Industrial Tribunals Northern Ireland Decisions

 
THE INDUSTRIAL TRIBUNALS

CASE REF: 715/05

CLAIMANT: Olinto Cunha

RESPONDENTS: 1. JSD Recruitment

2. Moypark Limited

DECISION ON A PRE-HEARING REVIEW

The decision of the tribunal is that:-

(i) The correct respondent to the claimant's unfair dismissal, notice pay and holiday pay claims is the first-named respondent.

(ii) The first and second-named respondents are correctly named as respondents to the claimant's race discrimination claim.

(iii) All the claimant's claims against the first-named respondent are stayed, following conciliation between the claimant and the first-named respondent by the Labour Relations Agency.

Constitution of Tribunal:

Chairman (sitting alone): Mr E McArdle

Appearances:

The claimant appeared in person.

A tribunal-designated interpreter, Mr Jonathan Bottomley, assisted the claimant to present his case and to follow the proceedings.

The second-named respondent was represented by Mr Michael Potter,

Barrister-at-Law, instructed by the second-named respondent's legal department.

Ms Maxine Murphy Higgins attended part of the hearing on behalf of the Labour Relations Agency.

Reasons

Evidence

1. The tribunal had before it a bundle of documents from the second-named respondent outlining the second-named respondent's contractual relations with the first-named respondent, and containing some background documents on the claimant's induction at the second-named respondent's plant. The tribunal heard evidence from the second-named respondent's Senior Human Resources Manager, Mr J Crammie. The claimant declined to give evidence. The tribunal also had regard to the matters set out in the claimant's claim form and the second-named respondent's response form. The first-named respondent had not presented a response. The tribunal considered the oral submissions of both parties, supplemented by submissions in writing from the second-named respondent.

The issue

2. The claimant had complained to the tribunal of unfair dismissal, unpaid notice pay and holiday pay, and race discrimination. He had cited two respondents, one, an employment agency, the first-named respondent, and the other, a food processing company, the second-named respondent, for whom the claimant had worked on assignment by the first-named respondent. The issue for the tribunal at the pre-hearing review (PHR) was:-

"To determine the correct respondent."

Summary

3. Analysis of the documentary and oral evidence led the tribunal to the conclusion that the claimant commenced employment in July 2003 with the first-named respondent under a contract of service. He was assigned to work for the second-named respondent, further to a contract for services between the first and second-named respondents. Although the direction of the claimant on a day-to-day basis as to the work to be done lay with the second-named respondent, a substantial degree of control continued to be exercised by the first-named respondent throughout the course of the claimant's assignment to the second-named respondent, sufficient to satisfy the test of control by an employer.

Tribunal's findings of fact

4. The tribunal found the following facts proved on the balance of probability:-

(a) The claimant, a Portuguese national of black African origin, was engaged by the first-named respondent, a Dungannon-based employment agency, in or around late July 2003.

(b) The claimant was then assigned by the first-named respondent to work for the second-named respondent at its Dungannon plant as a process operator/production worker from 31 July 2003.

(c) The claimant was initially engaged for a period of 26 weeks, and his contract with the first-named respondent was then renewed on an ongoing basis.

(d) The claimant worked continuously at the second-named respondent's plant up until the termination of his employment in disputed circumstances, the subject of his complaints to the tribunal, on 28/29 January 2005.

(e) According to the terms of a specimen 'contract of employment' form used by the first-named respondent:-

"The employee is in the employment of the JSD Recruitment Services with effect from the date the contract is signed".

The claimant received and signed a similar 'contract of employment' with the first-named respondent.

(f) The sole records produced to the tribunal by the claimant, a specimen pay-slip, dated 17 September 2004, his P60 for the end of the tax year 2003 – 2004 and a short reference from JSD Recruitment Services (such as might have been relied upon to secure accommodation or open a bank account) clearly identify the claimant's employer as JSD Recruitment Services.

(g) Other than signed acknowledgements by the claimant of receipt of health and safety notes provided at induction for agency workers by the second-named respondent, there was no documentary evidence of any kind to evidence a contractual agreement between the claimant and the second-named respondent.

(h) The second-named respondent makes extensive use of agency workers who, at any one time, may account for up to a quarter of its 3,000-odd workforce across its four sites in Craigavon, Dungannon, Moira and Lisnaskea. Many of its permanent full-time employees are recruited from the ranks of agency workers assigned to it by agencies. However a distinct employment regime applies to agency workers on the one hand and permanent employees on the other.

(i) In Dungannon the first-named respondent is one of two locally-based agencies which supply the second-named respondent with its requirement for 'temporary' or agency workers.

(j) The claimant was one of a group of 14 new starts identified as necessary for the operation of a new shift commencing on 31 July 2003. The requisition was issued by the second-named respondent to the first-named respondent by means of a 'Contract Labour Requisition Form'.

(k) The arrangements under which the first-named respondent provides the second-named respondent with 'contract labour' are set out and governed by an 'Engagement of Contractor Agreement' between the second and first-named respondents, the Company and Contractor respectively.

(l) Relevant clauses of this agreement provided:-

the status of the Contractor vis a vis the Company shall be that of an independent contractor;

the Contractor agrees that all temporary workers carrying out the contract works will be temporary workers/employees [both terms are used in different clauses] of the Contractor and the Contractor shall be responsible for making appropriate PAYE deductions for tax and national insurance or similar contributions … and shall be solely responsible to such temporary workers in respect of any and all claims … which may be made against the Company by any temporary worker of the Contractor arising out of any employment [with the Company].

(m) Under these arrangements the claimant worked for 18 months as a process operator on a production line subject to the direction and control, as to what work was carried out and how, of a Line Leader or supervisor who was an employee of the second-named respondent.

(n) The claimant arranged time off where required and arranged his holidays through the first-named respondent. He also notified his sickness absence to the first-named respondent.

(o) The claimant had no recourse to the second-named respondent's grievance procedure and was not subject to the second-named respondent's disciplinary procedure.

(p) In the course of his assignment to work for the second-named respondent the claimant applied three times, unsuccessfully, for permanent direct employment with the second-named respondent.

(q) When an issue arose at the workplace in January 2005 between the claimant and the second-named respondent's Line Leader, the matter was referred for resolution to a supervisor of the first-named respondent, acting upon a statement of complaint drawn up by the second-named respondent's Line Leader.

(r) The claimant's employment was terminated by a supervisor employed by the first-named respondent.

The law on employment status

5. Apart from some clearly defined exceptions which are not material to the present case, the right to claim unfair dismissal is confined, by Article 126 of the Employment Rights (Northern Ireland) Order 1996, to an 'employee'. Article 3 of the Order provides that:-

(1) In this Order 'employee' means an individual who has entered into or works 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.

The Order offers no assistance, however, in defining what constitutes for these purposes a contract of service. Assistance must be sought instead from the case law.

6. The Court of Appeal have recently, in Johnson v Underwood [2001] IRLR 269, commended as an aid to tribunals the guidance provided by the dicta of McKenna J in Ready Mixed Concrete v Minister of Pensions [1968] 2 QB 497 where he states:-

"I must now consider what is meant by a contract of service. A contract of service exists if the following three conditions are fulfilled:-

(i) The servant agrees that in consideration of a wage or some 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 it being a contract of service …".

As to (ii); control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant."

Tribunal conclusions

7. In applying the tests elaborated by McKenna J to the facts found by it the tribunal reached the following conclusions:-

(a) In regard to (i); the evidence established that the claimant agreed with the first-named respondent that in return for a wage he would agree to work for the first-named respondent's client as directed. It was common case that the claimant did so work for a period of 18 months, and that in return he was paid a wage by the first-named respondent. On this basis the relationship between the claimant and the first-named respondent clearly satisfied the first limb of the test for employment.

(b) In regard to (ii); it was accepted by the second-named respondent that it directed the claimant on a day-to-day basis in regard to the work to be done on the production line, in McKenna J's terms, 'deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it'. That did not of itself, however, decide the question of control. The Court of Appeal in Montgomery v Johnson Underwood Ltd [2001] IRLR 269, made clear that direct control, while it may be relevant, is not indispensable to a contract of employment. 'In many cases the employer or controlling management may have no more than a very general idea of how the work is done and no inclination directly to interfere with it.' What is required on the part of the employer, the Court stated, is a 'sufficient framework of control'. It was evident that the first-named respondent did not direct the claimant's work on a day-to-day basis. However, the first-named respondent did retain a significant degree of supervisory control over the wider employment relationship. Critically, it exercised the power to hire and reserved the power to fire which, in the event, it also exercised. It paid the claimant's wages. It operated its own parallel hierarchy of supervisory authority in the workplace, monitoring attendance, managing sickness and holiday leave, dealing with disciplinary matters. When a disciplinary issue arose in relation to the claimant it conducted its own investigation (the fairness of which would doubtless have been an issue in an unfair dismissal hearing) and decided upon dismissal. In short, it retained a 'sufficient framework of control'. In respect of the second limb of McKenna J's test, therefore, the relationship between the claimant and the first-named respondent also satisfied the test of employment.

(c) In regard to (iii); the express terms of the agreement between the second-named respondent and the first-named respondent provide that workers carrying out the contract would be the temporary workers or employees of the first-named respondent. They provide that the first-named respondent would be responsible for PAYE deductions for tax and national insurance. This is what was carried out in practice. The express terms of the claimant's agreement with the first-named respondent, labelled a 'contract of employment', designate the claimant as the employee of the first-named respondent. In all these respects the provisions of the contractual arrangements, including the terms of the claimant's contract, are consistent with a contract of service between the claimant and the first-named respondent.

8. The tribunal was referred to a number of authorities by the second-named respondent, including recent cases in which the EAT (Motorola Ltd v Davidson and Melville Craig Group [2002] IRLR 4) and the Court of Appeal (Franks v Reuters [2003] IRLR 423; Dacas v Brook Street Bureau [2004] 358) had been willing in principle to imply a contract of service between a claimant on assignment from an employment agency and a client employer or 'end-user'. The guidance given in Dacas has now received strong endorsement from a unanimous Court of Appeal in the case of Cable & Wireless v Muscat [2006] IRLR 354, reported since the PHR hearing, in which the Court implied a contract of employment between a worker and the end-user. That guidance requires tribunals to consider the possibility of an implied contract of employment between the worker and the end-user in light of all the evidence about the relationship between the parties.
9. In each of these cases there were distinctive factors at work that strongly influenced the Court's decision. In Muscat, for example, the claimant had originally been an employee of the company taken over by the appellant, and had been told by the company to provide his services as an 'independent contractor' prior to the takeover. As an independent contractor he continued to do the same work as before, was paid much the same, and remained integrated in the company's operation. Following the takeover by C&W, Mr Muscat continued to do the same work, was provided with a mobile and laptop by C&W who continued to pay his mobile phone bills. He arranged his annual leave with C&W. He was described as an employee within the company's management structure and designated by an employee number. He was then required by C&W to register with a specialised employment agency. The tribunal found as a fact that the only role undertaken by the employment agency was the payment of the claimant's invoices. In these circumstances it is understandable that the Court should be willing to find that the underlying reality was a contract of service. No comparable factors apply in the instant case to the claimant's relationship to the second-named respondent. Far from being integrated he was quite aware of the different regime that applied to agency workers on the one hand and permanent employees on the other and sought, unsuccessfully, to obtain permanent employment status on three occasions.
10. In Motorola, too, the EAT, confining itself to the issue of control on the appeal, considered the claimant's integration into the workforce of great significance. 'If he wanted a holiday he would get permission from (and only from) Motorola. He arranged absences from work directly with his Motorola supervisor. If he had a grievance he contacted his Motorola supervisor. … When he caused, or was thought to have caused, offence, it was a Motorola manager, Mr Carslaw … [who] constituted a disciplinary hearing for him.' Crucially, it was the same Mr Carslaw who suspended him and Mr Carslaw who (after discussion with his Motorola supervisor) also decided to terminate his assignment. This contrasts clearly with the facts of the instant case in which the first-named respondent maintained its own framework of supervision and control in regard to important aspects of the employment relationship.
11. In Franks the claimant had worked for the same employer on the agency's books for almost five years, was made a permanent employee by the employer but then dismissed before the end of the then two-year qualifying period for unfair dismissal claims. Unsurprisingly, length of service was a critical factor in the Court of Appeal's decision to remit the matter to a different tribunal to consider whether it should imply a contract of service between the claimant and the end-user.
12. It is noteworthy that in one of the strongest recent statements of the Courts' willingness, in the appropriate circumstances, to 'imply' a contract of service between an agency worker and an end-user (as in Dacas), the Court of Appeal per Mummery LJ, explained the typical relevant circumstances were those where:-

(a) the claimant has entered into a written agreement, expressed to be a contract for services and not a contract for service, with an employment agency; and

(b) the employment agency has entered into an express contract with its client (the end-user of the work done by the claimant); but

(c) no formal contract has ever been expressly entered into between the claimant and the end-user, in whose premises the claimant works regularly, exclusively and for reward until dismissal takes place on the initiative of the end-user.

This scenario is to be contrasted with the instant case where not only has the first-named respondent entered into what on its face is described as a contract of employment with the claimant, but where the first-named respondent has never, in the course of the proceedings, denied that it was the claimant's employer in the relevant period.

13. Having considered the distinguishing features of the cases cited to it, and having considered all the facts of the instant case, the tribunal concludes that nothing in the instant case (beyond the basic fact that the claimant worked at the factory of the second-named respondent on assignment from the first-named respondent for 18 months), assists the claimant establish the status of employee in relation to the second-named respondent.

Application for costs

14. The second-named respondent applied for an award of costs against the claimant for his persistence with the PHR in spite of the fact that the LRA had conciliated an agreement between the claimant and the first-named respondent. The second-named respondent submitted that the fact of the agreement demonstrated an implicit admission by the first-named respondent that it was the employer and the only correct respondent to the claimant's unfair dismissal claim ('demonstrated who was liable for the alleged wrong'). The second-named respondent further submitted that the claimant had sufficient understanding of the difference between worker and employee status as should have deterred him from pressing ahead with the PHR hearing. Moreover, following a warning from the tribunal, as to the risks of a costs award, the claimant should have been in no doubt that he was courting a real risk of a costs penalty.
15. The tribunal having considered the grounds of the second-named respondent's application for costs concludes in the exercise of the discretion conferred upon it under the Rules that it should make no award of costs. The tribunal does not accept that it can draw the conclusion contended for by the second-named respondent merely on the basis of the first-named respondent's decision to reach a conciliated agreement. Parties to tribunal proceedings settle claims for many different reasons and the tribunal is not in any position to assume or infer the reasons that prompted the first-named respondent to settle this claim, still less to speculate on whether the claimant in reaching such an agreement had already been compensated for his losses. Nor is the tribunal prepared to conclude, merely on the basis of an agreement he reached with the first-named respondent, that the claimant can only have proceeded in bad faith.
16. Second, notwithstanding its findings and conclusions on the main issue before it, the tribunal does not accept that the unrepresented claimant in this case should have appreciated, in advance of an airing of any evidence or argument, what precisely were the merits or weaknesses of the position he was advancing at the pre-hearing review. Part of the claimant's grievance doubtless related to his treatment by the first-named respondent in the circumstances leading to his dismissal. An important additional part of his grievance, however, it appeared to the tribunal, was his belief that his dismissal had been engineered by the second-named respondent, on the basis of false accusations, and that in one way or another they should be held accountable for that. The tribunal, needless to say, makes no findings in relation to the claimant's allegations. They are relevant, however, in making sense of the claimant's eagerness to explore some way of putting the second-named respondent in the frame for their treatment of him. Asking the tribunal to determine if the second-named respondent was an appropriate respondent to an unfair dismissal claim was a reasonable and legitimate way of pursuing that objective, even after the first-named respondent had settled the claim against it.
17. If account is taken of the difficulties experienced by the senior judiciary in the appellate courts in giving judgment on the issue that was before the tribunal, if proper weight is given to the evolution of the employment relationship in recent EAT and Court of Appeal decisions, underlined by the editors of Harvey on Industrial Relations and Employment Law and described by them as 'this notoriously difficult area', then the second-named respondent's submission ('anyone giving serious consideration to the evidence would take the view that the claimant was not employed by the second-named respondent') is simply not sustainable. The tests proposed in many of the recent cases in the Court of Appeal would more than justify a claimant in this claimant's circumstances, assuming he was apprised of such developments, asking whether effective control of his labour had passed from the agency to the end-user. That the tribunal concluded, on the facts, that it had not does not imply either that the claimant was being unreasonable or that his claim was misconceived. Accordingly, the application for costs is refused.
18. In answer to the issue for the pre-hearing review:-

"To determine the correct respondent".

The tribunal determines that the correct respondent to the claimant's unfair dismissal, notice pay and holiday pay claims is the first-named respondent, and the correct respondents to the claimant's race discrimination claim are the first and second-named respondents. As the first-named respondent has entered an agreement with the claimant conciliated by the Labour Relations Agency in regard to his claims, the tribunal orders that all of the claimant's claims against the first-named respondent be stayed until further order. All of the claimant's claims, bar the race discrimination claim, relate exclusively to the claimant's employer (the first-named respondent). The claimant's sole outstanding 'live' claim, of race discrimination, is therefore against the second-named respondent. The Office of the Industrial Tribunals and Fair Employment Tribunal will liaise with the parties with a view to listing a hearing of that claim.

Chairman:

Date and place of hearing: 24 April 2006, Belfast

Date decision recorded in register and issued to parties: