United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR B ROCHE (Of Counsel) Messrs Sandom Robinson Solicitors 226 Rye Lane Peckham London SE15 4NL
For the Respondent	MR J BACON (Of Counsel) Messrs Hamlin Slowe Solicitors Roxburghe House 273-287 Regent Street London W1A 4SQ


 


JUDGE CLARK: This case raises yet again the vexed question of whether a person is employed under a contract of service within the meaning of Section 230 of the Employment Rights Act 1996, or whether he was engaged under a contract for services.

The issue arose in this way. Prior to 13 June 1994 the Appellant was in business on his own account as a self-employed mini-cab driver. In June 1994 he applied for a job with the Respondent as a delivery driver. He was accepted and it was agreed between the parties that he would remain self-employed for a period of one year and thereafter become an employee. That agreement was not reduced into writing.

He was subsequently dismissed by the Respondent on 29 July 1996, according to his complaint presented to an Industrial Tribunal thereafter. It was said that that dismissal was unfair. In his complaint the Appellant relied upon a period of continuous employment of more than two years from 13 June 1994 until 29 July 1996. In response the Respondent contended that the period of employment did not commence until 24 March 1995, and that accordingly he did not qualify for unfair dismissal protection. In the alternative, the Respondent claimed that he was not dismissed, or if he was, the dismissal was fair, or in the further alternative, that he was not entitled to any compensation if it was an unfair dismissal.

The matter came before a Chairman, Mr G W Davis, sitting alone at London (South) on 27 January 1997, on the preliminary issue of whether the Appellant had completed two years continuous employment.

The Chairman correctly directed himself in law; he was required to look at the overall picture in order to discern whether, for the period 13 June 1994 until early April 1995, the Appellant was employed under a contract of service. He reminded himself that no one factor is conclusive, nor is the label which the parties choose to put on their arrangement.

The Chairman set out his relevant findings of fact at paragraph 5 of his Extended Reasons dated 3 March 1997. We can do no better than to set them out in extenso:

"5. I find the following facts.

(i) Prior to 13 June 1994 the Applicant was in business on his own account, self- employed as a mini-cab driver. He had worked in this way for some 3½ years.

(ii) In or about June 1994 the Applicant applied for a job with the Respondent as a delivery driver. The Applicant agreed with the Respondent that he would remain self-employed for a period of one year and thereafter would become an employee. The Respondent agreed to this suggestion.

(iii) For the purpose of carrying out his work the Applicant was provided with a company van and he was allowed to use this for travelling to and from work.

(iv) The Applicant was paid a set amount of £225 per week without any deductions and the Applicant was also entitled to overtime payments from time to time.

(v) The Applicant completed his own accounts and accounted to the authorities for income tax and national insurance contributions.

(vi) The Applicant's hours of work were between 8.00 am and 5.00 pm subject to the need to work over-time hours. The Applicant was entitled to five weeks' holiday. The Applicant had only had one day off for sickness and this was counted as a holiday day.

(vii) Some six or seven weeks after commencing with the Respondent the Inland Revenue raised various queries with the Respondent company. One of these queries was whether in fact the Applicant was genuinely self-employed.

(viii) In order to convince the Revenue that the Applicant was in fact genuinely self-employed it was agreed between the Applicant and the Respondent that he would be called a "type setter". The Respondent produced new invoices headed "M & T Typesetters" examples of which are shown in the Applicant's bundle commencing at A12.

(ix) From 3 September 1994, the Applicant then submitted M & T Typesetters invoices to the Respondent showing that he had supplied typesetting services to the Respondent and seeking payment therefore. In fact the Applicant did not do any typesetting work but continued as before to work as a delivery driver.

(x) The Applicant continued to account to the Revenue for his own income tax.

(xi) At the beginning of April 1995 the Applicant agreed with the Respondent that he would become an employee of the Respondent company and would be paid subject to PAYE deductions.

(xii) The Applicant completed a form entitled "Form to be completed by new employees" as R11. He was given a letter confirming that he would join the Respondent as a delivery driver. That letter was dated 24 March 1995 and appears at R12.

(xiii) It is not in dispute between the parties that from 3 April 1995 to 29 July 1996 the Applicant worked for the Respondent as an employee.

(xiv) There was no written contract or formal letter of appointment dealing with the Applicant's position between 1994 and April 1995."

The Chairman was plainly concerned about the false invoices created for Inland Revenue purposes. He made these observations at paragraph 7:

"I have been concerned by the change in title from delivery driver to typesetter and particularly by the introduction of the typesetters invoices in September 1994. In fact the Applicant continued with his work as a driver and never did any typesetting. This was clearly a device and I have considered whether or not there could be said to have been an illegal contract. The arrangement was certainly deceitful but I accept that there was no tax evasion and I cannot find that this was an illegal contract."

Finally the Chairman expressed his conclusion on the preliminary issue in this way at paragraph 10 of the reasons:

"..... In my judgement, between 13 June 1994 and 2 April 1995 the Applicant was self-employed and was in business on his own account."

It is well established that the question as to whether an employee is employed or self- employed, (absent a written contract, Davies v Presbyterian Church of Wales [1986] ICR 280) is essentially one of fact for the Industrial Tribunal Lee v Chung [1990] ICR 409. An appellate court or tribunal can only interfere where it is shown that the decision is perverse in the Edwards v Bairstow [1956] AC 14, sense. Such a finding was made by the Privy Council on the facts in Lee v Chung. Even where the parties have reduced their agreement in writing, it is still necessary to determine whether the totality of the written conditions did create a contract of service or for services - Meechan v Secretary of State for Employment [1997] IRLR 353.

The submissions before us follow predictable lines. For the Appellant it is said that the factors found by the Chairman point so obviously to the conclusion that this was a contract of service throughout that the decision may properly be described as perverse in the legal sense. For the Respondent it is submitted that the Chairman took into account factors going both ways and reached a permissible conclusion with which we ought not to interfere. Mr Bacon has reminded us of the test of perversity identified by Lord Donaldson MR in Piggott Bros Ltd v Jackson [1992] ICR 85, 92. We entirely accept that it is not for us to interfere because we would have reached a different conclusion sitting as an Industrial Tribunal; or because we think that the Chairman's conclusion is in some way against the weight of the evidence.

We have also considered the Court of Appeal's approach in Massey v Crown Life Insurance Co [1978] ICR 590. We distinguish the outcome of that case on its facts in that first, Mr Massey was, in the judgment of Lord Denning MR, more akin to a commission agent than an employee originally; secondly, that he entered into a genuine arrangement to become self-employed with his employer and thirdly, that he entered into a written agreement to that effect.

In our judgement this is one of those very rare cases where we are all of us driven to conclude that the finding by the Chairman that the Appellant was not employed by the Respondent between June 1994 and April 1995 is indeed perverse. It is an impermissible option on the primary facts as found.

There is no evidence to support the conclusion that the Appellant was in business on his own account, other than the consequences of the arrangement entered into between the parties, that the Appellant be treated as self-employed for tax and National Insurance purposes during the first year of employment. He received a flat-rate payment plus overtime payments. He had fixed hours of work. He was provided with all the necessary equipment. He took no business risk. He was part of the Respondent's organisation. No doubt he made deliveries as directed. There is no finding that he was not permitted to work elsewhere.

When the Inland Revenue queried his self-employed status, the parties went to elaborate lengths to disguise the true position by producing false invoices, suggesting that the Appellant was supplying typesetting services when he was doing nothing of the sort. That device, as the Chairman described it, was plainly designed to disguise the simple fact that the Appellant was an employee.

At the beginning of the 1995 tax year he was put on the books as a PAYE employee with no other significant alterations to his working arrangements.

In these circumstances we are bound to allow this appeal and substitute a finding that the Appellant was continuously employed for more than two years, prior to the termination of his employment on 29 July 1996, and to remit the matter to a fresh Industrial Tribunal for determination of the further issues outstanding between the parties.