United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR CHARLES CALVERT (of Counsel) MR K BETTS MESSRS MORLINGS Solicitors 1,2&3 Clarendon Place King Street Maidstone Kent ME14 1BQ
For the Respondents	MR THOMAS LINDEN (of Counsel) MR D COCKBURN MESSRS PATTINSON & BREWER Solicitors 30 Great James Street London WC1N 3HA


 


JUDGE CLARKE

1. This is an appeal by the second Respondent before the Ashford Employment Tribunal, Stevedoring & Haulage Services Ltd, against that Employment Tribunal's decision promulgated with extended reasons on 25 February 1995, that the Applicants were employees of the second Respondents, within the meaning of section 230(1) of the Employment Rights Act 1996 and consequently entitled to be provided with statements of their Terms & Conditions of Employment, pursuant to section 1 of the Act.
2. The material facts as found by the Tribunal were these. Each Applicant had been employed by the Respondent as a Dock Operative from and since the demise of the Dock Labour Scheme in 1989 at Tower Wharf, Northfleet. By letter dated 17 November 1995 the Respondent terminated the contracts of employment of all their 22 dock workers, with effect from 31 December 1995. However, on 21 December 1995 the Respondent wrote to the work force indicating that it was prepared to retain 8 employees as permanent employees and offered voluntary redundancy to the remainder. The terms offered to the volunteers included enhanced redundancy payments in excess of the statutory entitlement and the opportunity to qualify for pensions under the old National Dock Labour Board Scheme, which provided for pensions to become payable on redundancy. Each of the Applicants applied for the redundancy package and were accepted by the Respondent. In that letter the Respondent indicated that in future any fluctuating labour requirements would be met by agency and/or Casual Labour. Each of the Applicants, in volunteering for redundancy, indicated that he was prepared to work for the Respondent on a "casual basis" after the 31 December 1995. On 2 January 1996 the Respondent wrote to each Applicant in identical terms. Although that letter was on the note paper of an Associated Company, the first Respondent, nothing turns on the identity of the putative employer. The letter expressed the Respondent's delight that the Applicant was willing to be considered for casual employment, but pointed out the following

"The services you are to provide to the company are on an ad hoc and casual basis. This means that while the company will try to give you as much notice as possible when offering work, there is no obligation on the part of the company to provide such work nor for you to accept any work so offered.."

3. The letter continues by informing the Applicant that he is not an employee of the company and is not entitled to any fringe benefits such as sick pay, holiday or pension rights. He was to be paid only for hours actually worked, at set hourly rates depending on when the work was done. Night, Weekend and Public Holiday working attracted a higher rate of pay. There was to be an eight hour minimum payment per working period. Tax and National Insurance was to be deducted at source "for administrative convenience only." Each Applicant signed a copy of that letter to signify his acceptance of those terms. The provision as to the lack of obligation on the parties to respectively provide and do work was carried through into subsequent signed documents which varied the rates of pay, with effect from 1 January 1997 and later the 1 June 1998. At paragraph 15 of the reasons the Tribunal set out in 21 sub-paragraphs, their further findings of fact. Those facts including the following. Since the 1 January 1996 the Respondent operated a rota system whereby the Applicants were asked on the morning of one day whether they were available for work the next day and on Fridays they were asked about their weekend availability. If no work was available for an Applicant who had declared himself available then he went to the top of the list, to be offered work when it became available. Conversely, if he signified that he was not available for work, he went to the bottom of the list. All the Applicants were skilled workers, having been regular Tower Wharf employees. They were engaged directly by the Respondent; other casual workers were engaged via an Agency. In practice they worked for no other employer. They received training and protective clothing issued by the Respondent. They worked under the control of the Respondent. They did not make any financial investment in the enterprise and incurred no financial risk. Work was regularly available for the Applicants who worked most days when it was available, except during holiday periods and quiet periods. The written agreements expressly negatived mutuality of obligation between the parties, so the Tribunal found at paragraph 15 (21) of their reasons.
4. Before the Tribunal neither party was legally represented. Mr Watson, a full-time Trade Union Official, appeared for the Applicants and Mr Clarke, a director of the Respondent, represented that employer. The Tribunal were referred to only one authority, that of Carmichael –v- National Power Plc (1998) IRLR 301 (Court of Appeal.) At the time this case was decided the House of Lords had not given their opinion in Carmichael 2000 IRLR 40. However it is clear to us that the very experienced Chairman at the Ashford Tribunal, Mr David de Saxe, had in mind the earlier authorities. Reference is also made in the Tribunal's reasons to the Court of Appeal Decisions of O'Kelly -v- Trusthouse forte Plc (1983) IRLR 369, Nethermere (St Neots) Ltd –v- Gardiner [1984 IRLR 240 and Clarke –v- Oxfordshire Health Authority [1998] IRLR 125. There was also mention of Mr Justice McKenna's well known judgment in Ready-Mixed Concrete (South East) Ltd –v- Ministry of Pensions and National Insurance [1968] 2QB 497.
5. Mr Clarke, in putting the Respondent's case to the Tribunal, relied heavily on the express provision in the contractual documentation that there was no obligation on the Respondents to offer work or on the Applicants to take it. It was not open to the Employment Tribunal to imply a term to the effect that there was mutuality of obligation between the parties when they had agreed an express term to the contrary.
6. In reaching their decision the Tribunal took into account the observation of Stephenson L. J. in Nethermere, that there is an irreducible minimum of obligation in a contract of service. However, basing themselves on the judgment of Ward L. J. (in the majority) in Carmichael, they concluded, on the facts as found, that there was to be implied into the contract, based on the conduct of the parties after 1 January 1996 and continuing up to the presentation of the original applications in September 1998, the following terms set out in paragraph 25 of their reasons

"that the Respondents will

(i) offer the Applicants a reasonable amount of work as and when the work is available (and it appears to have been freely available since 1 January 1996), and (ii) that they will offer the Applicants that work in priority to other casual workers who are engaged through an agency, and not directly, as the Applicants are engaged. In return, as impliedly agree to make themselves available for work on at least a reasonable number of occasions when the work is offered to them."

It seemed to the Employment Tribunal that those implied terms reflected the reality of the working relationship.

7. Based on those implied terms the Employment Tribunal found that there was an overarching contract (also referred to in the earlier cases as an umbrella or global contract) between the parties. As to whether that contract was one of service or for services, they found in favour of the former construction, weighing the factors pointing each way on the facts as they had found them. The Applicants were employees and were entitled to a Statement of Terms & Conditions of Employment, under section 1 of the Act.
8. Against that decision the employer now appeals. Before turning to the rival submissions of Counsel it may be helpful for us to set out our understanding of the principles emerging from the cases, culminating in the House of Lords decision in Carmichael. The following propositions of law now seem to be clear.

(1) Where all the relevant terms of a contract of employment are reduced into writing and agreed between the parties, the questions to whether the contract is one of service or for services will be a question of law. An appellate court will be as well placed to carry out the construction exercise as an Employment Tribunal. Davies –v- Presbyterian Church of Wales (1986) ICR 280.

(2) However, in many cases the documentary evidence will form but a part of the material on which the question of construction will depend. In these circumstances it will be permissible for the fact-finding tribunal, the Employment Tribunal, to take into account the conduct of the parties following the inception of the contract between them. That was the approach taken by the Employment Appeal Tribunal (Slynn J.) in Airfix Footwear Ltd –v- Cope (1978) ICR1210, approved by the Court of Appeal in Nethermere (see particularly, Stephenson L. J.) and by the House of Lords in Carmichael.

(3) There is an irreducible minimum of mutuality of obligation necessary for a finding that a continuing contract of service exists between the parties. Nethermere, Clarke & see the speech of the Lord Chancellor in Carmichael (paragraph 18).

(4) In the second case, it will not be open to an Appellate Court to interfere with the finding of fact made by the Employment Tribunal as to the contractual arrangements between the parties and its characterisation unless the Employment Tribunal has reached a perverse conclusion. See e.g. Lee –v- Chung (1990) ICR 409 (PC).

9. It is the vexed question as to whether appeals against Employment Tribunal findings that there is or is not a contract of service in a given case raises a question of law that has led to the higher courts upholding Employment Tribunal decisions going both ways in circumstances where the facts are not dissimilar. This is particularly so of so-called casual workers. Thus the Employment Tribunal finding that an outworker was an employee in Airfix was upheld by the Employment Appeal Tribunal and a similar finding in Nethermere was upheld by the Employment Appeal Tribunal and Court of Appeal. Conversely, the Employment Tribunal finding that casual waiters in O'Kelly were not employees, nor tour guides working on an as required basis in Carmichael were upheld, respectively, by the Court of Appeal and House of Lords, in each case overturning successful appeals below before the Employment Appeal Tribunal and Court of Appeal respectively. In particular, the reason why the majority Court of Appeal decision in Carmichael was overturned was that the Court had treated the appeal as raising a question of law; what is the proper construction of the contract, rather than a question of mixed fact and law; could it be said, on the facts as found by the Employment Tribunal that their conclusion was perverse in the Wednesbury sense?
10. In advancing the appeal Mr Calvert submits that all relevant terms of the contract were contained in the documentation to which we have referred. In these circumstances it was not open to the Employment Tribunal to imply terms which, he contends, were inconsistent with the express terms negating mutuality of obligation between the parties, referred to in paragraph 15 (21) of their reasons.
11. But for that contention, Mr Calvert accepts that if the Employment Tribunal was entitled to imply the terms set out in paragraph 25 of their reasons, such terms met the irreducible minimum of obligation on each side (see Nethermere) and further that the Employment Tribunal reached a permissible conclusion that, balancing the factors pointing each way, the contracts here were of service rather than for services.
12. On the central point in the appeal Mr Linden submits that the Employment Tribunal found that not all the terms of the contract were reduced into writing. He pointed to the Employment Tribunal findings of fact as to the training provided by the Respondent and the rota system which emerged from evidence as to the conduct of the parties.
13. As to the critical question of whether the implied terms found by the Employment Tribunal were inconsistent with the express terms as to mutuality of obligation he submits that there is no inconsistency. He accepts, and we think it is trite law, that if an inconsistency exists the Employment Tribunal fell into error. However he draws a distinction between an absolute obligation on the employer to provide and the worker to do work on a fixed basis (the express term) and the way in which the arrangement between the parties operated in practice here, as found by the Employment Tribunal, which may permissibly give rise to the implication of terms that the employer will provide a reasonable amount of work and the worker will make himself available for work, at least on a reasonable number of occasions when work is offered.
14. Having considered the arguments advanced by Counsel we prefer that of Mr Linden. It seems to us that the express term reflected, for example the de fact position in Airfix and in Nethermere. However, on the facts as found it was open to the Employment Tribunal to imply terms as they did to give business efficacy to the agreement the parties. The employer wished to know that he had a body of skilled men available to do the work when demand required extra labour; those men wished to know that if they held themselves available and did not work for other employers (as the Employment Tribunal found) they would be provided with a reasonable amount of work. That is what happened in practice, looking at the varying number of days worked by the applicants in a year. The implied terms found by the Employment Tribunal reflected the reality of the agreement between the parties.
15. In these circumstance we have concluded that no error of law is made out in this appeal. Consequently it must be dismissed.