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Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> Noble v Department for Employment and ... [2011] NIIT 00883_11IT (10 August 2011)
URL: http://www.bailii.org/nie/cases/NIIT/2011/883_11IT.html
Cite as: [2011] NIIT 883_11IT, [2011] NIIT 00883_11IT
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THE INDUSTRIAL TRIBUNALS
CASE REF: 883/11
CLAIMANT: Brian William Noble
RESPONDENT: Department for Employment and Learning
DECISION
The decision of the tribunal (Chairman Sitting Alone) is that the claimant was not an employee pursuant to Article 3 of the Employment Rights (Northern Ireland) Order 1996
Constitution of Tribunal:
Chairman (Sitting alone): Ms J Knight
Appearances:
The claimant appeared and represented himself.
The respondent was represented by Mr Philip McAteer, Barrister-at-Law, instructed by the Departmental Solicitors’ Office.
Issues
1. Was the claimant an employee of Roy Edwards Fine Arts Limited when it became insolvent on 25 August 2010?
Mr McAteer BL indicated at the start of the Hearing that the respondent did not intend to pursue a time limitation point.
Evidence
2. The Tribunal considered the oral evidence of the claimant and documentation to which it was referred by the parties during the course of the hearing.
Facts
3. The Tribunal found the following facts to be proven on a balance of probabilities:
(a) The claimant, Mr Brian William Noble, commenced employment with Thomas Sinton and Co Ltd, a flax spinning company, as Factory Production Manager from February 1976. The claimant was not provided with a written statement of his terms and conditions of his terms of employment or a job description. In 1992 the claimant was made a director of Thomas Sinton and Co and was given a shareholding of 3000 of the 150,000 shares in the company. Following a downturn in the linen industry in 1996 the majority of employees were paid off. The claimant reached an agreement on behalf of the company with the Redundancy Payments Service for funding of redundancy payments. At this point the claimant was joint managing director with Mr Maynard Sinton and the services of two shop floor workers were retained. The claimant was given a further 5000 shares in 2001.
(b) From 1996 to 2002 Thomas Sinton and Co Limited carried on a linen yarn importing and upgrading business, supplying local weavers. This went on until approximately 2002 at which point further business was lost as customers cut out the company and went directly to the linen yarn suppliers.
(c) In or about November 2001 a decision was made by the directors of Thomas Sinton and Co to advertise to buy another business which in April 2002 bought over the share holdings of Roy Edwards Fine Arts Limited, a picture framing and sales of fine art business. Three months prior to the takeover the claimant went in to shadow the previous owners of the business and went took charge of the production end of the factory, working with employees on the shop floor. The claimant became a director of Roy Edwards Fine Arts Limited on 24 April 2002 (resigning on 22 February 2011).
(d) There was a transfer of undertaking from Roy Edwards Fine Arts Limited to Sinton and Co Limited on 26 June 2007. Simultaneously Sinton and Company Limited changed its name to Roy Edwards Fine Arts Limited. The original Roy Edwards Fine Arts Limited also changed its name on the same date to REFA Limited.
(e) The documentation before the tribunal showed that the claimant was working in Roy Edwards Fine Arts Limited from 2002. He continued to be paid the same amount of remuneration together with pension payments. The claimant paid tax and national insurance contributions under the pay as you earn scheme (PAYE). However the claimant did not produce copies of his payslips so there was no evidence before the tribunal as to whether his tax and national insurance contributions were made as an employee or as an office holder. The company accounts show that payments made to the claimant and his co director were recorded under the heading of “Directors’ Remuneration”. This was separate from and did not appear as under the heading of “Salaries and Wages” of the employees of the company. Those employees who had transferred over from Thomas Sinton and Co Limited in 2002 ceased to be entitled to pension payments and none of the employees of Roy Edwards Fine Arts Limited were entitled to pension contributions before or after the TUPE transfer in 2007.
(f) Between 2006 and 2009 there was a down turn in this business in Roy Edwards Fine Arts Limited. In January 2010 all employees were asked to take a reduction in wages of 7.5% to assist the cash flow position of the company. The claimant told the tribunal that the directors took a similar reduction of pay to set an example. The claimant also made loans to the company of £18,500.00 in or about May 2009 and £9,000.00 around April or May 2010.
(g) On 1 August 2010 a decision was made to close the business. The Company went into a creditors’ voluntary winding up on 25 August 2010 and the remaining employees were made redundant. At this time the claimant worked 50 hours over a five day week and received a gross monthly payment of £3,460 plus his pension contributions.
(h) The claimant made an application for a redundancy payment to the respondent department on 21 September 2010. In his application the claimant described himself as “Company Director”. His claim was rejected on 2 December 2010 as the Department was not satisfied that he was an employee. The claimant lodged his originating complaint with the Office of Industrial Tribunals and Fair Employment Tribunal on 1 April 2011.
The Law
4. Article 3 of the Employment Rights (Northern Ireland) Order 1996 as amended (“the 1996 Order”) provides:
(1) In this Order “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 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 tribunal was referred to the decision of the Court of Appeal in the case of Secretary of State for Business, Enterprise and Regulatory Reform v Neufeld and another [2009] IRLR 475. This decision deals with the position of majority shareholders but sets out general principles which apply equally in the present case. The Court of Appeal held that there is no reason in principle why someone who is a shareholder and director of a company cannot also be an employee under a contract of employment. In deciding whether a valid contract of employment is in existence, consideration will have to be given to the requisite conditions for the creation of such a contract and the court or tribunal will want to be satisfied that the contract meets them. In some cases there will be formal service agreement. Failing that there may be a minute of a board meeting or a memorandum dealing with the matter. In particular a Director of a company is the holder of an office and will not, mainly by virtue of such office be an employee; the putative employee will have to prove more than his appointment as a Director. It will be relevant to consider how he has been paid; whether he has been paid a salary, which points towards employment, or merely by way of director’s fees, which points away from it. In considering what the putative employee was actually doing it will also be relevant to consider whether he was acting merely in his capacity as a Director of the company, or whether he was acting as an employee. Although the absence of a written agreement will obviously be an important consideration, if the parties’ conduct under the claimed contract points convincingly to the conclusion that there was a true contract of employment, the Tribunal should not cease to rely on the absence of a written agreement as justifying the rejection of the claim.
Conclusions
5. In the claimant’s case I am satisfied that even though he did not have written terms and conditions of employment, he was initially employed under a contract of service with Thomas Sinton and Co which continued even when he became a minor shareholder in the company. However there was necessarily a change in the claimant’s status and role in or about 2002 when that company ceased carrying on its linen business and he ceased to be the Factory Production Manager in that business. The claimant’s involvement in the decision to diversify and buy out another business in a completely different industry and the subsequent TUPE transfer was in my view more consistent with the role of company director/office holder working hard to ensure the survival of the company rather than someone employed under a contract of employment.
6. The Court of Appeal in the Neufeld case specifies that where the putative employee is asserting the existence of a contract, it will be for him to prove it. By the end of April 2002 the claimant was a Director of both Thomas Sinton and Co and Roy Edwards Fine Arts Limited. There was no evidence before me of an intention on the part of the company to create an employment relationship with the claimant after April 2002. On the contrary the available evidence, particularly the company accounts, points the other way.
7. Although it is accepted that the claimant paid tax and National Insurance under PAYE I do not consider that this is indicative one way or the other as him being an employee or an office holder. It is of particular relevance that the claimant and his co director’s entire earnings are listed under the heading of “Directors’ Remuneration” rather than “Salary or Wages”. It is also significant that the claimant, along with his co-director and unlike other employees continued to receive payment contributions to his pension after he commenced work in Roy Edwards Fine Arts Limited. Similarly the claimant enjoyed the right to receive his earnings in full during sick leave absence unlike other employees in the company.
8. For these reasons I am not satisfied that the claimant has proven on a balance of probabilities the existence of an employment contract as defined in Article 3 of the 1996 Order. Accordingly the claimant’s claim is dismissed.
Chairman:
Date and place of hearing: 21 June 2011, Belfast.
Date decision recorded in register and issued to parties: