Industrial Tribunals Northern Ireland Decisions

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THE INDUSTRIAL TRIBUNALS

CASE REF: 88/02

89/02

APPLICANTS: Robert Anderson

Jane Hall Anderson

RESPONDENTS: 1. N.I. Hard Metal Ltd (In liquidation)

2. Redundancy Payments Service

DECISION

The unanimous decision of the tribunal is:-

(a) that neither applicant was employed by the first named respondent prior to May 1999; and

(b) that both applicants were employed by the first named respondent subsequent to May 1999;

(c) that neither applicant had sufficient length of employed service to qualify for a redundancy payment;

(d) that the Originating Application in respect of each applicant be amended to include a claim for payment in lieu of notice; and

(e) that the second named respondent do pay to each of the applicants one week's pay in lieu of notice.

Appearances:

The applicants were represented by Mr Anderson in person.

The second named respondent was represented by Mr J Dunlop, Barrister-at-Law, instructed by the Departmental Solicitor's Office.

Summary Reasons

Mr Anderson's evidence, which was not disputed, was that the business had originally been carried on as a partnership involving himself, his wife and Philip Hannigan. Mrs Anderson had her own business at this stage. Mr Hannigan had his own business in Dublin and Mr Anderson ran the business of the first named respondent. The business was incorporated into a limited liability company after about a year with the shareholding reflecting the previous position of equal partnership between the three parties. Mr Anderson continued to run the business and had day to day management and control of it. No contract of employment or service agreement was entered into. There was no specific appointment or minute indicating formally that a relationship of employer and employee existed as between himself and the company. No terms of service or terms as to notice were agreed. Mr Anderson was in day to day management and control of the business. Mr Hannigan was not involved in the day to day running of the business although he was kept informed of progress on a three-monthly basis. Mr Anderson accepted that he and Mrs Anderson controlled the board of directors. Mrs Anderson did not work for the company otherwise than as a director until 2 September 1996 when she started working part-time. While they were carrying out work for the company there were both paid by way of standing order for a specific sum of money each month. They did not receive payslips, the manner and amount of payment were matters for discussion at one of the quarterly directors' meetings described following the company's annual accounts. The level of payment depended on what the company could afford. If the company was doing well the profits were diverted into expansion and investment. At one directors' meeting it was suggested by the accountants and agreed by the applicants and Mr Hannigan that Mr Anderson should have a pension. No one else received a pension. Mr Anderson provided a personal guarantee for the purchase of a company vehicle (a van).

In 1998 discussions began with a view to Mr Anderson's retirement. It was agreed that Mr and Mrs Anderson would transfer their shareholdings to Mr Hannigan for a consideration and this was done in May 1999. It was accepted by the second named respondent that from that time onwards Mr and Mrs Anderson were in the company's employment. At that time Mrs Anderson made a loan to the company following a cashflow problem. This was on a commercial basis and in the expectation of repayment. In the course of the company's history Mr Hannigan had provided assistance, when times were hard, and by way of free labour from his other business and sales assistant.

The applicants' case was that he paid monthly insurance contributions and income tax as an employed person and that consequently he should be regarded as a employee. He regarded himself as an employee. The tribunal accepts that national insurance and tax were paid as described but does not consider that fact to dispose of the matter. The question whether or not someone is an employee will depend on the overall relationship between the individual and the company. In this case there was no contract of employment or service agreement between the company and either applicant; the payment arrangements whereby a specific sum was paid each month without regard to the length of the month or the number of weeks in it and without providing payslips are unusual and did not suggest an employment relationship. Mr Anderson gave a personal guarantee for company liability and, although she was no longer a shareholder, Mrs Anderson lent a significant sum of money to the company. Mr Anderson had no one at all to tell him what to do. These features are much more suggestive of proprietors rather than employees, a view which becomes all the more compelling when it is considered that Mr and Mrs Anderson between them controlled two thirds of the company's shares. Overall the tribunal cannot see that, while they were both major shareholders, the applicants could be regarded as employees.

That situation did change, however, when they transferred their shareholdings to Mr Hannigan. At that point he clearly became capable of exercising control over the company and over the applicants had he chosen to do so. However, this state of affairs came about in May 1999. The company went into liquidation on 6 October 2000. Article 190 of the Employment Rights (NI) Order 1996 provides that it is necessary to have been continuously employed for a period of not less than two years to become entitled to a redundancy payment. The applicants have less than this period and accordingly no entitlement to a redundancy payment arises. However, they would be entitled to the statutory period of notice attaching to that length of service, namely one week. Accordingly the second named respondent should pay each of the applicants one week's pay in lieu of notice.

Recoupment

No question of recoupment arises.

This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.

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Date and place of hearing: 6 December 2002, Belfast

Date decision recorded in register and issued to parties: