United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR T RIGBY (of Counsel) Messrs Towns Needham & Co Solicitors 121 Deansgate Manchester M3 2AR


 


JUDGE CLARK

1. By an Originating Application presented to the Reading Employment Tribunal on 30 September 1998 the Appellant, Mr Baxter, brought a claim for unpaid wages and unfair dismissal against the Respondent, Safe Air International Plc.
2. He alleged that he was employed by the Respondent as a driver from October 1997 to July 1998. His work frequently took him abroad to make deliveries. On one such trip, whilst sleeping in the back of his vehicle, he was the victim of theft. On his return to the UK the Respondent terminated his engagement and refused to pay him wages of £800 and 2 months mobile phone bills totalling £153.60.
3. The Respondent resisted the claim by their Notice of Appearance. They denied that he was an employee; they said that he was self-employed. They claimed that he had been negligent in allowing the theft of their property to take place. They were quite justified in making no further payment to him.
4. The case came on before a Chairman, Mr J G Hollow, sitting alone at Reading on 24 March 1999. Neither side was professionally represented. Mr Williams, a Trade Union Official appeared for the Appellant; Mr Garrod, Chairman of the Respondent, represented the Company.
5. It seems from the Chairman's extended reasons, promulgated with his decision on 15 April 1999, that on the morning of the hearing the Times Newspaper carried a report of the Court of Appeal decision in Carver –v- Saudi Arabian Airlines, later reported in full at (1999) IRLR 370.
6. The Chairman drew that case to the attention of the parties. It deals with the meaning of the expression "ordinarily works outside Great Britain" then to be found in Section 196(2) of the Employment Rights Act 1996. Section 196 has since been repealed by Section 32 of the Employment Relations Act 1999 with effect from 24 October 1999.

He decided to proceed in this way.

7. First, he adjourned the unfair dismissal claim pending the determination by the House of Lords in Regina –v- Secretary of State for Employment ex parte Seymour-Smith, the Appellant having been employed, on his case, for between one and two years. In fact, the House of Lords have now ruled in that case in favour of the Secretary of State (2000) IRLR 263.
8. As for the claim for unpaid wages, the Chairman treated that as a claim for unauthorised deductions from wages under Part II of the Employment Rights Act 1996. He observed that under Section 196(2) and (3) of the Act, part II does not apply to employment under a contract of employment where the employee ordinarily works outside Great Britain. He went on to conclude that Mr Baxter ordinarily worked outside Great Britain and thus the Employment Tribunal had no jurisdiction to entertain the Part II claim.
9. Against that decision the Appellant appealed and, with the leave of a division presided over by Judge Wilson at a preliminary hearing held on 26 October 1999, the matter now comes before us for final determination.
10. There has been a development since the Employment Tribunal hearing. The Respondent has gone into liquidation. By letter dated 7 December 1999 the Liquidater informed the Employment Appeal Tribunal that he intends to take no part in these proceedings. He states that there is no possibility of a dividend to any class of creditor of the company.
11. The Appellant nevertheless pursues his appeal intending , so we understand, to seek to recover any eventual award from the fund administered by the Secretary of State for Trade & Industry.
12. On the face of it, the issue before us is whether the Chairman has correctly applied the learning on Section 196(2) Employment Rights Act emanating from the Court of Appeal in cases such as Wilson –v- Maynard (1977) IRLR 491, (1978) 1QB665, Todd –v- British Midland Airways Ltd (1978) IRLR 370, Janata Bank –v- Ahmed (1981) IRLR 457 and finally Carver, all cases of unfair dismissal (save for Carver, where a further issue arose under Sex Discrimination Act 1975), where there was no question but that the Applicant was an employee of the Respondent. However, we bear in mind (a) that the Chairman's decision went to his jurisdiction to entertain the Appellant's claim for unpaid wages (b) the Respondent company is now in liquidation, and the liquidator does not appear before us and (c) the Secretary of State for Trade & Industry has not been given an opportunity thus far to be joined in these proceedings.

Accordingly, we felt it right to raise with Mr Rigby the following possible analysis.

Unauthorised deductions from Wages

13. Section 13(1) of the Employment Rights Act renders unlawful a deduction by an employer from wages of a worker employed by him unless the worker gives his written consent. There is no suggestion that Mr Baxter gave such consent in this case.

By Section 23 a worker may present a claim of unlawful deductions from his wages to an Employment Tribunal.

14. Section 27 defines wages. Specifically excluded from that definition (section 27(2)(b)) is any payment in respect of expenses incurred by the worker in carrying out his employment. Thus, prima facie, although the Appellant's claim for his daily remuneration falls within the definition of wages for the purposes of a Part II claim, the cost of his mobile telephone, assuming it was used for the employers business, arguably does not.

Worker

15. By referring to a worker, Part II of the Employment Rights Act extends the protection from unauthorised deductions from wages beyond an employee to a worker.

Those expressions are defined in Section 230 of the Employment Rights Act as follow:-

(1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.

(2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.

(3) In this Act "worker" (except in the phrases "shop Worker" and "betting worker") means an individual who has entered into or works under (or, where the employment has ceased, worked under)-

(a) a contract of employment, or

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;

and any reference to a worker's contract shall be constructed accordingly.

(4) In this Act "employer", in relation to an employee or a worker, means the person by whom the employee or worker is (or, where the employment has ceased, was) employed.

(5) In this Act "employment"-

(a) in relation to an employee, means (except for the purposes of section 171) employment under a contract of employment, and

(b) in relation to a worker, means employment under his contract;

and "employed" shall be construed accordingly.

16. It will be seen from the statutory definitions in Section 230 that an employee is an individual who works under a contract of employment, that is a contract of service or apprenticeship. The expression worker includes not only an employee, as defined, but also an individual who works under a contract for services (section 230(3)(b)). 'Employer' means a person by whom the employee or worker (presumably, the individual working under a contract for services) is employed, and 'Employment' means, in relation to an employee, employment under a contract of employment and in relation to a worker, employment under his contract.

Employment Outside Great Britain

17. The scheme of Section 196(2) provided;

"The provisions to which this sub-section applies do no apply to employment where under the employee's contract of employment he ordinarily works outside Great Britain."

18. By Section 196(3)(b), sub-section (2), applies to Part II of the Act.

Thus the question arises, if the Applicant in a Part II claim is not an employee employed under a contract of employment, but is nevertheless a worker within the meaning of Section 230(3)(b), can the exclusion contained in Section 196(2) apply to him? Section 196(2) applies only to employment where under the employee's contract of employment he ordinarily works outside Great Britain. If he is not employed under a contract of employment, Section 196(2) does not appear to bite.

19. If that analysis is correct, we have to look to the Chairman's decision and reasons to discern whether or not he has made a finding as to whether the Appellant was an employee under a contract of employment, or worker as defined in Section 230(3)(b), that is working for the Respondent under a contract for services.
20. It does not appear that the Chairman directed his mind expressly to this question, nor indeed to the possible significance of the distinction between an employee and a worker for the purposes of 196(2). Such findings as he made tend towards the conclusion that the Appellant was not, as the Respondent below contended, an employee. The Chairman made these findings:-

(1) The drivers are paid a fixed sum for each trip based loosely on a day's pay of £100.

(2) There was no obligation on the Respondent to provide work. The Appellant was hired as and when required, nor the Appellant to accept it if it was offered. Arguably there was no mutuality of obligation; an irreducible minimum for a contract of service. Carmichael –v- National Power (2000) IRLR 43 (HL)

(3) The Appellant was always paid gross, without the deduction of Tax or National Insurance.

(4) He worked elsewhere as a panel beater in a friend's garage a few days a week when there was no work offered to him by the Respondent.

(5) On the Appellant's case he worked for the Respondent about once a week. That was disputed by the Respondent, who said it was less frequent. No finding on that factual issue was made by the Chairman.

21. At paragraph 6 of his reasons the Chairman said:

"For the purpose of Section 13 Employment Rights Act 1996, I am satisfied that he would not have been running his own business and would therefore have been a "worker".

He does not find in terms whether the Appellant was a worker as defined by Section 230(3)(a) (an employee) or (b) (a person engaged under a contract for services).

The Dilemma

22. It seems to us that the Appellant faces this dilemma. If he is a worker under a contract for services he can arguably bring a Part II claim for his wages (if not expenses) without being subjected to the exclusion under Section 196(2) even if the Chairman was correct in holding that he ordinarily worked outside Great Britain.
23. However, unless he is an employee he cannot;

(a) pursue his claim for unfair dismissal, although this may not matter in the light of the House of Lords decision in Seymour –v- Smith, or

(b) pursue a claim on the National Insurance fund for his arrears of pay, based on the insolvency of his employer, under Part XII Employment Rights Act. It is clear that the rights under Part XII are afforded only to employees and not those engaged under a contract for services. See e.g. Secretary of State for Trade and Industry –v- Bottril (1999) IRLR 326.

Submissions

24. Mr Rigby takes this position:-

(1) That the Chairman made no express finding as to whether or not the Appellant was an employee or worker in the extended sense under Section 230(3)(b). We agree.

(2) He adopts the proposition that if the Appellant was a worker as opposed to an employee then Section 196(2) does not apply to him in any event. Again, we agree.

(3) That although this case must return to an Employment Tribunal for determination as to whether the Appellant was an employee or a worker in view of the insolvency of the Respondent and the outstanding unfair dismissal claim, it would be sensible for the Employment Appeal Tribunal to rule on the specific point in the appeal, whether the Chairman was in error in finding that the Appellant ordinarily worked outside Great Britain in the event that he is found to be an employee before remitting the case back to the Employment Tribunal. We accept that approach.

(4) As to the point in the appeal, we are persuaded by Mr Rigby that the Chairman did fall into error. Applying the contract test in Wilson –v- Maynard, further explained and followed by the Court of Appeal in Todd and Carver, it is clear to us that, on the facts as found, the Appellant was under his contract based in Great Britain and ordinarily worked here. He lived in this country. His employer, an English company had its Head Quarters in Slough. He was paid in sterling. There are no special factors to lead any Employment Tribunal to conclude other than that his base was in England and that that is where he ordinarily worked.

Conclusion

25. It follows that we shall allow this appeal and remit the case to a fresh Employment Tribunal to determine

(1) Whether the Appellant was an employee or a worker under the extended definition Section 230(3).

(2) Whether the Appellant can pursue his claim for unfair dismissal.

(3) Whether his claim for unauthorised deductions from wages succeeds on its merits and if so, whether the Secretary of State is liable to make payment to the Appellant. For that purpose the Secretary of State should be notified of this claim and given an opportunity to be joined as a party in the Employment Tribunal proceedings.