United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS McCORRY (Solicitor) Messrs Talfourds Solicitors Crown House 40 North Street Hornchurch Essex RM11 1EW


 


JUDGE C SMITH QC: This is an application by PHDS Limited who were the First Respondents before the Industrial Tribunal, for leave to proceed to a full hearing of their appeal against the decision of the Industrial Tribunal by a Chairman sitting alone, held at Stratford on 10 October 1997, when the Industrial Tribunal held that the Applicant before them, Miss J.B. West was employed by the First Respondent under a contract of service, so that the Industrial Tribunal had jurisdiction to adjudicate upon her complaint of unfair dismissal.

The Industrial Tribunal also held that the Second Respondent, Rhone Poulenc Rorer, had not entered into any contract with the Applicant, so that they were not a proper Respondent to the claim by the Applicant for unfair dismissal. The decision was a Reserved Decision.

We have listened to the submissions that have been addressed to us this morning by Ms McCorry on behalf of the Applicant, and we have reminded ourselves that, if we think there is an arguable point of law, then the matter should be allowed to proceed to a full hearing. The suggestion is made to us that the learned Chairman in carrying out the balancing exercise gave far too much weight to the business test and did not take properly or fully into account, or sufficiently into account, matters which went towards showing that the Applicant was self-employed and not an employee. Reference was made to the decision of the Employment Tribunal in the case of Knights v Anglian Industrial Services (EAT/640/96) and it was suggested that the Chairman had not properly followed the Court of Appeal decision on McMeechan v Secretary of State for Employment {1997] ICR 549. We have taken those submissions into account in our consideration of the matter.

In what was plainly, in our judgment, a very careful decision, the Chairman set out the relevant facts at paragraphs 2 to 11 of his decision and reference should be made to those very detailed findings should this matter proceed any further, since all that we say now is really no more than a summary of the detailed findings which he made.

In paragraphs 3 to 5 inclusive the Chairman analysed, carefully in our judgment, the form of contract which the Applicant had entered into with the First Respondent. He found, as a fact, that she did not read it, and its contents and effect were not ever explained to her, nor was she invited to confirm her acceptance of its terms, although, of course, he also found that she was bound by it as she had accepted the contract.

It was, apparently, on its face, a purchase order upon which, on the reverse, were set out the terms and conditions of the Applicant's engagement with the First Respondent. Under the statement of terms apparently, the Company is the First Respondent, the Applicant is the contractor and the Second Respondent is the Company to whom the Company, namely the First Respondent, offers to sell the services of the contractor.

This is the kind of nomenclature which the agreement uses and which the Chairman carefully considered. The Company undertakes the obligation to pay for the services at an agreed hourly rate. Contained within the agreement there was required an acknowledgement that no contract of service is thereby created between the contractor, ie the Applicant and either the First or the Second Respondents. At paragraph 6 the Chairman set out the terms of the back to back contract between the First and Second Respondents.

Against that contractual setting the Chairman found that in 1987, the Applicant, having contacted the First Respondent, discovered that there was a job available as a Document Controller/Technical Clerk with the Second Respondent, then known as May & Baker Ltd. She was interviewed by Mr Flynn, the Drawing Office Manager of the Second Respondent and offered the job. She worked at his direction and under his control for six to seven years until his retirement and then in the same way with his successors until the time of her dismissal in February 1997. She completed time sheets. which were countersigned by Mr Flynn, sent by the Second Respondent to the First Respondent and she was then paid by the First Respondent who made the appropriate deductions for tax and National Insurance contributions.

The Chairman found that the Applicant, herself, was uncertain of her status but, at no stage, did she regard herself as an independent contractor or self-employed. It is a fact, as the Chairman found, that she worked exclusively for the Second Respondent until, without any warning, her engagement was terminated by notice given by her Manager at the Second Respondent. She was given time sheets which enabled her to claim two weeks pay and the First Respondent promised to find her another job, but nothing materialised.

The Chairman then set out what he considered to be the relevant law at paragraphs 12 to 15 of his decision. He cited important passages from Market Investigations Ltd v Minister of Social Security [1969] Q.B. 173, and also, a very important passage in Hall v Lorimer [1994] ICR 218, which in turn cited with approval, a passage from the judgment of the then President, Mummery J, including a very important citation to this effect, from what Vinelott J said in Walls v Sinnett [1986] 60 TC 150, 164:

"It is, in my judgment, quite impossible in a field where a very large number of factors have to be weighed to gain any real assistance by looking at the facts of another case and comparing them one by one to see what facts are common, what are different and what particular weight is given by another tribunal to the common facts. The facts as a whole must be looked at, and what may be compelling in one case in the light of all the facts may not be compelling in the context of another case."

The learned Chairman then specified, with precision, the issues which he had to determine at paragraph 16 of his decision and in paragraph 17 he carefully analysed the commercial effect of the agreements and noted that the position might have been different if the Applicant had been mindful of the full implications of the arrangement. He accepted however, that the agreements could not be disregarded as a sham since they had legitimate commercial purposes.

He noted in the course of his definition of the issues, in paragraph 17 that, as he put it:

"She [the Applicant] gained the advantage afforded by the higher rates of pay, albeit that she suffered the disadvantages coming with that in the absence of sick pay, paid holidays and the like."

The Chairman then went on to consider the decision of the Court of Appeal in McMeechan v Secretary of State for Employment [1997] ICR 549 and quoted the headnote, i.e. the ratio of the decision as set out in the headnote. In particular, of course, included within the headnote was this citation:

"... that whether the individual engagement in respect of which the applicant's claim was made amounted to a contract of service, though essentially a question of fact and degree, largely fell to be determined on the interpretation of the conditions of service in the context of the specific engagement."

And the Chairman noted that he was concerned here with a single engagement lasting, in fact, for almost exactly ten years. He went on to note particularly the case of Knight and he obviously read the case of Knights v Anglian Industrial Services, a transcript of which was plainly before him and he took it fully into account. He accepted that his decision could not be readily reconciled with the decision on the particular facts in that case by the Industrial Tribunal, but he dealt with that by reminding himself that, to seek to make a point by point comparison would be to attempt an inappropriate task and he reminded himself of the passage which he had already quoted from Hall v Lorimer, but he continued in this way:

"I have, however, paid careful attention to the points raised in that case [the case of Knights] but they do not persuade me to reach a conclusion other than that to which I am driven by the evidence and by a consideration of the authorities."

The Chairman then addressed two questions, which he regarded as being relevant, the first question being, "who is the employer"? It is fair to say that, perhaps more logically, he should first of all have addressed the second question to which he addressed himself, that is to say whether Miss West was or was not an employee, but no point can really be taken by way of objection to the way in which the Chairman approached the matter.

He dealt with his first question, as he put it to himself in paragraphs 22 and 23 of his decision and he concluded that the employer was PHDS for the reasons he then gave. Then he turned to what is the crucial question, of course, which he had to decide, namely the status of Miss West and he dealt with the matter in this way in paragraphs 24 and 25:

"24 When turning to the question of the status of Miss West within the contract, I have no difficulty in finding that she was an 'employee'. That conclusion would have been the same had it been found that the relevant contract was between Miss West and Rhone Poulenc. She provided her time and effort in return for a wage and she followed instructions given her; she was, in all respects, fulfilling a role indisguishable from that of the ordinary employee. The only difference lay in the form of the contract under which she was engaged and paid. Whilst Miss West must be presumed to have consented to the terms of the document, I attach little weight to that fact or to the document itself because it does not accurately reflect the reality of the situation. It is now so well established as to be trite law that a thing does not become so just because the parties agree to call it so. It was clearly drafted for a very different situation and could not have been considered, by either party, properly to reflect the agreement reached. The place to work and the equipment by which she carried out her duties were provided to her; she had no opportunity for profit and she bore no risk of loss. By no stretch of the imagination could she be said to have been in business on her own account so as to be treated as an independent self-employed contractor.

25 When a status is chosen for Miss West [as it should read. In fact it says 'Miss Kelly' in error] as being employed either under a contract of service or a contract for services, I have no doubt that it is the former. She was, to use an accurate if somewhat dated term, a servant; there to do as she was told, what, when and how. A 'servant', or person employed under a contract of service, is a term which is entirely apt to describe her status and 'independent contractor' entirely inapt. No third category is suggested which is neither one nor the other and it is difficult to conceive of a description of status better suited to the reality of Miss West's situation than that of a servant."

In our judgment, at the end of the day, it must be a matter for the Chairman to decide what weight he is to give to the varying and variety of factors which he has the duty of weighing up and evaluating in any given case. In our judgment it cannot be said that he did not take into account the terms of the contract itself, because he clearly did, but concluded that they should not be given very much weight in the circumstances. In our judgment it cannot be said that he did not have in mind the fact that she did not get holiday pay or sick pay and that she obtained the advantages afforded by the higher rates of pay.

All those matters were weighed up by the Chairman. In our judgment, on a careful reading of the difficult decision of McMeechan v Secretary of State for Employment,, the learned Chairman was following the approach set out by Waite LJ in that decision. He was considering what was, in effect, a single engagement claim and, in our judgment, on careful consideration of the passages from the learned Lord Justice's judgment, particularly at page 563 to page 565, at the end of the day it must be, as the learned Lord Justice said a question essentially one of fact or degree on the construction of the specific engagement, whether or not the person concerned is self- employed or an employee and there is nothing in our judgment in that authority which causes us, in any way, to detect any flaw in the reasoning of the learned Chairman in this case. Indeed, he was careful to cite the headnote from McMeechan.

So that for those reasons, in our judgment, we can find no arguable error of law in the way in which the Chairman dealt with this difficult case. At the end of the day this was a case where the Applicant had worked for the same organisation for a period of ten years on a single engagement and in those circumstances, in our judgment, there was considerable merit, apart from accuracy in law, in the conclusion which the Chairman reached. For those reasons accordingly, this application must be dismissed.