United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR MCFADDEN (Advocate) Northern Complainant Aid Fund Midlands Unit 70 Villa Road Handsworth Birmingham B19 1BL
For the Respondents


 


HIS HONOUR JUDGE J R REID QC

1. This is the hearing of an appeal by Mr Kotecha against a decision of an Employment Tribunal held at Birmingham on 26 April 2001. The decision was registered and a copy sent to the parties on 5 July 2001. By that decision the Tribunal unanimously decided that the Applicant was not an "employee" or a "worker" and was therefore not entitled to pursue his claims. They therefore dismissed both the applications which he had made.
2. The applications were for unlawful race discrimination, victimisation, unfair dismissal, breach of contract and an unlawful deduction of wages. The Tribunal, no doubt inadvertently, mis-state the claims made in the second of the two originating applications, describing it merely as being unfair dismissal, unlawful deduction of wages and breach of contract.
3. The essential issue, so far as the race relations claim is concerned, was whether Mr Kotecha had a claim under Sections 1, 2 and 4 of the Race Relations Act arising out of his treatment, in what he said was his employment, by the Respondents, Insurety PLC trading as Capital Healthcare. There were various other Respondents who were individual employees of, or agents of, that company who were said to have participated in some of the various acts of which he complained.
4. In order to determine whether or not there was discrimination against him, or victimisation of him, in relation to employment by Insurety PLC, the Tribunal should have looked, amongst other things, at the terms of Section 78 of the Race Relations Act 1976 which defines employment in these terms:

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

The Tribunal, however, did not look at that Section. They had the disadvantage that before the Tribunal Mr Kotecha appeared in person and the Respondent company, Insurety PLC, was represented by a Director. They therefore did not have the advantage of any informed legal argument.

5. The Tribunal took the view:

"Both Originating Applications raise a preliminary issue and this hearing has dealt with the preliminary issue only, namely whether the applicant was an "employee" and/or a "worker" within the meaning of Section 230(1) on [or] Section 230(3) of the Employment Rights Act 1996 ("the 1996 Act") and therefore whether the applicant is entitled to pursue these claims."

The Tribunal, having then failed to identify the section which they were required to look at, understandably, given the complications of this legislation and the difficulties of receiving no professional assistance, then made a detailed series of findings of fact about the nature of the relationship between Mr Kotecha and Insurety PLC. In very brief terms, the essence of it was that Mr Kotecha had been acting as what was described as a Divisional Director, and subsequently as a Regional Manager, and subsequently as an Area Manager and some of his complaints arose out of what he regarded as being those demotions.

6. Having considered the written document into which the parties had entered which was described as an 'agency agreement', the Tribunal made findings of fact that Mr Kotecha had a considerable degree of control over the way in which his work was done, when it was done and how it was done, that he did not work regular fixed hours, it was up to him how many and which hours he chose to work, that he did not receive any basic salary, that his remuneration was entirely commission based, that he was entitled to work for other companies provided they did not compete with the business of the Respondent (ie did not sell the same products). They went on to find that he did not have any tax or national insurance deducted at source but accounted for it on filing of his annual return, that he was not entitled to sick pay or holiday pay, and that he was not subject to any formal disciplinary or grievance procedure. They noted that he was responsible from time to time for training other agents and in particular, for recruiting (subject to the approval of the company) new sales representatives, that he had a given area and was responsible for selecting members of his team for that area. They found that he held regular meetings with his team members and appears to have acted in some sort of supervisory capacity on behalf of Insurety, that he was called a 'Manager', and that although he was technically entitled to work for other companies the amount of time he spent working or selling Insurety products practically curtailed working for anyone else. They expressed themselves satisfied that he had considerable control over his work, that he was not obliged to work for lengthy hours, but in fact he did, which was something he chose to do.
7. They then said that the factors they had considered pointed in each direction:

"In nearly all of these types of cases, there is something of a balancing exercise. Usually there are some factors which point in one direction and some the other. We have to consider what weight is to be attached to them, with no single factor in itself being decisive. Factors (a) to (h) at para 5 above suggest that the relationship was one of independent contractor whereas (I) to (k) suggest he may be an employee."

They went on – and this is a paragraph in the reasoning which has caused us considerable puzzlement:

"We are satisfied that there was no mutality [mutuality] of obligation between the applicant and the respondent. The applicant could, so long as his work did not compete with the first respondent, work for other companies. If he chose not to do so, that was entirely his decision. So far as the first respondent was concerned, there was no obligation on him to work for them and them alone."

It seems to us that there the Tribunal was not addressing the question of mutuality of obligation in the sense of the obligation of each to the other and was not considering whether there was any obligation on Mr Kotecha to do some work , or undertake some functions for Insurety, but was simply looking at the question of whether there was exclusivity, namely an obligation on Mr Kotecha to work for no one other than Insurety.

8. The Tribunal went on to consider the significance of the label of 'self employment' to the relationship and that Mr Kotecha had acknowledged that he was a self employed agent and that the agreement was not to be considered one of employment. Their conclusions were then these:

"Having regard to all the various factors in this case, we conclude that the applicant was not an "employee" within the meaning of section 230(1) of the Employment Rights Act 1996.

We have gone on to consider whether the applicant was a worker within the meaning of section 230(3) of the Employment Rights Act. On the facts, we conclude he was not. He was a genuine self-employed independent contractor. The evidence of the respondent, which is not challenged, is that this type of self-employed arrangement is the norm within the industry. As Divisional Director, the applicant may have had responsibilities over and above sales representatives but those responsibilities do not necessarily alter his status."

We find it a bit difficult to see how the responsibilities fit in to the concept of there being no mutuality of obligation. The Tribunal then concluded:

"… that the Applicant was neither an "employee" or a "worker". Accordingly, all his claims are hereby dismissed."

9. We considered whether, in the absence of any reference to Section 78(1) of the Race Relations Act, we could look at the definitions of "employee" and "worker" in Sections 230(1) and 230(3) of the Employment Rights Act and conclude from the similarity of the words that the finding that he was neither an "employee" or a "worker" for the purposes of Sections 230 of the Employment Rights Act meant that his relationship with Insurety was necessarily not one in relation to employment as referred to in Section 4 of the 1976 Act.
10. We have come to the conclusion that it would not be safe for us to draw any conclusions one way or the other as to what the Tribunal would have done if it had looked at Section 78 rather than looking only at Section 230. The findings of fact we do not find entirely easy to fully understand, and we are not satisfied that we could tease out of them with sufficient clarity a decision as to precisely what the Employment Tribunal was finding so as to enable us to apply to those facts as found and reach a decision by reference to Section 78 of the Race Relations Act.
11. In the circumstances of the case, it seems to us that the only practicable option is to allow this appeal and direct that the case be remitted for re-hearing by a different Tribunal. That we therefore do.