United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR A HOGARTH (of Counsel) Instructed by: Messrs O H Parsons & Sons Solicitors 3rd Floor Sovereign House 212-214 Shaftesbury Avenue London WC2H 8PR
For the Respondent	MR A JACK (of Counsel) Instructed by: Britannia Developments Limited Lawns House Lawns Lane Farnely Leeds LS12 5ET


 


HIS HONOUR JUDGE ANSELL

1. This is an appeal from a decision of the Employment Tribunal sitting at Leeds, which consisted of the Chairman alone, Mr A J Simpson, on 19 November 2001. He decided that Mr Bryant was not entitled to holiday pay or compensation for holiday pay under the Working Time Regulations 1998 because he did not fall within the definition of "worker" contained in Regulation 2, the definition section. That decision was promulgated on 5 December 2001.
2. May we say at the outset that we are a little surprised the matter was dealt with by a Chairman alone, although it may well be that looking at the documents that had been presented it was thought that there was simply going to be effectively a legal argument on the interpretation on the interpretation of the documents that were presented. As it turned out in the final decision, the documents which were presented played little if no part in the decision making of the Chairman.
3. The history of the case in terms of the Tribunal documentation was that a claim was instituted by documents presented on 30 July for non-payment of holiday pay, based on a basic wage of £500 per week gross, £410 take home, an hourly rate of 40 hours per week and employment between 5 March and 11 June, at the employer's building site at Kippax in Yorkshire. The Applicant was one of a team of three who had been contracted to take on bricklaying work at that site on a priced basis. I will come back to those details in a moment.
4. The Respondent put in their Notice of Appearance together with three documents annexed to it. They contended that the arrangement the employee had, was that he was paid an agreed amount of money he had negotiated with the Respondent for undertaking a particular job. He was paid weekly by the Respondent. On the occasions when the job lasted longer than a week he was paid an amount of money to represent the proportion of the job he had completed. It is said he had a right to hire people to assist him and they would be paid by the Applicant (in other words, the employee in question).
5. The employers did not pay any separate sick pay or holiday pay. The agreed price of the job was said to include an amount to cover both of these. A copy of the terms under which self-employed labourers and sub-contractors provide their services was attached to the IT3. There was a notice which was said to require the employee to sign it and return it. The copy in the Tribunal papers was unsigned, unnamed and undated. It listed the following criteria:

(a) "…price work…

(e) No sick pay or holiday pay is provided.

(g) No transport is provided.

(h) Your engagement can be terminated by us without notice.

(k) No set hours of work are laid down.

(l) You have the right to hire other people, who would answer to you and be paid by you for the work done."

6. The documents included correspondence that had been taken place with the Inland Revenue who appeared to confirm self-employed status on the basis of the arrangements.
7. When the matter was dealt with by the learned Chairman, he does not actually record what evidence he took at the time, although we understand that he heard from the Applicant, who was represented by Mr Derek Johnson, a union representative, at the hearing and Mr David Firth, Financial Manager of Britannia.
8. The Chairman recorded that Mr Bryant was looking for work, together with other members of his gang, saw the advertisement, spoke to Mr Lee the Site Manager, was told to present himself with the other two members of the gang. "He told me that if he had gone by himself, he did not expect that he would have been taken on." There would be a price agreed depending on which stage the house had reached, so it was priced at the end of each week according to how far they had got on with the work.
9. The Applicant said it would have made no difference in his pay irrespective of how quickly or slowly he and his colleagues had laid their bricks. We do not understand that reference because if they had laid bricks quickly, they would have moved on to a further stage within the building and therefore would have been able to be paid not only for that one level of work, but also for the second stage.
10. The Chairman then referred to the Working Time Regulations 1998 and the definition of "worker". The last two paragraphs said this:

6 "I think the significant part of the definition is where the word "individual" occurs, as it does, on at least two occasions. I am satisfied on the evidence that it was not an individual who was entering into the contract. The Applicant said, quite freely in evidence, that had he presented by himself to Mr Lee, he would not have been given work. It was because he came as part of a package that he got work on or about 6 March and it was because he remained as a package during the ensuring thirteen or fourteen weeks that he retained that work.

7 I am satisfied, therefore , that whatever the arrangements are between the Applicant and his two colleagues in the two plus one gang, they were contracted with the Respondent as that package. It was not, therefore, a contract by him personally. It was a contract by him and two others. Because it was such a contract the Applicant does not fall within the definition of "worker" as set out in Regulation 2 of the Working Time Regulations. Because he does not satisfy that definition this claim must fail."

We will return to those conclusions.

11. The Working Time Regulations 1998 contain in Regulation 2 the definition of "worker". It is a definition which in fact appears in other statutes to which reference has been made by Counsel for the Appellant and he has referred us to the Employment Rights Act 1996, the National Minimum Wage Act 1998 and a number of other sections. That is a well-known definition. It is defined as:

""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."

12. In his submissions to us, Mr Hogarth has helpfully set out what effectively then are the four categories that can be considered under this definition. First of all, that there can be a worker meaning an individual who had entered into a contract of employment, or an individual who works under a contract of employment, or it can mean an individual who entered into any other contract (whether express or implied) and if express whether oral or in writing whereby the individual undertakes to 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 fourthly, a similar arrangement whereby the worker works under any other contract rather than having entered into any other contract.
13. So there are four possibilities that give rise to a person becoming a worker. That definition has received extensive interpretation from the courts, and in particular we have been referred to a decision of this court last year Byrne Brothers v Baird [2002] IRLR 96, where Mr Recorder Underhill QC was presiding. That case dealt with what was said to be a difficult area in terms of self-employed labourers, being sub-contractors working on building sites. The court held that they could come within the definition of "worker". The headnote reads as follows:

"The Employment Tribunal had also correctly concluded the applicants were not providing their services to the appellant company in the capacity of a "business undertaking" of which the company was a customer.

The structure of limb (b) in reg. 2 (1) is that the definition extends prima facie to all contracts to perform personally any work or services but is then made subject to an exception relating to the carrying on of a "business undertaking". The intention behind the regulation is plainly to create an intermediate class of protected worker who, on the one hand, is not an employee but, on the other hand, cannot in some narrower sense be regarded as carrying on a business. The policy behind the inclusion of limb (b) can only have been to extend the protection accorded by the Working Time Regulations to workers who are in the same need of that type of protection as employees in the strict sense – workers, that is, who are viewed as liable, whatever their formal employment status, to be required to work excessive hours. The reason why employees are thought to need protection is that they are a subordinate and dependent position vis-à-vis their employers. The purpose of reg. 2 (1) (b) 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 arm's-length and independent position to be treated as being able to look after themselves in the relevant aspects."

14. The criticism of this decision here is that there are no clear findings as to what were the precise contractual arrangements between the employees and the team of three that had been taken on; merely for the Chairman to describe it as a package or a contract involving all three of them does not set out clearly the precise contractual arrangements from which consideration can then be given as to which, if any, of the four limbs might, under Regulation 2, apply to the three of them and in particular Mr Bryant.
15. In particular, we remind ourselves that this case had moved from a position where it was contended in the Notice of Appearance that the only relevant contract was between Mr Bryant himself and the employers, with the ability of Mr Bryant to bring in others that he would be responsible for, to a position which was described as a package contract. Indeed it is regrettable in our view that no reference was made by the Chairman to any of the documents that had been presented to him by the Respondent as part of the original case.
16. But even taking paragraphs 6 and 7 at their face value, we find them confusing. There is no finding as to whether there were effectively separate contracts with the three of them; namely did each of them have similar terms to the example that had been given in the Notice of Appearance. Was the payment made separately, even assuming there was one contract for the three of them? Were there separate payments made by the employer, or was there one payment made to Mr Bryant which he then divided up between them? There are confusing passages, as I have said, in relation to those matters.
17. On the one hand the Chairman speaks of the arrangement between the Applicant and his colleagues inferring that it was the Applicant who was responsible for payment; and on the other hand he refers to a contract between the employer and all three of them. For our part we find that passage to be confusing.
18. Even, however, accepting that what is said by the Respondents today, that there was clarity with regard to the fact finding, namely the Chairman had found was there to be a contract with either two or three of them jointly (it is not clear whether it included the subsidiary worker), was it correct for the Chairman to then exclude the definition on the grounds that he did, namely that they were not individuals undertaking services within the meaning of Regulation 2 sub-paragraph (b)?
19. The submission of the Appellant contends that it is the third or fourth alternative that Mr Hogarth submits can be applied to this case, namely an individual who has entered into any other contract, whereby he undertakes to do or perform personally any work or services. The Respondent's argument, which was accepted by the Chairman, was that the worker who entered into the contract had to be effectively the only person performing personal services under that contract.
20. We do not agree with that approach. We can see a situation where there might be "any other contract", which either the worker had entered into with others, or under the fourth category, others had entered into, whereby he had individually undertaken to perform personal work or services on behalf of the employer. He would of course have to be identified, as indeed he was in this case, as one of the three people that were part of the gang that the employer wanted to use. But we cannot agree that the definition under sub-paragraph (b) requires there only to be one person who enters into the contract and then performs work under it.
21. It may well be that the Chairman could have excluded the definition on the grounds that the arrangement did amount to a business undertaking being carried on by the individual or individuals concerned. Mr Hogarth quite frankly admits that that was certainly a possibility on the facts of this case. But that was not the basis that the Chairman excluded the definition and as we have said already, we have serious concerns about the fact finding in this case and what contractual arrangements he concluded were in place between the two workers and the employer.
22. We would therefore allow this appeal and remit this matter to a fresh Tribunal for them to consider all these issues. We hope that the Tribunal would consist of lay members, as it seems to us that there are issues of fact which will require a Tribunal to determine in relation particularly to the precise contractual arrangements.