United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C HENNEY Solicitor Instructed by Messrs Henmans Solicitors 116 St Aldates Oxford OX1 1HA
For the first Respondent For the second Respondent	MR N BOOTH (Of Counsel) Instructed by The Woodbridge Partnership Solicitors & Legal Advisers Windsor House 42 Windsor Street Uxbridge Middlesex UB8 1AP MR B HEDLEY Solicitor Instructed by Messrs Clifford Chance Limited Liability Partnership 200 Aldersgate Street London EC1A 4JT


 


RESERVED JUDGMENT

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ELECTRONIC DATA SYSTEMS LTD -V- 1) MISS HANBURY 2) BROOK STREET (UK) T/A BROOK STREET BUREAU

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JUDGE CLARK

1. On 2 December 1999 an Employment Tribunal chaired by Mr G Flint was convened at London (North), now London Central, for a Preliminary Hearing in this case. The parties before that Employment Tribunal where the Applicant, Miss Hanbury and the Respondents (1) Brook Street Bureau (BSB), an employment agency and (2) Electronic Data Systems Ltd (EDS), a client of BSB. Against that Employment Tribunal's decision, promulgated with extended reasons on 23 December 1999, EDS now appeals and the Applicant cross-appeals.

The Facts

2. On 23 September 1998 the Applicant registered with BSB by signing their standard form temporary worker agreement. Under that agreement, the Employment Tribunal found, BSB would try to find the Applicant work with a client company, but were not bound to do so; if work was found, the Applicant could take it or leave it as she chose.
3. In December 1998 BSB found the Applicant a temporary placement with EDS. She agreed to work there as a scanner. Her hours were fixed, 9 am to 5.30 pm. She started on 7 December 1998.
4. She continued working at EDS's premises until 21 May 1999. She was then unwell from 24 – 28 May 1999 and did not attend work. On 28 May she was telephoned by an employee of BSB called Kelly and told not to return to EDS. She was told that EDS had asked them to find someone else.
5. During her time spent working at EDS she was paid by BSB, after deduction of tax and National Insurance, and EDS paid a fee to BSB which covered the payments made by BSB in respect of the Applicant and BSB's uplift or commission on the placement.

The Complaint

6. By an Originating Application presented to the Employment Tribunal on 11 August 1999 the Applicant complained of sex discrimination, unfair dismissal, dismissal without notice and breach of contract.
7. It is her case that she became pregnant and this was generally known within EDS by the time of her sick absence between 24 – 28 May 1998. She contends that her engagement was terminated by reason of her pregnancy.
8. Both Respondents resisted her claims.

The Preliminary Issues

9. The Preliminary Hearing was convened to determine these issues:

(1) whether the Applicant was an employee of either BSB or EDS within the meaning of s230(1) Employment Rights Act 1996 (ERA), and

(2) whether she was an employee of either Respondent within the wider definition contained in s82(1) Sex Discrimination Act 1975 (SDA).

The Employment Tribunal hearing and decision

10. As to the first issue, the Employment Tribunal had no difficulty in concluding that the Applicant was not employed by either BSB or EDS under a contract of service for the purposes of s320(1) ERA. There was no mutuality of obligation, either between the Applicant and BSB, or between the Applicant and EDS, regardless of the contractual position between those respective parties. That conclusion is plainly permissible. See, most recently, Montgomery v Johnson Underwood Ltd (Times – 16 March 2001. CA). We have been provided with a transcript of the judgments in that case. At all events, there is no appeal by any of the parties, particularly the Applicant, against that part of the Employment Tribunal's decision. That finding effectively disposes of all claims raised by the Applicant, save for her complaint of unlawful sex discrimination.
11. It is in relation to the Employment Tribunal's approach to the second issue that the appeal and cross-appeal are directed.
12. We begin with the procedure adopted by the Employment Tribunal.
13. The Applicant alone gave evidence and was cross-examined and questioned by the Employment Tribunal. She called no further witnesses. At the end of her evidence, according to an affidavit sworn on 8 February 2000 in these appeal proceedings by Mr Henney, who represented EDS below, Mr Napper, representing BSB, indicated that he would not be calling any evidence. Mr Henney, according to his evidence before us, indicated that he had witness evidence to call, but proposed to make a submission of no case to answer, expressly reserving his right to call evidence if that submission failed.
14. Pausing there, a copy of Mr Henney's affidavit was sent to the Chairman for his comments. By a letter dated 2 March 2000 the Chairman states that he cannot recall Mr Henney indicating that he wished to make a submission of no case to answer. Copies of Mr Henney's affidavit and the Chairman's letter were also sent to Mr Adams, the Applicant's representative below. In his reply dated 15 March Mr Adams makes no comment, save that he could not recall whether Mr Henney had any witness with him from EDS.
15. At all events, all 3 advocates addressed the Employment Tribunal. The Employment Tribunal then retired and returned some 10 minutes later. The Chairman announced that the Employment Tribunal would give its decision and he then proceeded to give their decision orally. It was to the following effect, so far as the second issue was concerned. The Applicant was employed by EDS for the purpose of s82(1) SDA, but not by BSB. Accordingly BSB were dropped out from the proceedings, which were to continue to a merits hearing on the sex discrimination claim between the Applicant and EDS only.
16. After the oral decision was announced Mr Henney asked for extended reasons with a view to EDS appealing the decision.
17. A decision with extended reasons was then promulgated. The decision reads:

"The unanimous decision of the Tribunal is that the Applicant's claim against the First Respondent fails but that towards the Second Respondent she was a person contracted to execute work or labour and that on this basis her claim for sex discrimination against the Second Respondents can proceed."

18. However, at paragraph 5 of the extended reasons the Employment Tribunal added an alternative finding, namely that if she was not a s82 employee of EDS, then she was a contract worker and EDS was a principal within the meaning of s9 SDA.
19. By a further affidavit sworn on 14 July 2000, in support of an amendment to the grounds of appeal (paragraph 6(d)) by EDS, Mr Henney states that in giving the Employment Tribunal's oral decision the Chairman made no reference to the alternative finding under s9 SDA. That appeared for the first time in the Employment Tribunal's extended reasons. He complains that no notice was given to him that the Employment Tribunal were considering this alternative basis for decision.
20. In response to that second affidavit the Chairman wrote, on 25 September 2000:

"He wishes to observe that it is well known that it is the written not the oral decision which is the decision of the Tribunal.

As section 9 was mentioned in the BP Chemicals case (BP Chemicals Ltd v Gillick (1995) IRLR 128 ) the Chairman felt it advisable to refer to it. This is not in the Chairman's view a review of the decision but a perfection of the decision."

The Statutory provisions

21. Of immediate relevance to the appeal and cross- appeal are these provisions in SDA.

By s82(1):

"'employment' means employment under a contract of service … or a contract personally to execute any work or labour, and related expressions shall be construed accordingly;"

and by s9:

(1) This section applies to any work for a person ('the Principal') which is available for doing by individuals ('contract workers') who are employed not by the principal himself but by another person, who supplies them under a contract made with the principal.

(2) It is unlawful for the principal, in relation to work to which this section applies, to discriminate against a woman who is a contract worker –

…

(b) by not allowing her to do it or continue to do it."

22. For completeness we should also mention, although not directly material to the issues which we have to decide, the definition of employment agency in s82(1); the discrimination provisions relating to employment agencies in s15(1) and the provisions relating to aiding unlawful acts contained in s42.

The appeal and cross-appeal

23. The following issues arise for determination in the appeal and cross-appeal:

(1) was the Applicant a s82 employee of EDS?

Under this head Mr Henney takes 2 points, the first procedural, the second substantive. The procedural point is whether the Employment Tribunal was wrong to proceed to an oral decision without giving EDS an opportunity to call evidence having rejected the submission of no case to answer. The substantive point is whether the Applicant was in law a s82 employee of EDS.

(2) If she was not a s82 employee of EDS, was she nevertheless a s82 employee of BSB? That is the Applicant's contention in her cross-appeal.

(3) Was the Applicant in the relationship of contract worker to principal vis-à-vis EDS within the meaning of s9(1)? Here Mr Henney takes a procedural point, namely, that having delivered their oral decision it was not then open to the Employment Tribunal to include this alternative finding in their written reasons without prior notice to the parties, the point not having been argued before the Employment Tribunal.

Section 82

24. The first question, logically, is whether the Employment Tribunal were entitled to hold that the Applicant was not employed by BSB under a s82 contract.
25. We return to the facts. It is not entirely clear from the Employment Tribunal's reasons whether or not they find that a contract existed at all between the Applicant and BSB. However, Mr Hedley accepts that there was such a contract in the form of the Temporary Worker Agreement which was put before the Employment Tribunal.
26. Under that agreement the parties agreed that the Applicant contracted with BSB in the capacity of a self-employed worker in relation to each assignment (clause 2(b)) and where the terms of the agreement apply they shall constitute a contract for services between BSB and the Applicant (clause 2(c)); conversely, no contract for services existed between assignments (clause 6(g)).
27. When the worker was on assignment (as this Applicant was when working for EDS) BSB agreed to pay her a fee calculated at a minimum hourly rate of £5. (clause 5((a)). At the end of each week the worker was required to provide a time-sheet, signed by or on behalf of the client (clause 8(a)). BSB then agreed to pay her fee based on the hours worked, less tax and National Insurance deductions (clause 5(a)). It was specifically provided that the worker would have the paid leave to which she was entitled under the Working Time Regulations
28. How, in these circumstances, did the Employment Tribunal reach the conclusion that she was not employed by BSB under a contract personally to execute any work or labour?
29. Their finding, at paragraph 3 of the reasons, appears to be based on the following propositions:

(1) because the contract did not provide for the necessary mutuality of obligations for the purpose of finding a contract of service,

"for the same reasons we cannot find that the Applicant was personally contracted towards (BSB) to execute work or labour", and

"(2) there was no contract by which it could be said that the Applicant had agreed to do more than to execute work or labour for any person to whom (BSB) might send her with her agreement."

30. Taking those propositions in reverse order, it is not correct, as a matter of law, to hold that because a worker is directed to work for a 3^rd party she cannot be said to be executing work or labour for the other contracting party. In Harrods Ltd v Remick (1998) ICR 156 the Applicant was employed by a concessionaire within Harrods department store. She complained of racial discrimination on the part of Harrods when store approval was withdrawn, leading to termination of her employment by the concessionaire. She relied on s7(1) Race Relations Act 1976 (RRA), the equivalent of s9(1) SDA, contending that she was a contract worker supplied to Harrods as the Principal. Her complaint was upheld on appeal to the Court of Appeal. In the course of his judgment Sir Richard Scott V-C said (161H-162A):

"… it is implicit in s7 that the work to which s-s(1) is referring will not only be work done for the employer, in that it is work done pursuant to the contract of employment, but will also be work done for the principal."

31. We would add that the same proposition applies where work is done for an employer under a contract for services for the purposes of s82(1)SDA (s78(1) RRA).
32. Remick was followed by the Employment Tribunal in C J O'Shea Construction Ltd v Bassi (1998) ICR 1130. There, the Applicant was engaged by Pioneer Ltd under a contract for services to transport ready-mixed concrete in his own vehicle to building sites of customers of Pioneer. He complained that on one occasion, when delivering concrete to a customer, O'Shea, at a building site he was unlawfully discriminated against on grounds of his race by an employee of O'Shea. He contended that, under s7 RRA, he was a contract worker supplied to O'Shea as principal. In the course of his judgment Lindsay J said (1137H – 1138A):

"We detect no error of law in (the Employment Tribunal's) conclusion that Mr Bassi was engaged in work "for" O'Shea, notwithstanding that it was also work for Pioneer, a fact which, of itself, by no means precluded its being for O'Shea,"

citing the passage to which we have referred in the judgment of Sir Richard Scott V-C in Remick.

33. We too, find nothing untoward in a temporary worker working both for the employment agency to whom she is contracted and the client to whom she is directed. Accordingly we reject this part of the Employment Tribunal's reasoning.
34. On the question of mutuality of obligation, Mr Henney has sought to erect an argument, based on the Court of Appeal decision in Mirror Group Newspapers Ltd v Gunning (1986) IRLR 27, that a degree of mutuality of obligation is necessary not only for a contract or service, but also for a contract for services falling within the s82 definition. The particular passage on which he relies is to be found in the judgment of Balcombe LJ (paragraph 36).
35. In our view that submission is based on a misunderstanding of the rationale in Gunning. There, the question was whether the dominant purpose of a contract to distribute newspapers was the personal execution of any work or labour. The Court held on the facts that the dominant purpose of the contract was not the execution of personal work or labour, but the regular and efficient distribution of newspapers. On this ground the Applicant failed to bring herself within s82. In the present case there is no doubt that the sole purpose of the contract between this Applicant and BSB was her personal execution of work and labour.
36. In further support of the Employment Tribunal's conclusion that there was no s82 contract between the Applicant and BSB, Mr Hedley, whilst acknowledging the existence of a contract between the Applicant and BSB, urged us to hold that having, permissibly, found that EDS was the employer for the purpose of s82, it was unnecessary for the Employment Tribunal to see whether BSB was also a s82 employer. That begs the next question, was the Employment Tribunal entitled to find that a s82 contract existed between the Applicant and EDS?
37. On this aspect of the case we have considered the Employment Appeal Tribunal decision in BP Chemicals Ltd v Gillick (1995) IRLR 128, to which the Employment Tribunal refer in their reasons, it having been cited to them by Mr Henney.
38. In Gillick an employment agency, Roevin had a contract to supply personnel at a fee to BP. Any staff so supplied were paid by Roevin, who invoiced BP. The Applicant was supplied to BP by Roevin under this arrangement. She became pregnant and, having informed both BP and Roevin of that fact, she stopped work. Later she approached BP with a view to returning to her old work but was not permitted to do so. Instead she was offered alternative, less well paid work which she refused. She brought a complaint against Roevin and, by amendment, BP that she had been discriminated against on ground of her sex.
39. The Industrial Tribunal found that she was in an employment relationship with both Roevin and BP within the meaning of s82. On appeal to the Employment Appeal Tribunal it was contended on her behalf that she was also entitled to proceed against BP as a contract worker under s9.
40. The Employment Appeal Tribunal held that she was not employed by BP under s82. The contract to personally execute work must be a contract between the party doing the work and the party for whom the work is done. They preferred to put the case on the basis of s 9.
41. We are quite certain that the Employment Appeal Tribunal conclusion in that case was correct, although the reasoning is not always easy to follow. In essence, the Employment Appeal Tribunal found that there was a contract between the Applicant and Roevin ("Mrs Gillick was employed by Roevin." Paragraph 12); Roevin was supplying workers to BP. The Applicant was a contract worker and BP a principal for the purpose of s9.
42. The real question in the present case is whether there was a contract between the Applicant and EDS for the purposes of s82 given, on any view, that there was a contract between the Applicant and BSB (the Temporary Worker Agreement) and a contract between BSB and EDS for the supply of a temporary worker, the Applicant.
43. The Employment Tribunal found that there was a contract between the Applicant and EDS and that was a contract personally to execute work or labour. We accept that the Applicant worked for EDS, as she did for BSB. see Remick.Bassi. However, we can find no basis for the conclusion that a contract existed between the Applicant and EDS.
44. In argument, supporting the Employment Tribunal's finding that the Applicant was in a s82 contractual relationship with EDS, Mr Booth referred in passing to the Employment Appeal Tribunal decision in Motorola Ltd v Davidson (2001) IRLR 4, where a division presided over by Lindsay P held that the Applicant, assigned by an employment agency to work for Motorola, was an employee of Motorola for the purposes of s230(1) ERA. That case may be viewed as the highwater mark of the contract versus status debate in employment law. Motorola was decided essentially on the question of control. In the present case we prefer to follow the words of the statute and to determine whether or not a contract existed between the Applicant and EDS.
45. We accept Mr Henney's submission that it did not. The facts are clear and require no distortion. The Applicant was employed, in the wider s82 sense, by BSB, under a contract for services. She was supplied to EDS under a contract made between EDS and BSB. There was no contractual relationship between the Applicant and EDS. Beswick v Beswick (1968) AC 58.
46. Having so concluded, Mr Henney's first procedural point, namely that he was not given the opportunity to call evidence after his submission of no case to answer was rejected and before the Employment Tribunal gave their oral decision, becomes academic, as he accepts. The evidence which he wished to call went only to the question whether a s82 contract existed between the Applicant and EDS.

Section 9

47. There are a number of difficulties with the Employment Tribunal's alternative finding, contained in their extended reasons, that the Applicant was in a s9 relationship of contract worker and principal with EDS, viz

(i) the point was not taken on behalf of the Applicant during the hearing, as the Employment Tribunal observed in paragraph 5 of their reasons and Mr Booth accepts

(ii) it follows that Mr Henney was given no opportunity to address the Employment Tribunal on this point

(iii) substantively, the alternative finding is inconsistent with the Employment Tribunal's original finding that there was no s82 contract between the Applicant and BSB. For s9 to bite there must first be a s82 contractual relationship between, here the employment agency and the worker, for there to be the supply of that 'contract worker' to the principal.

48. In these circumstances none of the parties seek to support the Employment Tribunal's alternative approach, either procedurally or substantively on the basis of the Employment Tribunal's earlier findings.

Conclusion

49. It will be apparent that almost everything that could go wrong did go wrong in this case, both procedurally and substantively. Does that mean inevitably that the matter must be remitted to a fresh Employment Tribunal for rehearing with all the attendant cost, delay and inconvenience to the parties? Happily, it does not.
50. All parties agree that if we conclude, as we do, that a s82 contract existed between the Applicant and BSB, then it follows that she was a contract worker supplied to EDS under a contract made between BSB and EDS. S9(1) is fulfilled.
51. In these circumstances we shall, by consent, exercise our powers granted by s35(1) Employment Tribunals Act 1996 to allow the appeal of EDS against the Employment Tribunal's finding that a s82 contract existed between the Applicant and EDS; allow the Applicant's cross-appeal against the finding that she was not employed under a s82 contract by BSB and substitute, for the declaration made by the Employment Tribunal, the following declaration:

(1) the Applicant was employed by BSB under a s82 contract

(2) she was a contract worker supplied to EDS, as principal, by BSB for the purposes of s9 and

(3) that, in the premises, the Employment Tribunal has jurisdiction to entertain her complaint of sex discrimination against both Respondents.

52. The case will now proceed to a merits hearing before a different Employment Tribunal on that complaint only.