationship between the parties in this case before 1 September 1998: see Carmichael v. National Power [2000] IRLR 43 at paragraph 18.
4. It is common ground that there was no single contract of service of a global, umbrella or overarching character spreading over the entire period 1988 to 1998. Mrs Prater's case relies specifically on the succession of numerous individual work teaching contracts during the period and on the application of the provisions of the 1996 Act relating to continuity of employment to bridge the gaps between the individual teaching contracts.

The appeal

5. The appeal is from the order of the Employment Appeal Tribunal dated 8 June 2005 (HHJ Serota QC presiding). The appellant Cornwall County Council (the Council, for whom Mr Adam Heppinstall appeared) lost its appeal from the employment tribunal. As explained in its extended reasons sent to the parties on 2 December 2004, the employment tribunal had unanimously held that the respondent, Mrs Margaret Prater (for whom Mr Rohan Pirani appeared) was, as a result of the combined effect of the succession of individual contracts and the continuity provisions of section 212 of the 1996 Act, an employee of the Council between 1 April 1988 and 1 September 1998.
6. Hooper LJ granted permission to appeal on 21 July 2005.

The facts

7. Mrs Margaret Prater, who is 65, is a teacher in the Council's Education Out of Schools Service (formerly the Home Tutor Service). Her main subject is biology, but she teaches many other subjects. She was engaged by the Council as a home tutor to teach children, who were unable for a variety of reasons to attend school (e.g. injury, illness, pregnancy, exclusion for behavioural problems and so on). The Council uses other home tutors. It tries to match the tutor to the needs of a particular pupil.
8. Work was offered by the Council to Mrs Prater by way of a particular pupil, who would be taught by her at the pupil's home. The Council was not under any contractual obligation to offer pupils to her. Mrs Prater was under no contractual obligation to accept the pupils that the Council asked her to take on. In fact she never refused any offers of work during the whole of the relevant period from 1988 to 1998 and she worked under engagements with the Council throughout almost the whole of the 10 year period.
9. Having agreed to take on a pupil, Mrs Prater regarded herself as having undertaken a commitment to the pupil to deliver teaching on a regular basis. The teaching would continue for as long as was necessary, subject to regular reviews.
10. She taught a number of different pupils a week, some for 5 hours a week, others for as much as 10 hours a week. The duration of the individual engagements varied from a few months to several years, one lasting for as long as 5 years. After an initial assessment, the tuition to be delivered had to be timetabled according to a number of factors, including the attendance of a parent or guardian, the needs of the child, the nature of the curriculum, the tutor's own commitments and so on.
11. Although Mrs Prater was not obliged to accept pupils offered by the Council, once she had agreed to take on the work she was obliged to fulfil her commitment to that particular pupil and the Council was obliged to continue to provide that work until the particular engagement ceased.
12. Although the engagements were not documented, Mrs Prater was given a document in about 1992 headed "Information for Home Tutors," in which it was stated (Section 4) that she was "employed by the Education Authority." As shown by a schedule of payments going back to 1988, the Council paid Mrs Prater in arrears. Because schools were closed for holidays in August Mrs Prater generally received no payment in September. Tax and National Insurance were deducted at source and at the end of each financial year Mrs Prater received a P60 form. She did not receive holiday pay, sick pay or pay for time travelling to and from pupils' homes.
13. Sometimes there were periods when Mrs Prater was not teaching a pupil for the Council. The Council has not, however, appealed against the finding of fact by the employment tribunal that Mrs Prater's absence from work during those periods was "on account of a temporary cessation of work" within section 212(3)(b) of the 1996 Act. This meant that, if her individual engagements were contracts of service (which is denied by the Council), she was statutorily entitled to bridge the gaps in service for continuity purposes.
14. In 1998 Mrs Prater successfully applied for the post of 0.3 full time equivalent (FTE) home tutor as a part time teacher of science within the Education Out of School Service. From 1 September 1998 she continued to perform the same teaching duties as before, plus a certain amount of administrative work. Under that contract she was entitled to holiday pay, sick pay, pay for preparation and for travelling time to and from pupils' homes. The Council accepted that, as from 1 September 1998, Mrs Prater was an employee in respect of all the work undertaken by her for the Council. The dispute about her claim to be a Council employee is only concerned with the decade 1988 to 1998.

Issues in the proceedings

15. In her originating application presented on 11 May 2004 Mrs Prater sought written particulars of her employment. She made the claim on the basis that she should be treated as having been continuously employed by the Council since 1988.
16. The Council's response was that she was not an employee of the Council during the period 1988 to 1998. When asked by this court what she was, if she was not an employee, Mr Heppinstall for the Council replied "casual worker." She had a series of short, fixed term, discrete, individual teaching engagements. None of them, he submitted, were contracts of service, as they were lacking in the requisite "irreducible minimum" of continuing mutual obligations. There were no continuing duties on either side: Mrs Prater had no obligation to accept work offered by the Council; the Council was under no obligation to offer work to Mrs Prater. The position was that she performed teaching work for the Council as and when she pleased. Before and after each engagement she was free to choose whether or not to accept another engagement with the Council.
17. Section 212 of the 1996 Act is relevant to continuity, notwithstanding the gaps between engagements. I should explain its effect, even though it is not controversial on this appeal. It is agreed that it can only apply if Mrs Prater's contracts with the Council were contracts of service.
18. Section 212(1) sets out the weeks which may be counted towards the total period of employment. A week counts if, in the whole or part of it, the employee's relations with the employer are governed by a contract of employment.
19. Section 212(3)(b) deals with "temporary cessation of work" An employee may count towards his total period of continuous employment a week during which, or during part of which, "he was absent from work on account of a temporary cessation of work." It applies only where there is a period during which there is no contract of employment followed by the worker again becoming an employee of the Council under a contract of service
20. Section 212(4) provides that not more than 26 weeks count under section 212(3)(b) between any periods falling under subsection (1).

Employment tribunal decision

21. The tribunal found that Mrs Prater was an employee of the Council from 1 April 1988. It concluded as follows-

"14. On the basis of those facts we address the first question as to whether or not there was a contract between the parties and, if so, whether it was a contract of employment. It seems to us that in this situation having agreed to take on a pupil the claimant regarded herself as committed to deliver teaching to that pupil for as long as was necessary or until the arrangement was brought to an end for particular reasons. The respondents had a similar view of the situation. The matter was subject to regular review, as might have been expected, but was not re-negotiated on a week by week or month by month basis. It simply rolled on for as long as was necessary. Other than periodic reviews of the situation the claimant was not subject to any close level of control. As a qualified and experienced teacher we would not have expected close control or supervision. The claimant expected to teach and the respondents expected that she would do so. She was remunerated for the work she did as a home tutor. Had the claimant failed to carry out the teaching she had agreed that would at the very least have led to enquiry by the respondents for her reasons for her not doing. It is also clear to us that this was not a situation in which the claimant could substitute another teacher if she was unable to attend on any particular occasion. There is an important difference between this case and the cases of Carmichael and Clark. In those cases the periods of work were short and known to be so from the outset. That is not so here where the arrangement was very much more open-ended. In our view there was mutuality of obligation between the parties sufficient to create a contract of employment."

22. The tribunal thus found that there was mutuality of obligation between the Council and Mrs Prater while the individual contracts were in force. As for the times between the individual contracts when she was undertaking no work for the Council, the tribunal held (in paragraph 15) that those gaps between the contacts of service were "periods of time when it had ceased as temporary cessations of work" and were bridged by the provisions in section 212 of the 1996 Act: see Ford v. Warwickshire CC [1983] ICR 273.

Decision of the Employment Appeal Tribunal

23. The EAT dismissed the Council's appeal, holding that the employment tribunal directed itself correctly as to the law and applied it to the facts it found.
24. In particular the Appeal Tribunal rejected in paragraph 31 the proposition advanced by the Council that because, after the completion of an assignment during a period of "downtime" there was no mutuality of obligation to provide or accept work, there was a lack of mutuality which prevented the individual assignments themselves from being regarded a periods of employment stricto sensu. It held that the relationship created for the term of the assignment must be assessed on the basis of well established principles to determine whether it is a contract of service or for services. The employment tribunal was entitled to find on the facts that each assignment undertaken by the claimant constituted a separate contract of employment, properly so called, and that section 212 worked backwards so as to join up a number of short periods of employment, because she was only absent from work on account of a "temporary cessation of work."

The Council's submissions

25. The Council's case is that the employment tribunal erred in law in finding that the requisite mutual obligations were present in the separate teaching contracts made between the Council and Mrs Prater.
26. Mr Heppinstall submitted that authorities binding on this court demonstrated the development of the demarcation between employment and other work relationships based on the lack of mutuality of obligation. The courts had refused to extend employee status to those who undertook engagements without any guarantee of further work. It was not sufficient for the person undertaking work to be contractually obliged to perform the work undertaken when they accepted the engagement. According to Mr Heppinstall's skeleton argument (paragraph 15)

" ….The requisite "mutuality" is that which binds an employer to keep on providing work and an employee to keep on doing that work for the duration of the contract of employment. It is these continuing mutual duties which were absent in all of the cases cited and which were absent in this case."

27. He cited O'Kelly v. Trusthouse Forte plc [1983] IRLR 369; Clark v. Oxfordshire Health Authority [1998] IRLR 125; Carmichael (see above); and Stevedoring v. Fuller [2001] IRLR 627.
28. In this case, the Council argued, Mrs Prater accepted that she was under no obligation to undertake any particular engagement and that the Council was under no obligation to offer any more such engagements to her. She merely agreed to undertake a discrete engagement with a clear beginning and an end without any guarantee of work thereafter. She was no more than a casual worker free to choose to work as and when she pleased. An employee would not have had that choice. She was one of a number of teachers in a flexible pool of home tutors, whom the Council was not obliged to pay and maintain if there was a fall in demand for their services.
29. The fact that Mrs Prater's engagements by the Council were extensive in terms of commitment and in terms of overall length did not satisfy the requirement of mutual obligation, as Mrs Prater was under no obligation to accept any further engagements once each engagement came to an end and there was no obligation on the Council to offer her further work.
30. The employment tribunal and the Employment Appeal Tribunal misunderstood and misapplied the concept of mutuality of obligation. The mutuality created by Mrs Prater being contractually obliged to work during each successive engagement was not, Mr Heppinstall argued, the same mutuality necessary to constitute the "irreducible minimum" required for a contract of service to exist. Simply working hard on a regular basis under a series of short engagements one after the other without a continuous mutuality of obligation was not enough to make Mrs Prater an employee of the Council. There had to be a continuing obligation to guarantee and provide more work and an obligation on the workers to do that work.
31. It followed that none of the separate contracts were contracts of service and that the employment tribunal was not entitled to apply section 212 in order to create continuity of employment over the 10 year period.

Discussion

32. It will be necessary to examine the authorities cited by Mr Heppinstall in order to see whether, as he contends, they establish his proposition that mutuality of obligation within each separate contract is insufficient to create a contract of service if, after the end of the contract, there is no continuing or further obligation on the Council to offer more work or on Mrs Prater to accept more work.
33. In my judgment, the authorities do not support the Council's argument for a degree of mutuality of obligation over and above the mutual obligations existing within each separate contract, namely the obligation on Mrs Prater to teach the pupil and the obligation on the part of the Council to pay her for teaching the pupil, whom they continue to make available for teaching by her.
34. Mr Heppinstall's point on O'Kelly was that the reason why the regular casuals in that case were not employees was because they reserved the right not to work and the respondent reserved the right not to engage them. The claimants had the right to choose whether or not to come to work. In my view, the judgments in O'Kelly do not assist the Council's case on the alleged absence of mutuality of obligation in this case. The industrial tribunal in that case decided that there was no overall or continuous contract of employment, but it did not deal with the point of whether there were individual contracts of service and whether there was a "dismissal" at the expiry of each individual contract: see paragraphs 57 and 73.
35. Mr Heppinstall cited the passage from the judgment of Sir Christopher Slade in Clark (paragraph 22), which was a case of a supply nurse who never refused any work and consistently worked for the respondent, that no contract of employment can exist "in the absence of mutual obligations over the entire duration of the relevant period." The claimant in Clark was not an employee, as she was under no obligation to undertake any work offered and the respondent was under no obligation to offer work to her. Section 212 was not relied on. Mr Heppinstall sought to apply what was said in Clark to the entire duration of the period of 10 years from 1988 to 1998 without regard to the fact that in this case there was a succession of individual contracts in that period and that within the duration of each of which there was a mutuality of obligation in the sense described above.
36. In Carmichael the power station guides were paid for working for up to 25 hours a week, but the respondent was under no duty to provide them with any work and could not have disciplined them for refusing to work. They were held not to be employees. When work was available they were free to undertake it or not as they chose. They worked on a "casual as required basis" which did not create a contract of service, as there was an absence of mutuality from the working arrangements. The case did not, however, address the case of individual work contracts, in which there were mutual obligations or the status of the claimants when actually working as guides: see paragraphs 3 and 20 of Lord Irvine's speech.
37. The issue in Stevedoring was whether the claimants, who were casual dock workers, were employees, other than when they were actually working: see paragraph 1 of the judgment of the court given by Tuckey LJ. There was no overarching or global contract in that case: see paragraph 6. Their contracts expressly negatived mutuality of obligation between the parties by providing that the claimants were under no obligation to work and that the respondents had no obligation to provide them with work. The claimants did not therefore have a contract of service. In the face of the express terms of the contract, it was not possible to imply a contract with the mutual obligations necessary for a contract of service. Section 212 of the 1996 Act was not relied on.
38. In brief, the authorities cited by Mr Heppinstall are distinguishable, as they did not deal with the case of a succession of individual contracts for work within each of which there was mutuality of obligation relating to the work provided and performed under that contract.

Conclusion

39. In my judgment, the employment tribunal was entitled in law to hold that there was mutuality of obligation in the individual contracts between the Council and Mrs Prater; that they were contracts of service; and that, by virtue of section 212, Mrs Prater was to be regarded as an employee of the Council continuously throughout the period 1988 to 1998. The Employment Appeal Tribunal was right to dismiss the Council's appeal.
40. To sum up, the legal position between the Council and Mrs Prater was as follows.

(1) During that period 1988 to 1998 Mrs Prater had a number of work contracts with the Council. The issue was whether or not they were contracts of service. If they were, she enjoyed continuity of employment, notwithstanding the breaks between the contracts.

(2) Under the contracts Mrs Prater was engaged and was paid to teach individual pupils unable to attend school.

(3) There can be no doubt that, if she was engaged to teach the pupils in a class, collectively or individually, at school under a single continuous contract to teach, Mrs Prater would have been employed under a contract of service.

(4) It makes no difference to the legal position, in my view, that she was engaged to teach the pupils out of school on an individual basis under a number of separate contracts running concurrently or successively.

(5) Nor does it make any difference to the legal position that, after the end of each engagement, the Council was under no obligation to offer her another teaching engagement or that she was under no obligation to accept one. The important point is that, once a contract was entered into and while that contract continued, she was under an obligation to teach the pupil and the Council was under an obligation to pay her for teaching the pupil made available to her by the Council under that contract. That was all that was legally necessary to support the finding that each individual teaching engagement was a contract of service. Section 212 took care of the gaps between the individual contracts and secured continuity of employment for the purposes of the 1996 Act.

Result

41. I would dismiss the appeal. It is agreed that the wording of the order made by the employment tribunal ("..the claimant was an employee of the respondent") does not fully reflect the scope of the tribunal's conclusion in paragraph 15 of the extended reasons. Mrs Prater made it clear in her ET1 that she claimed to be an employee in respect of all the work that she had done for the Council's Education Out of School Service. The position should be clarified by including in the order of this court a declaration that Mrs Prater was an employee of the Council from 1 April 1988 down to the present day.

Lord Justice Longmore:

42. Mr Heppinstall submitted that whereas many previous authorities had decided that someone whom he described as a "casual worker" had no over-arching or global contract of employment covering all the commitments into which such casual worker entered, it had never been decided whether the individual commitments made each constituted separate contracts of employment. He then submitted that, on the facts as found in this case, none of Ms Prater's individual commitments constituted a contract of employment and that section 212 of the Employment Rights Act 1996 was not engaged. This was said to be because there was no or no sufficient "mutuality of obligation" which was part of the irreducible minimum which had to exist before a contract could be a contract of employment. In this context "mutuality of obligation" had to be understood in a special sense of

"an on-going duty to provide work and an on-going duty to accept work".

That, according to Mr Heppinstall, did not exist in this case.

43. I cannot accept this submission. There was a mutuality of obligation in each engagement namely that the County Council would pay Ms Prater for the work which she, in turn, agreed to do by way of giving tuition to the pupil for whom the Council wanted her to provide tuition. That to my mind is sufficient "mutuality of obligation" to render the contract a contract of employment if other appropriate indications of such an employment contract are present.
44. If Ms Prater had been seeking to prove that there was a long-term or global contract of employment, the fact that the Council were not obliged to offer her any work and that, if they did offer her work, she was not obliged to accept that offer would, no doubt, mean that no such long-term or global contract existed. But Ms Prater put forward no such argument. She was only saying that the individual commitments, or engagements, once entered into, constituted contracts of employment. The Employment Tribunal held that this was indeed the position in paragraph 14 of their decision and I can detect no error of law in their conclusion.
45. The tribunal then addressed the question whether Ms Prater had continuity of service "back to 1998" by which they meant "back to 1988". They held, as a fact, that when Ms Prater was not working there was a temporary cessation of work within section 212 (3) of the 1996 Act. There can be no challenge to that finding, as Mr Heppinstall accepted. Again there is no error of law and the Employment Appeal Tribunal were correct to dismiss the Council's appeal.
46. For these short reasons and the reasons given by Mummery LJ, with which I entirely agree, I would dismiss this appeal.

Mr Justice Lewison:

47. The Employment Tribunal approached the question before it in two stages:

a. Were individual assignments contracts of employment? If yes,

b. Was there continuity of employment back to 1988 as a result of the application of section 212 (3)(b) of the Employment Rights Act 1996?

48. The cases to which we were referred about casual workers all concern the question whether there was a single umbrella agreement which itself amounted to a contract of employment covering the whole period from the beginning of the first engagement to the conclusion of the last. Thus it was relevant to look at the whole period alleged to be covered by the umbrella to see whether there was mutuality of obligation throughout that period, including during gaps between individual engagements. That is not the argument in this case.
49. The starting point for the argument in this case is that each individual assignment was itself a contract of employment. The cases recognise that this is a permissible legal conclusion and may be the right conclusion on the facts: Clark v Oxfordshire Health Authority [1998] IRLR 125, paragraph 20 (referring to McMeechan v. Secretary of State for Employment [1995] IRLR 461), paragraph 43 (remitting the question whether a specific engagement amounted to a contract of service to the industrial tribunal); Carmichael v National Power plc [1989] 1 WLR 2042 paragraph 36.
50. The Employment Tribunal applied the test: was there sufficient mutuality of obligation in relation to each individual engagement so as to amount to a contract of service? They held that there was.
51. The question whether there is mutuality of obligation is not the complete test for determining whether a contract of service exists. I would have thought that the question of mutuality of obligation goes to the question whether there was a contract at all, rather than what kind of contract there was, if a contract existed. However the alleged lack of mutuality of obligation is the only ground of appeal.
52. The Appellant's argument presupposes that it was necessary to find mutuality of obligation over the whole period from the beginning of the first engagement to the conclusion of the last. In a case where section 212 does not apply, that may well be right. But in a case where gaps between individual engagements can be bridged by section 212, that necessity does not arise.
53. Having reached the conclusion that each individual engagement amounted to a contract of service, the Tribunal then considered whether gaps between them could be bridged by the application of section 212 (3) (b) of the Employment Rights Act 1996. They held that they could. There is no appeal against that conclusion, which is itself a question of fact.
54. In my judgment the Employment Tribunal made no error of law; and the Employment Appeal Tribunal was correct to dismiss the appeal.
55. For these reasons, and those given by Mummery and Longmore LJJ, with which I entirely agree, I also agree that this appeal should be dismissed.