United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	Ms R Edgar, Representative Of- Scottish Employment Rights Network 24 Sandyford Place GLASGOW G3 7NG
For the Respondents	Mr I D Truscott, QC Instructed by- Glasgow City Council Legal Services City Chambers GLASGOW G2 1DU


 


MR JUSTICE LINDSAY (PRESIDENT):

We have before us the appeal of Mrs Christine MacFarlane and Mrs Tamara Skivington in the proceedings MacFarlane and Skivington v. Glasgow City Council. The two Appellants appear by Ms R.Edgar and the City Council by Mr I. Truscott, Q.C. The appeal raises the issue of whether the two Appellants, qualified gymnastic instructors, were employees properly - so-called of the City Council.

1. In July 1998 each Appellant lodged an IT1 claiming unfair dismissal and constructive dismissal. Each had been presented with a new form of contractual agreement which, in her view, significantly changed her terms of employment. Each declined to accept the new form. Each said that if she had signed the new form it would have made her self-employed. The Council's case was that that had been the position all along. The case was put out for a preliminary determination as to whether the Applicants had no right to bring the proceedings. There was a hearing at Glasgow on 20th and 21st April 1999 under the Chairmanship of Mr H J Murphy. The decision was sent to the parties on 5 October 1999. Whilst it is expressed as unanimous it is clear that one member dissented on part of the approach and it was, if we may so put it, a close run thing. The decision was that the Applicants were not employees and hence were unable to claim for unfair dismissal. On 15 November both Applicants appealed. Before turning to the appeal in any detail it would be as well to set the scene by reference to the Tribunal's findings. The Tribunal held:-

"The respondents are Glasgow City Council who operate a number of recreational and sports centres. For many years they have made use of the services of gymnastic instructors whom they have traditionally paid on a sessional basis. Both applicants are gymnastic instructors and hold appropriate qualifications from the governing national body of which they are members. For a number of years prior to 1991 the first named applicant carried out work on a casual basis for the respondents and was paid an appropriate hourly rate. Until 1991 she would work only a few hours per week for the respondents, and did not see herself as an employee of the respondents."

A little later, in relation to the second named Applicant the Tribunal continued:-

"During the period between 1991 and 1994 she too worked for the respondents as a gymnastic instructor for 3 or 4 hours per week, but in or around September 1994 a third coach, who worked for the respondents, went abroad and the second named applicant commenced to undertake the work formerly done by that coach."

The Tribunal then turned to the manner in which the two Applicants were paid:-

"Until roughly 1991 or 1992 the first applicant was paid gross without deduction of tax or national insurance. In or around 1991 or 1992, as a result of pressure exerted on them by the Inland Revenue, the respondents deducted tax and class 1 national insurance contributions from their payments to the applicants as if the applicants were their employees. In addition, the respondents paid the appropriate employer's contributions to the national insurance fund.

From 1991 onwards there was a considerable increase in the demand for training in gymnastics within the city of Glasgow with an increase in the number of gymnastic programmes run by the respondents and an increase in the demand for the services of appropriately qualified gymnastic coaches, such as the applicants."

2. The Tribunal then described how coaches would be appointed by letter with attached terms and conditions added to the letter. The Tribunal, on this subject held:-

"Occasionally it happened that the appropriate letter of appointment would not be issued at the beginning of each term, but a pattern developed whereby the applicants came to understand that their services would be required in connection with the coaching of certain gymnastic classes and they would turn up for these classes, even if no letter of appointment had been received by them. They would then take the class.

Finally, the respondents attempted to regularise the relationship between themselves and the coaches and sent to both applicants a document in the form of A11 the terms of which were not acceptable to them and which they declined to sign."

Continuing with findings of the Tribunal, the Tribunal held:-

"There is no doubt that the respondents, in conjunction with the sports governing body, specified the courses which were to be taught by the applicants, and provided the venue, equipment and support staff who were required to put the equipment in place at the beginning of each session. The applicants, moreover, were required to wear uniforms provided by the respondents. The respondents also monitored the work of the applicants.

In order to be paid, the applicants would complete a timesheet, which they would submit to the respondents. They would then be paid for the number of hours worked by them. Subsequent to 1992, they were - in effect – on the respondent's payroll. Each of the applicants, however, were required to have their own public liability insurance."

3. Next came a provision to which great importance was attached as will later appear; the Tribunal held:-

"If for any reason, one of the applicants was unable to take a class, she would contact a replacement from the register of coaches maintained by the respondents, and arrange for her class to be covered by a member on the register."

It is to be noted that it was the applicant who was enabled to select the replacement coach rather than the Council, but that the substitute had to come from the Council's list. The arrangement for the replacement was made by the applicant not the Council. It is to be noted, too, that this provision for substitution would only be available where an applicant was "unable" to take a class, albeit that the inability could be "for any reason".

4. The Tribunal then turned to examining whether the applicants viewed themselves as employees. Lord Hoffmann's important speech in Carmichael & Anor v National Power plc [2000] IRLR 43, shows how a party's subjective understanding of what had been agreed cannot in all cases be laid aside as irrelevant in the objective search for what agreement, if any, has been reached. However, it is important to note that in Carmichael both sides agreed the essential fact that the employer was under no obligation to provide work and the individuals under no obligation to perform it. By contrast, in our case the Tribunal accepted that Glasgow City Council never saw the Appellants as employees. It may therefore be that the Tribunal attached too much importance to whether the Appellants viewed themselves as employees. For all that, the question was examined. The Tribunal said:-

"The Tribunal was divided on this issue. One of our members took the view that the applicants did indeed see themselves as employees of the respondent's: she took the view that the fact that the applicants worked at times and places fixed by the respondents, carried out work the content of which was determined by the respondents to standards again fixed by them (though agreed with outside supporting bodies), where monitored by the respondents, wore uniforms, which identified them as the respondents' personnel, that they were fully integrated into the respondents' organisation, that they paid PAYE and national insurance contributions appropriate to employees, rendered probable the applicant's statements that they saw themselves as employees of the respondents.

The majority did not feel able to acquiesce in this view. Though recognising the full force of the considerations outlined by the minority, they took the view that the fact that the applicants well knew that they were not entitled to sick pay, holiday pay, pensions, and the fact that the respondents' failure to pay holiday pay was a source of grievance for some time, left them unconvinced that the applicant's truly saw themselves as employees of the respondents."

The issue was one of fact involving credibility of individuals who had given oral evidence. The majority plainly felt unable to hold that the appellants had viewed themselves as employees.

5. Then we come to the area most attracting criticism on the part of the Appellants; the Tribunal in their last full paragraph held as follows:-

"We must say that the picture, formed by the accumulation of detail in this case was largely and (particularly in the case of one of our members) an image of the applicants being employees of the respondents, but for one factor. It was indisputably the case that, if either of the applicants were unable to attend work, in the first instance, she would arrange for a substitute from the register of coaches maintained by the respondents. Occasionally the respondents would, themselves, organise a replacement, but the normal practice was undoubtedly for the coach to organise a replacement for him or herself, and the Tribunal asked themselves whether, in the light of the dicta and decisions in Ready Mix Concrete (South East) Ltd v The Minister of Pensions and National Insurance [1968] 2 QB 497 and in Express and Echo Publications Ltd v Tanton [1999] IRLR 367, it could truly be suggested that the applicants were employees. Neither of these cases is exactly like the present case, because, in both those cases, the worker, who claimed the status of an employee, could employ a substitute at his own expense. In this case we were not implicitly advised of the payment arrangements, if one of the applicants organised a substitute, but it was implicit in what we heard that, in such circumstances, she would not claim payment for the services of the substitute leaving it to that substitute to claim payment from the respondents, and we asked ourselves, whether the said cases could be distinguished on that ground. We have concluded, however, that such a distinction would not be valid. The last mentioned case makes it clear that a contract of employment must necessarily contain an obligation on the part of the employee to provide his services personally. On the evidence, the applicants could arrange for substitutes to attend on their behalf and this right is inconsistent with the existence of the contract of employment, and we feel, therefore, bound to refuse the applicant's claims."

6. It is against that background that the Appellant's pleasingly concise Notice of Appeal says:-

"The Tribunal erred in law in applying the wrong legal test in determining whether contracts of employment existed. The Tribunal focused on the issue of the arrangements that were made when one of the instructors was absent to the exclusion of all other factors. The Tribunal followed the decision in Express and Echo Publications Ltd v. Tanton [1999] IRLR 367 CA. However in Tanton, there was an express agreement that the contractor provided a substitute, at his own expense, in the event of his being unable or unwilling to perform the services. In the case at hand, there was no such express agreement. Furthermore, when the appellants did assist in finding a substitute, they took no part in the arrangements to pay that substitute.

The conclusions drawn by the Tribunal from the evidence about the arrangements made to engage a substitute in the event of absence from work were perverse. It was not reasonable for the Tribunal to conclude that informal, irregular arrangements for providing cover in the event of sickness indicated the absence of an obligation to perform services personally."

7. A primary question before us is what should our approach be; do we have before us an issue of law, as to which we may override the Tribunal, or solely a question of fact, as to which the Tribunal is master? Reverting to Lord Hoffmann's speech in Carmichael supra at page 46 we find the following:-

"Thus the rule that the construction of documents is a question of law was well established when industrial tribunals were created and has been carried over into employment law.

It was this rule upon which the majority in the Court of Appeal relied as entitling them to say that the construction of the exchange of letters between the CEGB and the respondents, together with any terms which could be implied by law into the contract which they created, was a question of law."

A little later Lord Hoffmann continues:-

"But I think that the Court of Appeal pushed the rule about the construction of documents too far. It applies in cases in which the parties intend all the terms of their contract (apart from any implied by law) to be contained in a document or documents. On the other hand, it does not apply when the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct. In the latter case, the terms of the contract are a question of fact. And, of course, the question of whether the parties intended a document or documents to be the exclusive record of the terms of their agreement is also a question of fact."

8. There does not seem in our case to have been a reliance by either side on oral exchanges between the parties; at all events none is mentioned by the Tribunal. However, conduct was relied upon. The fact that the City Council paid National Insurance contributions and PAYE, the fact that letters of appointment were sometimes not issued before the opening of a term, the fact that a pattern developed, nonetheless, whereby coaches understood that they would be required for work, the fact that uniforms would be provided by the City Council and that the Appellants would be required to wear them were all matters that seem to have derived from evidence as to conduct. Equally the fact that the Appellants were required to provide public liability insurance seems not to have been covered by anything express which we have seen, nor anything that would have been implied by law. All those features appear to have been important considerations held by the Tribunal to be features of the relationship between the parties but deriving, as it would seem, from conduct. On that basis the question of what were the terms of the contract was a question of fact. Thus the Employment Appeal Tribunal's rôle is circumscribed; see for example, Lee Ting Sang v Chung Chi-Keung & Anor [1990] ICR 409 PC, where Lord Griffiths, at page 414, was dealing with a case where the relationship between the putative employer and employee had to be determined solely by investigation and evaluation of the factual circumstances in which the work had been performed.

Had the Tribunal stayed wholly within areas of fact its decision would be beyond challenge. However, the decisive feature, one that appears to have overturned the view that otherwise would have been taken, was in our view, contrary to Mr Truscott's argument, an issue of law. The Tribunal held, firstly, that the Applicants had a right to arrange for substitutes to attend on their behalf; secondly, that such right was inconsistent with a contract of employment and, thirdly, that therefore – that is to say, on that particular account - the Tribunal was bound to regard the Applicants as not employees. The Tribunal's reasoning had manifestly turned to points of law. Accordingly we are entitled to scrutinise it for error.

9. The Tribunal especially relied upon the recent Court of Appeal case already referred to, Express and Echo Publications Ltd v Tanton, supra. In that case there was a document called "An agreement for services" which Mr Tanton had refused to sign. It had within it a clause 3.3 which the Peter Gibson LJ (with whom Hurst and Auld LJJ agreed) described as follows:-

"Clause 3.3 of the agreement for services provided:

'In the event that the contractor is unable or unwilling to perform the services personally he shall arrange at his own expense entirely for another suitable person to perform the services.'

To this I should add what was contained in paragraph 13 of the schedule, where it is stated:

'In the event that the contractor provides a relief driver, the contractor must satisfy the company that such a relief driver is trained and is suitable to undertake the services.'

That right for Mr Tanton to provide a substitute driver was utilised by him from time to time and, exceptionally, throughout a period of six months whilst Mr Tanton was ill, Mr Tanton paying the substitute driver, though receiving remuneration from the appellant. Clause 3.3, as the chairman expressly found, is not a sham."

10. It is to be noted that that Clause 3.3 dealt inter alia with occasions when the individual was merely unwilling to perform though not unable to perform. The individual, in other words, could freely choose whether or not to turn up personally and there was no limit on how often that right might be exercised. Mr Tanton need never have turned up himself for work. The substitute, it is to be noted, was to be provided at the individual's expense and yet payment would continue to be made to that individual, Mr Tanton. Mr Tanton could freely choose anybody as a replacement so long as that substitute was "trained" and "suitable". The employer had no veto so long as those requirements were met. Mr Tanton had, in fact, exercised the right not only occasionally but also for a continuous stint of six months. Presumably it was, in practical terms, that exercise of the right that made it impossible for Mr Tanton to assert, on the ground that he had never signed the "agreement for services", that Clause 3.3 was not an effective term between him and the company. Peter Gibson LJ continued, after a review of the authorities:-

"In these circumstances, it is, in my judgment, established on the authorities that where, as here, a person who works for another is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer."

A little later Peter Gibson LJ continues:-

"But, for the reasons which I have given, clause 3.3, entitling Mr Tanton not to perform any services personally, is a provision wholly inconsistent with the contract of service which the chairman found the contract to be."

It is important to note that Mr Tanton was entitled not to perform any services personally.

11. The Tanton case is in our judgment distinguishable from that at hand for at least the following cumulative reasons. Firstly, the Appellants in our case could not simply choose not to attend or not to work in person. Only if an Appellant was unable to attend could she arrange for another to take her class. Secondly, she could not provide anyone who was suitable as a replacement for her but only someone from the Council's own register. To that extent the Council could veto a replacement and also could ensure that such persons as were named on the register were persons in whom the Council could repose trust and confidence. Thirdly, the Council itself sometimes organised the replacement (without, it seems, protest from the Appellant concerned that it had no right to do so). Fourthly, the Council did not pay the Appellants for time served by a substitute but instead paid the substitute direct. There is no finding as to what the substitutes were paid nor that they were paid the same as the Appellants nor that the Appellants had any say in what the substitutes were paid. These four grounds in our view provide ample reasons for the Tanton case to be distinguished but unfortunately only the last of the four was considered by the Tribunal in our case.
12. Without in any way meaning hereby to doubt the correctness of Tanton, which in any event we are not free to do, but having in mind the distinctions we have mentioned, we do not see that Tanton obliged the Tribunal in our case to hold the contract to have been one for services. We cannot regard a provision of the kind found by the Tribunal in our case to have such force that it had to be seen to overwhelm the factors pointing the other way; it was not such that it had inescapably to lead to a conclusion that the Appellants were not employees. We note that in the Ready Mixed Concrete (South East) Ltd case supra, MacKenna J, in a passage very frequently relied upon since, said with our emphasis:-

"Freedom to do a job either by one's own hands, or by another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be: see Mr Atiyah's Vicarious Liability in the Law of Torts (1967), pp.59-61, and the cases cited by him."

It would, for example, be easy enough to imagine a case where a person clearly to be taken to be an employee – say a schoolteacher employed by a local authority - might have in his or her contract a provision that if he or she was unable to take a class then he or she might arrange for another colleague from the local authority's common room in the school to take it for him or her. No one, surely, could say that the presence of such a clause would deny the teacher the label, otherwise appropriate, of being an employee. As Ms Edgar points out, it is, at the lowest, improbable that Parliament would have intended that the employer-employee relationship could be so easily avoided.

13. The relevant clause in Tanton was extreme. The individual there, at his own choice, need never turn up for work. He could, moreover, profit from his absence if he could find a cheaper substitute. He could choose the substitute and then in effect he would be the master. Properly regarded, Tanton does not oblige the Tribunal to conclude that under a contract of service the individual has, always and in every event, however exceptional, personally to provide his services. The Tribunal, in a passage we have already cited, said:-

"The last mentioned case [Tanton] makes it clear that a contract of employment must necessarily contain an obligation on the part of the employee to provide his services personally."

That citation is justified by Tanton as that very sentence appears in Tanton's paragraph 30 but we have no reason to think that the Court of Appeal was there meaning to depart from the observation of MacKenna J in Ready Mixed Concrete as to limited delegation. Indeed, that very passage had been quoted by Peter Gibson LJ only three paragraphs earlier in Tanton. Tanton indicates that if a contract contains a provision that the individual need not perform any services personally then it cannot be a contract of service – see paragraph 32 – and, so regarded, it does not deal with a limited ability to delegate such as that in the case before us. Tanton was a case where the individual could at his own will perform his contract by sending along someone else. Our case, by contrast, is a case in which, in limited circumstances, it would not be a breach of the individual's contract if, the individual being unable to attend, she arranged for another person approved by the employer to attend in her place. The Tribunal erred in law in regarding Tanton as driving them to the conclusion which they reached. We are therefore entitled to, and do, set aside their decision.

14. However, we are far from saying that the only possible proper conclusion of the matter is that the Appellants were employees. The Tribunal found it a difficult case and we are not surprised that they did. We are not prepared to say what a due interpretation of all the relevant facts would be, if for no other reason than that we do not have all the relevant facts before us and still less are we able to evaluate the witnesses in the way that the Tribunal, that had the advantage of seeing and hearing them, could do. There may, moreover, be some features which might need to be taken into account but which are unmentioned in the present Extended Reasons such as that, as it would seem, however long an Appellant worked she was still only to be entitled to one week's notice. It may need to be considered whether a responsible employer would nowadays put such a provision into its dealings with employees as opposed to its dealings with self employed persons for whose services it contracted. Such considerations are for the Tribunal to examine as matters of fact. In the circumstances, the proper course, in our view, is for us to remit the matter to the Tribunal.
15. We see no reason why the remission should not be to the same Tribunal as before, at all events unless re-constituting the same panel of three is either now impossible or would significantly delay the further hearing. At the rehearing either side is to be at liberty to call further evidence.
16. Accordingly we allow the appeal. We set aside the Tribunal's decision as recorded in its paragraph 1. We remit the preliminary determination to the same Tribunal as before (subject to the exceptions we have mentioned) and we direct that at the further hearing fresh evidence may be called.