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URL: http://www.bailii.org/nie/cases/NIIT/2012/00912_11IT.html
Cite as: [2012] NIIT 00912_11IT, [2012] NIIT 912_11IT

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THE INDUSTRIAL TRIBUNALS

CASE REF: 912/11

APPELLANT: ECJ Limited T/A Clive Alexander Haircutters

RESPONDENT: HM Revenue & Customs

DECISION

The unanimous decision of the tribunal is that the appellant’s appeal is dismissed.

Constitution of Tribunal:

Chairman: Mr N Drennan QC

Members: Mr R McKnight

Mr R Hanna

Appearances:

The appellant was represented by Mr J Kennedy, Barrister-at-Law, instructed by Murphy & McManus, Solicitors.

The respondent was represented by Mr P McAteer, Barrister-at-Law, instructed by the Crown Solicitor’s Office.

Reasons

1.1 This is an appeal brought by the appellant under the National Minimum Wage Act 1998 (‘NMWA’). The respondent issued to the appellant a Notice, pursuant to Section 19 of the NMWA of an underpayment in the sum of £4,956.20 in relation to the payments made by the appellant to Ms Aine Cox together with Notice of Penalty in the sum of £2,653.50.

1.2 It was not necessary for the tribunal to consider further, in light of its decision, the amount of the said underpayment and penalty. It was further agreed by the appellant’s representative that, if the appeal was dismissed, the said underpayment and penalty set out in the Notice would be payable by the appellant.

1.3 Under Regulation 12 of the National Minimum Wage Regulations 1999 (‘the Regulations’), as amended at the material time for the purposes of this appeal, it was provided:-

“12 Workers who do not qualify for the National Minimum Wage –

(1) …

(2) A Worker who –

(a) has not attained the age of 26;

(b) is employed under a contract of apprenticeship …; and

(c) is within the first 12 months after the commencement of that employment or has not attained the age of 19, does not qualify for the National Minimum Wage in respect of work done for his employer under that contract.”

1.4 It was not disputed Ms Aine Cox was a worker for the purposes of the Regulations. The focus of the appeal was whether the appellant was obliged to pay the worker, Ms Cox, the National Minimum Wage. The appellant contended, that for the purposes of the appeal, at the material time, Ms Cox was employed under a contract of apprenticeship and therefore, pursuant to Regulation 12 of the Regulations, the appellant was not required to pay her the National Minimum Wage. It was not disputed the appellant did not pay Ms Cox the National Minimum Wage at the material time.

1.5 The tribunal heard oral evidence, on behalf of the appellant, from Mr Clive Johnston (the Chairman of the appellant), Ms Joanne Collins (the present manageress of the appellant), Mr Andrew Doherty (the appellant’s Accountant); and, on behalf of the respondent, from Ms Aine Cox and Ms C Crean (the National Minimum wage Compliance Officer).

1.6 The tribunal was informed by the appellant’s representative that Mrs Eileen Johnston, the mother of Clive Johnston, and a director of the appellant, was unable to attend the hearing and give oral evidence. Having taken instructions, at the invitation of the tribunal, the appellant’s representative informed the tribunal that he did not wish to make any application for a postponement of the hearing in the circumstances.

2.1 The tribunal found the following facts, insofar as necessary and relevant for the determination of this appeal, as set out in the following sub-paragraphs, after considering the evidence given by the witnesses, as set out above, the documents to which the tribunal was referred and the oral and written submissions of the representatives.

2.2 Mr Clive Johnston is the Chairman of the appellant who opened a hair salon at the Erne Shopping Centre in Enniskillen at new premises in or about December 2009. His mother, Mrs Eileen Johnston attended the new premises, after it opened, to deal with office and administrative tasks including payment of staff. The appellant also used the services of a professional accountant, Andrew Doherty, in relation to the keeping of, inter alia, the payroll records of the appellant. The tribunal was satisfied that Mr Clive Johnston was an experienced and highly regarded hair stylist with a large number of clients in the Enniskillen area and that his main role in the salon was in relation to hair styling and that, once the new salon opened, he had little or no involvement in office and administrative tasks. These were mainly left to be carried out by his mother, Mrs Eileen Johnston, with the assistance of the accountant, Andrew Doherty.

2.3 Ms Cox, whom the tribunal found a very impressive witness, at the time when she was studying for a NVQ level 2 Hairdressing, worked at Caroline’s Hair Studios in Enniskillen, on her placement for the said course, had also on Saturdays for extra experience. When she successfully completed the above course in 2008 the said salon offered her a part-time position within the salon as a junior stylist. When working there, Ms Cox was shampooing, carrying out root/all over colouring, blow-dries, curling hair, prepping bridal party hair and keeping the salon clean and tidy at all times. Due to the financial crisis in or about 2009, Ms Cox’s hours were reduced. On 5 October 2009, she applied for the advertised position of junior/trainee stylist, which she found in the local newspaper by replying to a box number. She was asked to leave her CV in at Venus Hair Salon, another hair salon in Enniskillen. She was then interviewed by Ms Joanne Collins for the position of junior stylist with progression to a senior stylist at Venus Hair Salon. However, no position was offered to Ms Cox and indeed Ms Collins informed her she was shortly leaving this salon. Ms Collins subsequently left to become, initially, senior stylist with the appellant and later manageress. Ms Cox accepted she told Ms Collins she was not sure if she was ready to go on the floor on her own at that time but emphasised what she needed, in the circumstances, was more experience, which she had been gradually gaining in her work at Caroline’s Hair Studios.

2.4 In November 2009, on the recommendation of Ms Collins, Mr Johnston invited Ms Cox to a coffee shop in Enniskillen to discuss a job offer to work at the appellant’s hair salon. The tribunal is satisfied there was no advertisement; and Mr Johnston had a copy of Ms Cox’s CV at the meeting, although Ms Cox provided her with another copy. Ms Cox told him she would need more experience and that she would not be up to senior stylist level at that time.

2.5 The tribunal is satisfied that, at the conclusion of the meeting and after reading her CV, Mr Johnston offered Ms Cox a job in his salon as a junior stylist working full-time hours, carrying out junior duties, cleaning the salon and undertaking Mr Johnston’s blow-dries for his clients. Ms Cox understood junior duties to mean; hair washing, cleaning the salon, making tea and coffee, preparing hair for hair up by either back-combing, curling or straightening, blow-drying, cutting foil, helping to mix colours, basic cuts, putting on root colours, applying foils. Mr Johnston offered to pay Ms Cox £100.00 a week and informed her that her pay would go up at Easter 2010 when he considered Ms Cox would be styling his cuts to his salon’s standards, and she would get her own clients and then be able to earn more money. The tribunal is satisfied that training was not discussed at that time nor was there any discussion of an apprenticeship or indeed any written contract of apprenticeship entered into with Ms Cox at that time (see later).

2.6 Although Mr Johnston maintained in his evidence that at all times Ms Cox was an apprentice, the relevant payroll entries referred to Ms Cox from the outset as a ‘Junior’ not an apprentice. Ms Collins, in her evidence, asserted, at best, she believed Ms Cox was employed as an apprentice but was unable to support this assertion by any other relevant evidence.

2.7 The tribunal is satisfied that after Ms Cox commenced her employment with the appellant on or about 3 December 2009 she did not receive any formal training and was not made aware of any plans for her development. No formal training, instruction or tuition was provided to Ms Cox, either internally in the salon or by some external arrangement organised by the appellant. Indeed, no formal training was offered by the appellant until in or about September 2010, after the investigation had begun into the failure of the appellant to pay Ms Cox the National Minimum Wage. Indeed the tribunal considered this was a belated attempt by the appellant to show that Ms Cox at all material times had been employed as an apprentice.

2.8 Ms Cox’s duties included covering reception, making appointments, washing client’s hair, taking client’s money, keeping the salon clean and tidy, gowning up clients, neutralising perms, blow-drying, preparing hair for updos by back-combing, curling or straightening. Also, she made teas and coffees, cleaned equipment used in the saloon. Significantly, Ms Cox was not carrying out any actual hair styling work on clients, which might have been expected as an apprentice, under the supervision of Mr Johnston or indeed Ms Collins.

2.9 In relation to this failure to provide Ms Cox with training the tribunal found of considerable significance the following matters:-

At a meeting on 26 August 2010, with Ms Crean (the National Minimum Wage Compliance Officer). Mrs Johnston, who was authorised to act on behalf of the appellant at the meeting, said, as set out in the record of the meeting which the tribunal accepts is an accurate record of the meeting:-

“There are no formal training programmes or contracts specifying a start and end date for the in-house training programme”;

and:-

“To date there have not been any training events, training evenings or special events. EJ said they are planning to introduce them.”

Indeed, Emma Aspell, a stylist recently employed in the salon, confirmed in her note of 25 August 2010:-

“I will undertake the training of Aine Cox for Clive Alexander’s Saloon. Aine’s training will start in September 2010.”

It is apparent from the note this was a new development and not part of a training/development programme that had commenced from the start of Ms Cox’s employment. Indeed it was a reference to a training programme to commence some nine months after the commencement of her employment and some few months after the commencement investigation in or about May 2010 into whether Ms Cox had been paid the National Minimum Wage by the appellant. The tribunal would have expected, if there was a contract of apprenticeship, to have seen, from December 2009, some evidence of training and/or a relevant programme of training events and/or evidence of progress by Ms Cox under such a programme. No such evidence was provided. Mr Johnston insisted, in evidence, that training was meant to be held on a Tuesday afternoon every week from in or about February 2010 onwards. He said it had not started earlier due to staffing problems and the bad weather at that time. He contended it did not happen as he said Ms Cox did not provide models for her to work on. The tribunal was satisfied that, at the outset of her employment, there was some reference by Mr Johnston to such Tuesday afternoon training sessions these never took place. In fact, no such training took place until in or about September 2010, as referred to above. Ms Cox did provide models on two occasions, not without some difficulty, but this was not until September 2010 and October 2010, which was long after the investigation had begun and with minimal input/ training assistance from Ms Aspell. Both models were charged for the work carried out on their hair. The tribunal would have expected, if Ms Cox was not doing what was expected of her in relation to any issue of training, as contended in evidence by Mr Johnston, such as not providing models, Mrs Johnston would have said so at the meeting on 26 August 2010. As seen above, she did not do so.

The tribunal does not consider that, the fact that, on 21 February 2010, Ms Cox assisted Mr Johnston at a wedding Fayre at a local hotel, in the absence of Ms Collins, was relevant evidence of training of Ms Cox as an apprentice. It was a ‘one-off’ occasion; and it was clear Mr Johnston only permitted Ms Cox to provide minimal assistance, which the tribunal accepts she would have already known how to do from her NVQ qualification and previous work in Caroline’s Hair Studio.

2.10 Ms Cox stated, in evidence, she at no time entered into a written contract of apprenticeship. She said in evidence, which was accepted by the tribunal, that on or about 23 July 2010 she was first asked by Mr Johnston to sign a written contract of apprenticeship, which was dated 10 December 2009. She refused to do so, as she considered it did not properly reflect her working relationship with the appellant. Mr Johnston, although he acknowledged that issues about contracts were more to do with his mother and/or Mr Doherty, maintained, in evidence, that contracts had been issued to all staff in or about December 2009; but Ms Cox was the only person who had not signed hers by July 2010. Ms Cox, in evidence accepted by the tribunal, said she was not asked to sign any contract until on or about 23 July 2010, which was after the investigation had begun.

If this was correct the tribunal would have expected to have seen correspondence/ memos asking her to sign the contract and asking her about her refusal to do so. Again, significantly, at the meeting on 26 August 2010, Mrs Johnston accepted no contracts of apprenticeship had been signed at that time [tribunal’s emphasis], which was confirmed by Mr Doherty in evidence. Then, somewhat surprisingly, on 16 October 2010, a contract of apprenticeship was produced by the appellant to Ms Crean, as part of the investigation, suggesting another person, who is not the subject-matter of this appeal, had signed a contract of apprenticeship on 1 July 2010 – which it must be noted was contrary to what had been stated at the meeting on 26 August 2010. In the above circumstances, it was not necessary for the tribunal to consider this document further as to its authenticity – albeit it had grave doubts, not least given the different colour of ink used on the document in respect of the date and signature and the failure to produce it earlier.

2.11 In addition, the tribunal was not satisfied this said written ‘contract of apprenticeship’, relied upon by the appellant, constituted, in any event, a proper written contract of apprenticeship.

Mr Doherty acknowledged, in evidence, that he had obtained the document from a precedent contract of employment and the words ‘employee’ and ‘employment’ were merely changed by him to ‘apprentice’ and ‘apprenticeship’, as appropriate.

Indeed, subject to the above changes, this document was similar to any contract of employment in general use. Significantly, it did not have features of an apprenticeship which the tribunal would have expected to find in such a contract of apprenticeship. In particular, there was no defined period of apprenticeship. Rights to dismiss and/or to make Ms Cox redundant were retained, without qualification, which the tribunal was satisfied was inconsistent with a true contract of apprenticeship. There was no reference to training or a training programme nor indeed the specific requirement for a model to be brought each Tuesday, which on Mr Johnston’s evidence was a major part of the training to be offered by him (see before). There was no reference to what Ms Cox might have hoped to achieve at the end of her apprenticeship, whatever its length. The contract was silent on this. At best, there was the vague oral assertion by Mr Johnston, in his initial meeting with Ms Cox, that by Easter 2010 he expected her to be styling his cuts to his salon’s standard; but not even that was referred to in the document. The tribunal is left with the conclusion that this document was prepared and sought to be relied upon by the appellant, with all its imperfections as referred to above, after the investigation had been commenced and it was realised by the appellant there was no written contractual document to be relied upon in defence of the allegation that Ms Cox had been wrongly not paid the National Minimum Wage. For the reasons set out above, the tribunal is not satisfied the document, in any event, constituted a proper contract of apprenticeship.

2.12 The appellant, under cover of letter dated 8 January 2011, sought to produce to Ms Crean, a letter from Mr Clive Johnston enclosing a log showing, inter alia, Ms Cox’s failure to provide a model on various Tuesday afternoons, from February 2010 onwards. If this log was an accurate record, and prepared at the time, the tribunal would have expected it would have been produced earlier during the course of the investigation and, in particular, in or about August 2010, when the issue of the apprenticeship and training, as set out previously, was discussed at the meeting on 26 August 2010. But no reference to same was made. Again, the tribunal has to conclude this log was produced after the event and long after a ‘different story’, as set out above, had been told to Ms Crean at the meeting on 26 August 2010, by Mrs Johnston. It was not a document the tribunal could rely on in the circumstances.

2.13 The tribunal is not satisfied Mr Johnston ever offered, as he suggested in evidence, Ms Cox the opportunity to obtain her NVQ Level 3 in Hairdressing. Ms Cox did not want any further technical qualification when she commenced her employment. She wanted to gain further experience in a salon, of the type she had commenced when working in Caroline’s Hair Studio.

2.14 Mr Johnston, in his evidence, did not recognise, in the opinion of the tribunal, the special nature of an apprenticeship contract, and that an apprentice was not the same as a simple trainee. Indeed, he seemed to believe the words, as he admitted in evidence, were interchangeable.

2.15 Ms Cox resigned from the appellant’s employment with effect from 2 December 2010.

3.1 It was not disputed by the parties that the burden of proof was on the appellant to establish that Ms Cox did not qualify for the National Minimum Wage (see further Section 28 and 55 of the NMWA).

3.2 The main focus of this appeal was therefore in relation to whether Ms Cox was employed ‘under a contract of apprenticeship’ at the relevant time, in order for the appellant to be exempt from having to pay her the National Minimum Wage (see further Regulation 12 of the Regulations, as set out previously).

3.3 There is no statutory definition contained in the NMWA or the Regulations of what is meant by ‘contract of apprenticeship’.

In NMWA Guidance – ESM 2615 – Common Law, the following is set out:-

“There is no statutory definition of what is meant by a contract of apprenticeship. An apprentice is defined in the Oxford English Dictionary as being:

‘One who is bound by a legal agreement to serve an employer for a period of years, with a view to learn some handicraft, trade, etc in which the employer is reciprocally bound to instruct him.’.”

Further guidance on what is meant by a contract of apprenticeship can be found in several cases on the subject.

In Wiltshire Police Authority v Wynn [1981] QB 95, the Lord Denning RM stated:-

“If the primary purpose was to work for the Master – and teaching a trade was only a secondary purpose – it was a contract of service. But if teaching a trade was the primary purpose – and work for the Master was only secondary – then it was a contract of apprenticeship.”

In the more recent of Edmonds v Lawson & Others [2000] ICR 567 concerning a Pupil Barrister, the Court of Appeal judgment contains more commentary on contracts of apprenticeship. The Lord Chief Justice stated:-

“A contract of apprenticeship or any equivalent contract in our judgment a synallagmatic contract in which the Master undertakes to educate and train the apprentice (or pupil) in the practical and other skills needed to practise a skilled (or learned) profession and the apprentice (or pupil) binds himself to serve and work for the Master and comply with all reasonable directions. These mutual covenants are in our judgment cardinal features of such a relationship.”

The judgment contains references from earlier cases concerning the meaning of ‘apprenticeship’ and the common thread is that an apprentice is one who is bound to serve a Master who is bound to teach him.

In Wallace v CA Roofing Services Ltd [1996] IRLR 435, Sedley J said:-

“Where an employee might expect to be dismissed for misconduct, an apprentice can expect to be punished, though today not physically. The difference in treatment reflects the difference in the nature of the relationship. Most particularly, although a contract of apprenticeship can be brought to an end by some fundamental frustrating event or a repudiatory act, it is not determinable at will as a contract of employment is at common law.”

Mr Justice Sedley also stated:-

“Although modern legislation has assimilated apprenticeship to contracts of employment, the contract of apprenticeship remains a distinct entity at common law. Its first purpose is training; the execution of work for the employer is secondary … .”

In Dunk v George Waller & Son Ltd [1970] 2 QB 163, Widgery LJ held that a contract of apprenticeship secured three things for the apprentice:-

“It secures him, first, a money payment during the period of apprenticeship, secondly, that he should be instructed and trained and thus require skills which will be a value to him for the rest of his life, and thirdly, it gives him status, because the evidence in this case made it quite clear that once a young man, as here, completes his apprenticeship and shows by a certificate that he has completed his time with a well-known employer, this gets him off to a good start in the labour market and gives him a status the loss of which may be of considerable damage to him.”

In Whitely v Marton Electrical Ltd [2003] IRLR 197, Mr Recorder Underhill QC, as he then was, when he confirmed that contracts of apprenticeship are distinct in character from contract of employment and terminates only on the conclusion of the agreed period of training and not by prior notice, whether by reason of redundancy or otherwise (save where the employer’s business closes or undergoes a fundamental change in its character). In Whitely, Mr Recorder Underhill QC confirmed that the principal purpose of the ‘modern apprenticeship pact’ was the training of the apprentice and the employer undertaking much wider responsibilities than he would towards an ordinary employee. He further held that there was nothing inherently surprising in a contract of apprenticeship being for a duration of as much as five years; nor did the fact that the contract was expressed as being ‘for the duration of the training plan’, rather than for a fixed period of time, render it too uncertain to be enforceable. There was no reason, in principle, why a contract cannot be determinable on the happening of a certain event, even though the date of that event may not be certainly predictable. The provision in the pact requiring the apprentice to comply with the employer’s terms and conditions of employment did not mean that the employer’s terms as to notice of termination applied to the apprentice. Where any provisions of the employer’s terms and conditions were inconsistent with those of the pact, the provisions of the pact must prevail since it was plainly the pact which the parties intended should govern their relationship.

3.4 The decision of the Court of Appeal in England and Wales in the case of Flett v Matheson [2006] EWCA Civ 53, the Court of Appeal reviewed many of the above cases. The Court of Appeal held that a modern tripartite apprenticeship arrangement could constitute a common law contract of apprenticeship. In its view, the important issue was the nature and duration of the employer’s obligations under the agreement. The fact that part of the training was provided by a third party was not crucial to the analysis of those obligations. There was no obvious advantage to all parties that the more academic part of the training was arranged by a specialist. The Court of Appeal, whilst acknowledging that the use of the word ‘apprentice’ in the documents was an important element in construing the obligations under the individual learning plan, held that to decide upon the extent of those obligations it was necessary to construe the particular agreement and not to rely on the label alone. Further (see Paragraph 33) there is a suggestion, in the course of the judgment of Pill LJ, that where an appellant is receiving less than the National Minimum Wage it points to the agreement being one of apprentice. It would not therefore be conclusive in itself.

In a recent case, Chassis & Cabs Specialist Ltd v Lee [2010] UKEAT/268/10, Mr Justice Underhill (President), as he then was, followed the judgment in Flett v Matheson and held, on the evidence in that case, that the relevant person was an apprentice and not an employee. In the view of the Employment Appeal Tribunal the type of arrangement entered into was substantially identical to the modern apprenticeship scheme referred to in Flett v Matheson.

Although the above decisions are not binding on this tribunal, but are of persuasive authority, the tribunal considered that they should be followed, in the absence of any relevant authority from the Northern Ireland Court of Appeal, in circumstances where the legislation in Great Britain and in Northern Ireland is the same. In Northern Ireland, there has been one decision, at first instance, by an industrial tribunal, namely the case of Kings Security v HM Revenue and Customs [2011] NIIT 1782/10, which decision was not the subject of appeal. In that case, the tribunal found, on the facts, there was no contract of apprenticeship, after reviewing above case law, and, in particular, the decision in Edmonds v Lawson & Others and Wallace v CA Roofing Services Ltd referred to above. The tribunal held, inter alia:-

“It is clear law that a contract of apprenticeship is a special type of contract. A simple trainee is not an apprentice and does not create a contract of apprenticeship. It is normal that a contract of apprenticeship should be in writing although the absence of a written contract is not in itself determinative of the issue … .”

4.1 In light of the facts as found by the tribunal and the case law referred to, the tribunal, as set out above, was not satisfied that, at the material time, Ms Cox was employed by the appellant as an apprentice. In particular, she was employed by the appellant at all material times as a junior and was so described on payroll records. There was no proper written contract of apprenticeship, albeit this of itself was not determinative of the appeal. However, what was subsequently sought to be relied upon by the appellant as the relevant contract of apprenticeship, entered into between Ms Cox and the appellant, was an ordinary contract of employment not a contract of apprenticeship. The terms of that written contract were inconsistent with a contract of apprenticeship. Significantly, there was no training and/or training programme provided or offered by the appellant to enable Ms Cox to achieve a relevant level of skill to enable her to come a hair stylist until September 2010; and then only after the investigation had begun into the failure to pay her the National Minimum Wage and as a belated attempt to show she was at all material times employed as an apprentice. There was no evidence of any modern tripartite apprenticeship arrangement, as referred to in Flett v Matheson. Indeed, Ms Cox already had the necessary academic skills/qualification. It was training in ‘hands on’ hairstyling work on clients she required, which was not provided, save in a very limited sense until in or about September 2010. In the absence of any previous training from the commencement of Ms Cox’s employment, this was not in the circumstances sufficient, in the view of the tribunal, to show a contract of apprenticeship had been entered into by the appellant with Ms Cox. At all material times, in the judgment of the tribunal, the appellant failed to understand the nature of the legal relationship required to be entered into by it when employing an apprentice. Since Ms Cox was never employed as an apprentice by the applicant; she therefore, at all material times, required to be paid by the appellant the National Minimum Wage.

4.2 The tribunal therefore decided the appeal of the appellant must be dismissed.

Chairman:

Date and place of hearing: 2 November 2011; and

8 November 2011, Belfast

Date decision recorded in register and issued to parties: