United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Dr M Bennett (Representative) S.D.U.C 11 Porchester Road Woolston Southampton SD19 2JB
For the Respondent	Mr T Gibson (Advocate) Wragge & Co Solicitors 55 Colmore Row Birmingham B3 2AS


 


THE HONOURABLE MR JUSTICE ELIAS

1. The Appellant in this case claimed against the Respondent for unfair dismissal, failure to pay notice pay and failure to provide written reasons for dismissal. All these claims are dependent upon her establishing that there was a contract of employment in existence. The Employment Tribunal found, at a hearing of a preliminary issue, that there was no such contract. Indeed, they held that there was no contract at all between the Appellant and the Respondent in the circumstances of this case. It is against that Decision that she now appeals to this Tribunal.

The facts

2. On 11 April 1997, the Appellant signed an application form to be placed on the books of Barker Professional Services (BPS). This is an employment agency that provides labour to third party clients. She signed an application form and printed on that form was an acknowledgement that she was in receipt of a Temporary Field Staff Employment Guide issued by BPS, although the Applicant had no recollection, in fact, of receiving that Guide. The Guide indicates that the Applicant would be employed by BPS; they would have the responsibility of paying her, and providing holiday pay. The Guide included its own grievance and disciplinary procedures and it expressly stated that the Applicant would be employed by BPS.
3. The Respondent in this case is based in Southampton. At the relevant time it had a permanent staff of about 1,900 persons. They had a requirement for fluctuating temporary staff and it secured these by taking advantage of the services of BPS who provided such staff. There is a document, referred to in the Tribunal's Decision, but which we have not seen, entitled "Temporary Staff Services" which sets out the terms under which labour is provided by BPS to the Respondent. Under the agreement the Respondent notifies BPS of any requirement it has for a temporary worker, then it is the responsibility of BPS to provide a suitable person. Under that agreement, it is BPS that is responsible for making all payments to the workers including holiday, sick pay and overtime. This agreement also expressly states that it is BPS who is the employer of the temporary staff.
4. There is some dispute about the period during which the Appellant was in fact working at the premises of the Respondent, but it was not a material one. On any view, the Tribunal accepted that from as long as 1998, the Applicant had been working with the Respondent on a series of fixed term contracts. Those fixed term contracts are not contracts made between the Appellant and Respondent; they were the contracts made between the Respondent and the agent, BPS. Once the Appellant was working on the Respondent's premises, then the day to day management of the Appellant was carried out by an employee of the Respondent; they controlled what she did on a day to day basis.
5. When the fixed term contract came to an end, BPS would then have to find a suitable alternative position for the worker concerned. If, however, a client such as the Respondent wished to continue to employ labour, and expressed a preference for a particular worker, then of course it was in everyone's interests that BPS would continue to provide that worker to the client. In the case of this Appellant, she got to know many persons in the Respondent organisation and, in practice, what happened was that she would tend to be approached by a manager of another department that needed a temporary worker, once her fixed term contract with BPS came to an end; she would then be invited to take up that employment.
6. In those circumstances, however, the Respondent would follow its usual procedure of submitting a request to BPS, detailing their requirement, but adding a rider that they would prefer the Appellant to be assigned to the role, given her previous experience. As to pay, the temporary workers would complete a weekly timesheet, signed by the relevant manager for the Respondent and passed to BPS. A representative of BPS would attend the Respondent's premises every Friday to collect such forms and to liaise with the workers and their line managers as to the arrangements. In practice, the Appellant was not there on Friday, so she would fax her weekly timesheets to BPS. Those are the principal findings of fact made in this case by the Tribunal.

The law

7. The law is not in dispute in this case, as Lord Justice Longmore put it in the case of Montgomery -v- Johnson Underwood Ltd [2001] IRLR 269, at paragraph 46:

"mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment: see Nethermere (St Neots) Ltd -v- Gardiner [1984] IRLR 240, 245 per Stephenson LJ, approved in Carmichael -v- National Power plc [2000] IRLR 43, 45 per Lord Irvine of Lairg LC."

More specifically, the Court in that case approved of the traditional analysis of what is meant by a contract of service, as enunciated by Mr Justice MacKenna in Ready Mixed Concrete (South-East) Ltd -v- Minister of Pensions and National Insurance [1968] QB 497. At page 515 he said this:

"I must now consider what is meant by a contract of service.

A contract of service exists if these three conditions are fulfilled. (i) the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service."

The Tribunal's conclusions

8. The Tribunal in this case considered separately the issues of mutuality of obligation and control, and concluded that neither were established. They gave their reasons as follows:

"It is important to look at the issues of mutuality of obligation and the question of control of the Applicant, while taking account of all other factors that one would normally expect to see in a relationship of employer and employee. In this case it is clear that the day to day control of the Applicant's work lay with her manager, who is an employee of the Respondent, but the Tribunal is of the view that day to day control is not in itself sufficient as that would normally rest with the company where the worker actually worked, rather than an employment agency, because there is not normally any practical alternative. That would even be the case if an agency placed a worker with a company for just a single day. The Tribunal's view is that it is important to look further and to see if there are any additional factors indicating an employer and employee relationship exists and, in particular, that a mutuality of obligation has arisen. In this case it is noted that the Applicant had been providing services for the Respondent for a long period of time similar to the workers in the cases of Motorola and Montgomery. However, unlike both those cases, the Applicant had not been placed long-term in one role that was in practice for an indefinite period, but had been placed in various roles on a series of fixed-term contracts, which is less consistent with employment by the company where she is placed. BPS also continued to exercise significant areas of control. They paid the salary and any sick or holiday pay entitlement and set out detailed conditions of employment, including grievance and disciplinary procedures. This is very different to the situation in Motorola where the facts showed that the worker was in almost every respect treated the same as any other permanent employee with, for example, Motorola using their disciplinary procedure to deal with the worker. So, given the specific facts of this case, the Tribunal is satisfied that the Applicant did not at any stage become an employee of the Respondent, as there was an absence of mutuality of obligation and as significant areas of control of the Applicant remained with BPS. As the Applicant was not an employee of the Respondent, her claims must be dismissed."

We will consider the submissions made in respect of mutuality and control separately.

Mutuality

9. It was always, in our view, going to be a significantly uphill battle for the Appellant to establish mutuality of obligation here, not least because, as is recounted in the Tribunal's Decision, the Appellant, in her evidence to the Tribunal, acknowledged that the Respondent was under no obligation to continue to provide work for her, or for her to continue to carry it out, and that BPS alone determined where she would work. However, Dr Michael Bennett, courteously and carefully framed certain arguments to support the appeal, notwithstanding that finding, and we now consider those arguments.
10. First, he submitted that it is important to go back to the passage from the judgment of Mr Justice MacKenna which we have already recited, in particular, to the first condition referred to. He submits that in this case, the Appellant did agree, in consideration of a wage, to provide her own work and skill. Similarly, the Respondent did agree to provide the pay for the work done, albeit that was paid not directly to the Appellant, but indirectly through the employment agency. Accordingly, he submits, it is a straightforward application of the test adopted in Ready Mixed, as subsequently approved in the Court of Appeal in Montgomery and, indeed, by the House of Lords in Carmichael. We reject that argument; in Ready Mixed there was no question of any third party agency or anything of that kind in the picture. What the authorities plainly show is there must be mutual exchange of obligations.
11. In this case, the contractual arrangements between the parties do not manifest any mutuality of obligation at all; rather they indicate that there are separate and distinct independent obligations that are undertaken in each case to the third party agency, BPS. The Appellant has undertaken to work for BPS, once work is provided for her, and the Respondent has undertaken to pay BPS in respect of the labour that they supply to the Respondent, but the mutuality of obligation, which is a condition precedent to creating any contract of employment, is absent. There is no need, or indeed any justification, for implying any contract between the Appellant and the Respondent in these circumstances. The fact that she works on their premises, and the fact that she receives, indirectly, pay from them are referable to the existence of the two contracts to which we have referred, namely the contracts between the agent and the Appellant and the agent and the Respondent respectively.
12. The second argument advanced by Dr Bennett was that there was, in any event, a separate agreement made between her and the manager of the Respondent. We reject that because it is inconsistent with the evidence. True it is that the manager would express a preference, but it is made plain that what happened in those circumstances was that it was still a matter for BPS to determine who would be supplied to the Respondent. Of course, it made commercial sense to provide, where possible, the particular worker for whom the Respondent had expressed a preference, but that is nowhere near establishing any kind of direct contractual relationship between the Appellant and the Respondent in this case. Dr Bennett also submitted that the Tribunal may have acted on the premise that it was not possible to have a mutuality of obligation arising under fixed term contracts. We do not think that is what they are saying in their Decision.
13. We turn then to the question of control; that, as we say, is a separate and independent ground. Whereas the question whether there is mutuality of obligation goes to the fundamental issue of whether there is a contract at all, the question of control goes to the question of how to characterise such contract as does exist, and, more specifically, whether it can be properly characterised as a contract of employment. Again, Dr Bennett asked us to go back to first principles and bear in mind what had been said by Mr Justice MacKenna in the Ready Mixed case, in relation to control. In the course of giving judgment, the judge had said this, at page 515F

"Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed by doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted."

14. Dr Bennett also referred to the case of Motorola Ltd -v- (1) Davidson and (2) Melville Craig Group Ltd [2001] IRLR 4. That was a case which was also one where there was a three party relationship, and in which the Employment Appeal Tribunal held that the employee was indeed under a contract of employment with a client of the agency. It is important to note that in that case that it was conceded by the Appellant that there was sufficient mutuality of obligation to create a contract, and the only question was the nature of that contract. In that context, the Employment Appeal Tribunal looked at the question of control. The Employment Tribunal had found there was sufficient control to establish a contract, and the Employment Appeal Tribunal held that they were entitled so to conclude. In the course of giving the judgment for the Employment Appeal Tribunal, Mr Justice Lindsay said this:

"Nor, further as we see it, does one necessarily disprove the existence of a degree of control over a worker consistent with his being an employee of A by showing that B had equal or even greater powers over him."

15. In these circumstances, Dr Bennett submits that the Tribunal plainly erred in reaching the conclusion it did. He submits that the criteria referred to by Mr Justice MacKenna were clearly complied with, and the fact that there was control being exercised in other respect by the agency, BPS, did not prevent a conclusion that there was sufficient control in this case. We should say at once that we entirely accept that if there had been no interposition of an agency in this case, with the contractual arrangements made through the agency, then there can be no doubt that had the Appellant been employed directly by the Respondent, she would have been working under a contract of employment. It would be quite ludicrous to suggest that in any way she would have been employed on her own account, or under a contract for services, and Mr Gibson has accepted that for the Respondent. But the important feature in this case is that the party exercising control over the day to day contract is not ultimately the party who determines and administers the wages, and in other respects deals with the issues that might arise under the contract. In a sense, control is being exercised at two different levels; first there is the administrative level, regulating day to day work, which is under the control of the Respondent, then there is the control over all what might be called the contractual aspects of the contract, which are carried out by the agent.
16. In these circumstances, it seems to us that it was open to the Tribunal to come to the conclusion that there was insufficient control, but we have to say that in truth this is really saying no more than that the substance of a relationship was that there was a contract with the agency, BPS, rather than with the Respondent. It was only because of the relationship between the agency and the Appellant, and the fact that they had control over significant aspects of her employment, that the Tribunal reached the conclusion that it did.
17. Accordingly, we dismiss this appeal. We do so principally on the basis that the Tribunal was plainly right to find no mutuality of obligation, but in addition we would not interfere with its finding that in the circumstances, and given that lack of mutuality, there was not sufficient control in any event; but the latter finding, as we say, is very much dependent upon the former.
18. We would finally simply mention in passing, as have a number of other Courts that have dealt with the position of agency labour of this kind, that there are some concerns that the arrangements may be manipulated unjustly to defeat the rights which would otherwise attach to employees. The issue of their rights is a matter which is actively under consideration at the moment by Government, and we say no more about it.