United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P CHAPMAN (Solicitor) Messrs Shirtcliffe & Co Solicitors 53 Market Place Thirsk North Yorkshire Y07 1HA
For the Respondents	MR J S MARSH (Consultant) LPMS Ltd Merchants House 1 -7 Leeds Road Windhill Bridge Shipley West Yorkshire BD18 1BP


 


JUDGE D PUGSLEY: This is an appeal from a decision of the Employment Tribunal sitting at Middlesborough on a decision promulgated on 20 February 1997.

The factual background arose from the claim by Mr Gettings that he had been employed as a decorator/handyman at the home run by the Respondents and that he was unfairly dismissed for refusing, on two occasions, to collect bread for the home. The company's defence was, first that the Applicant was not an employee of the company, second that, if he was an employee, that that contract was tainted with illegality and, thirdly, if he was employed, under a lawful contract of employment, he was not dismissed. In the event, the Tribunal did not consider the third of those arguments by reason of its findings on others matters.

It is perhaps the simplest course merely to quote the decision of the Tribunal:

"3 The applicant's involvement with the Company began in 1994 when he was already self-employed as a carpet fitter but his business with shops occupied him for only two days a week. Accordingly, when offered he took an engagement as a decorator at the Home on the basis of 20 hours a week such hours to be chosen by him at £4.00 an hour on the understanding that his own carpet fitting business would have priority and that he would come and go at the Home as he pleased. He had no holiday entitlement and provided his own tools. Initially he was paid under PAYE for Income Tax purposes but in May 1995 he asked the Company if he could received his payments gross so that he could account for tax thereon at the same time and on the same basis as for his carpet fitting takings. The Company agreed and thereafter they did not deduct any Income Tax until termination of the applicant's engagement. In the meantime his pay was increased to £4.12 an hour and his hours from 20 to 30 a week when the previous part-time handyman was made redundant so that the applicant took on his duties and the Company began to use the services of a Saltburn painting and decorating contractor.

4 It should also be noted that in the summer of 1996 the applicant did some carpeting work for the Company at one of its homes in Darlington. This led to a dispute as to the applicant's charges and he was not paid for that work until after he had engaged the services of a debt collecting agency. The applicant alleges that it was this which led to the termination of his services at the Home on 23 September 1996. In view of our findings on the question of the applicant's being employed or not we do not need to go into such termination in any detail. Suffice it to say that when on the 20th and again on the 23 September 1996 the applicant was asked to collect bread for the Home he refused because, he says, this was not part of his job. The same reason is quoted in his written statement, at this hearing he for the first time said that the reason was because he was decorating a bathroom at the time. In consequence he alleges that he was dismissed. The Company denies this.

5 On the question of illegality Mr Marsh submitted that the applicant's alleged Contract of Employment had an illegal object and that the applicant had deliberately avoided payment of Income Tax on his earnings from the Home from 1995/96. The applicant on the other hand produced documents which showed that tax had been paid by him. The result is that we are satisfied that the applicant's Contract had no illegal purpose and required no illegality in the manner of its performance.

6 As to whether the applicant was an employee within the definition of Section 230 of the Employment Rights Act 1996 Mr Marsh stressed that the applicant had provided his own tools, came and went as he pleased, did not pay tax under Pay As You Earn, had no holiday entitlement and no fixed hours. In the circumstances and viewing the facts as a whole we have no hesitation to find that the applicant was not an employee. The pity is that this hearing could have been avoided had the applicant been given a proper letting setting out the terms of his engagement when he was first appointed."

The Appellant, in the form now of Mr Chapman, argues that the Tribunal erred in law in that it did not direct itself properly on the test to be applied and distinguish between a contract of employment and a contract of services. It is pointed out that the Industrial Tribunal gave five reasons for holding the Appellant was not an employee, namely; he provided his tools, came and went as he pleased, did not pay tax under PAYE had no holiday entitlement and had no fixed hours. But it is contended that that position was shared by other persons, accepted as being employees. It is pointed out, the fact that he did not pay tax under PAYE is compatible with the status of being an employee and the case of Young v Woods & West [1980] IRLR 201 is cited.

The Industrial Tribunal, it is said, failed to take into account various factors relevant to the issue, namely, that the Appellant always received pay slips describing him as an employee, he had an employee works number, he received a pay rise and a Christmas bonus, he received a P60 form, he received a PAYE notice of coding, he was under the control of the Respondent during his hours of work and, it is said, the employer - self-employed distinction was highlighted by the different ways the Appellant was paid for decorating work and carpet-fitting work. Moreover, it is said, the Respondents assertion of illegality is consistent only with a contract of service.

We have to say that at times, we thought, Mr Chapman, appearing for the Appellant, was straying into the area of really alleging perversity and that is not a ground of appeal and we have no Chairman's notes. We are grateful that Mr Marsh who, unlike Mr Chapman, appeared at the initial hearing, has pointed that he does not accept that the evidence before the Tribunal was, in every respect, as is alleged by the Appellant in the skeleton argument.

The test of whether someone is under a contract of service, or contract for services, is a difficult one. The distinction is not one that it is easy to define. There have, over the years, been a number of decisions as to the fundamental test that should be applied. One of the traditional tests was whether the contract of service was dependant, in part, on the control of service exercised by the employer, but the nature of the control test is not an absolute one. Indeed, many, many years ago, Denning LJ, in the case of Stephenson, Jordan & Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101, 111, said:

"It is almost impossible to give a precise definition of the distinction. It is often easy to recognise a contract of service when you see it but difficult to say wherein the difference lies. A ships master, a chauffeur and a reporter on the staff of a newspaper are all employed under a contract of service, but a ships pilot, a taximan and a newspaper contributor are employed under a contract for services. One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business whereas under a contract for services his work, although done for the business, is not integrated into it but is only necessary to it."

In ReadyMix Concrete (SE) Ltd v Ministry of Pensions & National Insurance [1968]2QB Div 497 McKenna J used a multiple test when he said:

"A contract of service exists if the following three conditions are fulfilled:-

1 A servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in performance of some service for his master;

2 He agrees expressly or impliedly that in the performance of that service he will be subject to the others control in a sufficient degree to make that other the master;

3 The other provisions of the contract are consistent with being a contract of service."

More recent cases, such as Mark Investigations Ltd v Ministry of Social Security [1969]2QB 173, 178 have emphasised the test of whether it is a business trading on its own account. In all cases there are a host of matters to be taken into consideration. Perhaps the most pithy test is to ask the Applicants' honest answer to the question, "are you your own boss?" - a test formulated by Peter Bristow J in Withers v Flackwell Heath FC [1981]IRLR 307. There is a difficulty about any comprehensive definition but there is a general acceptance that, at the core, the test, pithily put by Bristow J, "are you your own boss?" is a matter that has to be considered.

In Hall v Lorimer, a decision of Mummery J, affirmed on appeal in the Court of Appeal 1994, ICR 218, at 226, the following citation from Mummery J was approved:

"In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work. This is not a mechanical exercise of running through items on a checklist to see whether they are present or absent from a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall affect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and making an informed, qualitative appreciation of the whole. It is a matter of evaluation of the overall affect of the detail which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation, the details may also vary in importance from one situation to another. The process involves painting a picture in each individual case."

There is a plethora of cases as to whether or not it is an issue of fact or law as to whether a person is an employee and various cases, both sides of that dispute, can be cited. We have avoided going in to that detail because it is accepted, quite rightly if we may so, by both advocates that, whether or not the correct test to distinguish the employed from the self-employed in being applied is as a matter of law; when the right test has been applied conclusion to be drawn is usually regarded as a question of fact; and it is not for this Court to intervene in the findings of the Industrial Tribunal. It is the Industrial Tribunal, now the Employment Tribunal, which is the fact-finding body.

The difficulty we have and, if we may say so, we are refreshingly assisted by Mr Marsh, for his candour and professionalism, is to find exactly what test it is that the Tribunal was applying. Mr Marsh has, very helpfully, referred us to the well known case of O'Kelly v Trusthouse Forte Plc [1983]IRLR 369. It is unnecessary for us to deal with the wider issues which that case decided as to the power of the EAT, but is worth noting that this was the direction of the Industrial Tribunal:

"What we derive from the authorities is that the Tribunal should consider all aspects of the relationship, no single feature being in itself decisive and each of which may vary in weight and direction and, having given such balance to the factors as seem appropriate, to determine whether the person was carrying out business on his own account."

Now, there is no such formulation of the test in this case. We are well aware of those decisions which rightly say the Industrial Tribunal's decisions should not be subject to myopic scrutiny and, when a case has died at the Tribunal, this Tribunal pour over the entrails of the corpse to see whether it can resurrect some sort of case. But, of course, while one should not comb through a decision, the parties have a right to know and an Appellate Tribunal has a right to know, in broad terms, why the party won and why the party lost, with sufficient particularity to see if any error of law can be identified.

We wish to make it very clear, and do so, that in no way are we suggesting that it would be right for us a) to reverse the Employment Tribunal's decision and to come to the view that the Applicant was an employee. That would be quite wrong. The arguments that were put on the findings of fact made by the Tribunal, by Mr Marsh, were persuasive. But what this Tribunal's decision lacks is any summation of what the relevant principles are and any balanced portrait at all of what the reality of the case was. It is true that the Tribunal made certain findings of fact but these were hardly placed in the context of any overall overview.

What the Tribunal has done is to note various aspects of the matter but it has never, ever, set out a comprehensive test and said, "well, applying that test we have come to this decision". What it has done is to allow its conclusions to become its reasons and to invert the fact-finding and judicial process into selecting certain items.

We think this case is fundamentally flawed. As Mr Marsh put it 'it was not so much a question of being the wrong direction as no direction' so it is almost impossible for anyone to say, with any degree of certainty, what this Tribunal had in mind as being the test. What we have here is an assertion not a judicial decision based on the application of a direction of law on to particular facts. We wish to make it very clear that in remitting this matter, as we do, to a differently constituted Tribunal we are not, in any way, giving any hint either way as to how that matter should be determined.

There is one matter which we will mention: this is now the third appearance of the Appellant before an Employment Tribunal of some sort. It is the second appearance of the Respondent. If this case goes back, as we direct it must, to a differently constituted Tribunal, there are a number of issues to be resolved: the issue of whether the applicant is an employee; the issue of whether there was dismissal, the issue of whether, if there was a dismissal, it was unfair and, of course, if it was held to be unfair a whole range of issues such as contribution and the like become relevant.

We genuinely would abhor any thought that we are putting pressure on either of the parties to do anything but we do note, with sadness, that a jurisdiction that was there to give an economic and expeditious way of resolving disputes should have led to such protracted proceedings. It is always open to the parties to consider whether there are alternatives to litigation. We are sure that the integrity of this Tribunal will be accepted when we say, as to the merits we know nothing and we are making no judgment, but as to a position which has arisen in this case we regret the inconvenience and expense that has been occasioned to both parties.

Costs

I have the benefit of sitting with two members who have sat on this Tribunal for many years and their experience, identical to my own, is that an application for costs in these circumstances is without precedent. What Mr Chapman is saying, effectively, is the Respondent should have conceded the appeal. The precise test set out in Order 34 of the Employment Appeal Tribunal Rules 1993 is:

"(1) Where it appears to the Appeal Tribunal that any proceedings were unnecessary, improper or vexatious or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings."

We do not consider that by any stretch of the imagination and, however great our sympathy for the Appellant, this is an appropriate case to make an award for costs. It is true that Mr Marsh did not argue the unarguable when he saw which way the judicial wind was blowing - we consider it would be wholly wrong to penalise him for his reasonableness. This was a decision of a Tribunal. There were words in which could be said to be the Tribunal 'groping' at the test if not stating it. The area of law as to the power of the EAT to intervene in cases such as this is one of great contention and controversy and we certainly do not think this is an appropriate case for an award of costs.