United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 1291_95_2006

Appeal No. EAT/770/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 20th June 1996

THE HONOURABLE MR JUSTICE MUMMERY (PRESIDENT)

MR J A SCOULLER

MR S M SPRINGER MBE

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MR C J IVEY (EAT/1291/95)          APPELLANTS

MR R BUCHAN (EAT/770/95)

SECRETARY OF STATE FOR EMPLOYMENT           RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant (EAT/1291/95) MR GUY PRICHARD

Counsel

Woodfords Solicitors

70/72 Parsons Green Lane

LONDON SW6 4HU

(EAT/770/95) MR M SHERRATT

Thomas More Chambers

51-52 Carey Street

LONDON WC2R 2JB

For the Respondents MR BRUCE CARR

Counsel

Treasury Solicitor

Queen Anne's Chambers

28 Broadway

LONDON SW1H 9JS


 


First draft 2.7.96

MR JUSTICE MUMMERY (PRESIDENT) In recent years Industrial Tribunals and this Tribunal have dealt with an increasing number of cases in which a person, who is both a director and a majority shareholder in a small private company, which has become insolvent, claims to have been an employee of the company for the purpose of recovering redundancy payments and to have been an employee of the company for the purpose of recovering redundancy and other payments from the Secretary of State under sections 106 and 122 of the Employment Protection (Consolidation) Act 1978 ("the 1978 Act"). We have seen, from time to time, different decisions on this point from various Industrial Tribunals in different parts of the country. In some cases the Tribunal has held that the claimant is an employee. In other cases the Tribunal has held that the claimant is not an employee.

This variation is not altogether surprising because the precise circumstances of a claimant differ from case to case and there is no precise statutory or common law definition of an employee which is bound to produce a wholly predictable result.

These two appeals provide the Appeal Tribunal with an opportunity to consider the legal position of such claimants. Counsel suggested that the Appeal Tribunal should attempt to formulate a test or to frame guidelines for the assistance of legal advisers and of future Industrial Tribunals in an attempt to improve on the predictability and consistency of conclusions. The history of case on the more general question as to who as an employee show that it is impossible to devise a single or simple foolproof test which would accommodate both the principles of certainty which give priority to predictability of result and consistency of conclusion and the principle of justice which requires some space for the operation of circumstances in individual cases.

There is much to be said for abandoning the request for a single test and for approaching the issue of employee status from a number of different directions. Light will be thrown on the issue by asking a series of different questions - Is the claimant under the control of another? Is the claimant an integral part of another's organisation? Is the claimant in business on his own behalf? What is the economic reality of the relationship between the claimant and the person he claims to be his employer? Is there mutuality of obligation between them? What is their respective bargaining power? and so on. In many cases the answers to these questions are helpful in resolving the immediate case, thought it must always be borne in mind that -

(1) the issue is coloured by the context in which the question of the claimant's work status has arisen; and

(2) the questions asked will produce answers which highlight different factors operating in any given situation. Some factors will point to an employment relationship, some will point away from such a relationship. The decision-making body has to consider the potential relevance of all these factors and decide what weight to give to each of them, how to evaluate them and how to balance one against the other in order to arrive at a conclusion.

In this judgment we propose to focus on the particular question whether a Tribunal can ever be legally justified in concluding that a majority shareholder of a company is an employee of the company.