United Kingdom Employment Appeal Tribunal

APPEARANCES

 

 

For the Appellants	Mr A Strain, Solicitor Of- Messrs Biggart Baillie Solicitors 7 Castle Street EDINBURGH EH2 3AP
For the Respondent	Mr G Bell, Solicitor Of- Messrs Dallas McMillan Solicitors Shaftesbury House 5 Waterloo Street GLASGOW G2 6AY


 


LORD JOHNSTON:

1. This is an appeal at the instance of a firm of building contractors against a decision of the Employment Tribunal (Chairman sitting alone), that the applicant respondent, in working on a building site in Dundee for the appellants, should be categorised as a worker within the meaning of Regulation 2(1) of the Working Time Regulations 1998 ("The Regulations"). The respondent is a joiner. The aim of the application is to establish an entitlement to holiday pay.
2. After a lengthy and detailed exposition of the evidence, the Chairman made the following findings in fact:-

"1. The applicant was a time served joiner holding a CIS4 registration card under the Inland Revenue scheme for the construction industry.

2. The applicant was engaged by the respondents to undertake joinery work at their Kingsway site. He was offered the option of becoming an employee at the rate of £6.70 per hour plus overtime and bonus or £9.00 per hour as a CIS4 registration card holder, and chose the latter. There was no written contract between the parties.

3. The work to be undertaken by the applicant at the Kingsway site was assigned to him by the respondents' site management as the progress of the contract required. The same applied to the respondents' employed joiners.

4. The applicant was left by the respondents to decide how to undertake the work assigned to him, with limited supervision by the respondents in view of their overall responsibility for quality. The applicant would on occasions work alongside joiners employed by the respondents.

5. The applicant had to clock in and out of the Kingsway site but this was principally a health and safety requirement. The same applied to the respondents' employed joiners.

6. The respondents provided all of the materials used by the applicant at the Kingsway site. The same applied to the respondents' employed joiners.

7. The applicant provided his own hand tools while the respondents provided power tools. The same applied to the respondents' employed joiners.

8. The applicant was expected to work normal site hours which were 39 per week. The applicant's perception was that he was also expected to work evenings and weekends when asked to do so by the respondents. He was however under no contractual obligation to do so.

9. The applicant was paid on the basis of the number of hours he worked, and not on the basis of the amount of work he carried out. The respondents' employed joiners were paid on the same basis (although not at the same rate), but they also received payment for overtime and bonus.

10. There was no agreement between the applicant and the respondents as to the length of his period of engagement.

11. The applicant and the respondents understood that there was no requirement on either to give notice to terminate the applicant's engagement, but as a matter of courtesy the respondents would have tried to give the applicant a week's notice so that he had the opportunity to arrange work elsewhere.

12. The applicant had taken 4 days off when his father died and had also had occasional absences through sickness. He was not paid for these days off.

13. While the respondents would normally have expected the applicant to attend work in person he could have arranged for a substitute provided that substitute was acceptable to the respondents' site management in terms of qualifications and skills. He did not however do so.

14. The applicant's perception was that his engagement with the respondents was a full time job. He did not undertake work for anyone else while working for the respondents, although he was not contractually prevented from doing so.

15. The applicant did not invoice the respondents for his services but completed a form of record sheet provided by the respondents.

16. In the course of his engagement with the respondents and because he was paid at an agreed hourly rate, the applicant did not undertake any significant commercial risk (in the sense of whether he would make a profit or not from the work he was undertaking for the respondents) and in so finding the Tribunal did not regard the retention monies held by the respondents against the cost of making good defective work as constituting a significant commercial risk to the applicant.

17. The applicant prepared annual accounts as a self employed person. He paid self employed national insurance contributions. His accounts disclosed overheads including the provision of tools, insurance, travelling expenses and telephone/mobile phone costs.

18. The applicant could take holidays when he chose. The respondents' employed joiners normally had fixed holidays. If the applicant had chosen to take holidays when the respondents did not wish him to do so, the respondents would in all probability have terminated his engagement.

19. When the applicant returned from his holiday in September 2001 he was not guaranteed to resume work at the Kingsway site.

20. The terms of the construction industry Working Rule Agreement did not apply to the applicant. The Working Rule Agreement did however apply to the respondents' employed joiners."

3. Against that background the Chairman thereafter approached the matter against the decision of the EAT in London in Byrne Brothers (Formwork) Ltd v Baird & Ors [2002] IRLR 96 which is the first case to attempt to construe the relevant part of the Working Time Regulations which is in the following terms:-

" "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."

4. The critical part of Byrne is as follows:-

"We were referred to no authority giving guidance on that question; and we accordingly spell out our approach to it in a little detail, as follows:-

(1) (1)                We focus on the terms '[carrying on a] business undertaking' and 'customer' rather than '[carrying on a] profession' or 'client'. Plainly the applicants do not carry on a 'profession' in the ordinary sense of the word; nor are «Byrne Brothers» their 'clients'.

(2) (2)                '[Carrying on a] business undertaking' is plainly capable of having a very wide meaning. In one sense every 'self-employed' person carries on a business. But the term cannot be intended to have so wide a meaning here, because if it did the exception would wholly swallow up the substantive provision and limb (b) would be no wider than limb (a). The intention behind the regulation is plainly to create an intermediate class of protected worker, who is on the one hand not an employee but on the other hand cannot in some narrower sense be regarded as carrying on a business. (Possibly this explains the use of the rather odd formulation 'business undertaking' rather than 'business' tout court; but if so, the hint from the draftsman is distinctly subtle.) It is sometimes said that the effect of the exception is that the Regulations do not extend to 'the genuinely self-employed'; but that is not a particularly helpful formulation since it is unclear how 'genuine' self-employment is to be defined.

(3) (3)                The remaining wording of limb (b) gives no real help on what are the criteria for carrying on a business undertaking in the sense intended by the Regulations - given that they cannot be the same as the criteria for distinguishing employment from self-employment. Possibly the term 'customer' gives some slight indication of an arm's -length commercial relationship - see below - but it is not clear whether it was deliberately chosen as a key word in the definition or simply as a neutral term to denote the other party to a contract with a business undertaking,

(4) (4)                It seems to us that the best guidance is to be found by considering the policy behind the inclusion of limb (b). That can only have been to extend the benefits of protection to workers who are in the same need of that type of protection as employees stricto sensu - workers, that is, who are viewed as liable, whatever their formal employment status, to be required to work excessive hours (or, in the cases of Part II of the Employment Rights Act 1996 or the National Minimum Wage Act 1998, to suffer unlawful deductions from their earnings or to be paid too little). The reason why employees are thought to need such protection is that they are in a subordinate and dependent position vis-à-vis their employers: the purpose of the Regulations is to extend protection to workers who are, substantively and economically, in the same position. Thus the essence of the intended distinction must be between, on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other, contractors who have a sufficiently arms'-length and independent position to be treated as being able to look after themselves in the relevant respects.

(5) (5)                Drawing that distinction in any particular case will involve all or most of the same considerations as arise in drawing the distinction between a contract of service and a contract for services - but with the boundary pushed further in the putative worker's favour. It may, for example, be relevant to assess the degree of control exercised by the putative employer, the exclusivity of the engagement and its typical duration, the method of payment, what equipment the putative worker supplies, the level of risk undertaken etc. The basic effect of limb (b) is, so to speak, to lower the pass-mark, so that cases which failed to reach the mark necessary to qualify for protection as employees might nevertheless do so as workers.

(6) (6)                What we are concerned with is the rights and obligations of the parties under the contract - not, as such, with what happened in practice. But what happened in practice may shed light on the contractual position: see Carmichael (above), esp. per Lord Hoffman at pp. 1234-1235.

(7) We should add for completeness that, although the Regulations are of course based on the Working Time Directive, we were referred to no provision of the Directive nor any case law of the ECJ. which sheds any light on the present issue. The Directive does not contain any definition of the term 'worker'."

5. The substance of the debate before us turned, essentially, upon whether we should follow as the Chairman had done, the reasoning as set out in Byrne.
6. Mr Strain, appearing for the appellants, submitted that the reasoning was wrong inasmuch that the Directive and, in particular, the Regulation 2(1) definition, did not expand the existing distinction between contract of service on the one hand and contract for services on the other. In this respect, reference was made to Express and Echo Publications Ltd v Tanton [1999] IRLR 367 and Lee v 1. Chung and 2. Shun Shing Construction & Engineering Co Ltd [1990] IRLR 236. The approach of the EAT in Byrne, it was submitted, was wrong to construe the section as creating a further category of intermediate worker. The issue remained whether or not the employee was to be regarded as an independent contractor providing services on the basis that he was working for himself and that the recipient of the services was his customer. If Byrne was taken out of the equation, it was submitted, the majority of the findings in fact by the Chairman pointed to this being the correct interpretation and, accordingly, he had misdirected himself in his approach to the matter which constituted an error of law. That being established, this Tribunal should thereafter conclude that the correct interpretation of the findings in fact was that, properly, this person was to be regarded as an independent contractor and therefore not subject to the Regulations.
7. Mr Bell, appearing for the respondent, submitted that the approach of the EAT in Byrne was correct and that its construction of the definition was rightly accepted by the Chairman and, thereafter, correctly applied by him to the evidence. While there were some factors pointing in each direction, it was sufficient, as the Chairman had done, for him to determine that the exception did not apply. That being so there was no error of law.
8. Mr Bell had a separate submission that even if Byrne should not be followed, the balance of the evidence would favour the view that his client was an employee in the sense of performing a contract of service rather than for services.
9. We agree with the EAT in London in Byrne that the definition and particularly limb (b) in the Regulation is not happily expressed but it requires to be given a meaning by us against the background that we are concerned with statutory construction which may well innovate on pre-existing common law.
10. We consider that the proper approach to the issue is to concentrate on the phrase "any other contract" which is all-embracing in the relevant context, leaving the exception to be the only qualification to that broad position. It is therefore appropriate to consider whether or not, in any given case, the relevant worker falls within the exception. The consequence of this approach as is identified by the EAT in Byrne is that Parliament has created a hybrid between the clear question of a contract of service and equally clear issue of contract for services. That hybrid may have elements of both but, at the end of the day, the issue falls to be determined as to whether the evidence points exclusively to the exception applying. If it does not, the inevitable result must be that limb (b) is satisfied.
11. That is precisely the approach that the Chairman has taken in the present case and based his conclusions upon the evidence, even if he recognises, as we do, that there are aspects of the matter pointing both ways. We do not consider it necessary to rehearse in detail his conclusions since we are prepared to accept them against his findings in fact and certainly are not prepared to hold that he has approached the evidence against our view of the law in a way as to render his conclusions perverse, bearing in mind, against the background of the settlement of the legal issue, this is not a court of appeal but rather of review.
12. Having said that, however, if we had to answer the question without reference to Byrne we still would have inclined to the view that the evidence supports the notion of an employee rather than a self-employed contractor.
13. However, that is not the basis of our decision which is simply that, against the background of Byrne being correctly decided, the Chairman applied the correct law to the evidence he found proved and reached a conclusion which was entirely sustainable.
14. In these circumstances this appeal will be refused.