United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR DAVID READE (of Counsel) Instructed By: Redrow Group Services Ltd Redrow House St David's Park Flintshire CH5 3RX
For the Respondents	MS JILL BROWN (of Counsel) Instructed By: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE


 


HIS HONOUR JUDGE PETER CLARK:

1. We have before us two conjoined appeals raising the same question of law, namely the meaning of the expression "worker" as defined in regulation 2(1) Working Time Regulations 1998 (WTR). The first appeal in time (EAT/337/02) is brought by Redrow Homes (Yorkshire) Ltd against a decision of the Leeds Employment Tribunal promulgated with extended reasons on 26 February 2002, upholding a complaint by Mr Wright that Redrow had unlawfully deducted from his wages holiday pay to which he was entitled under regulation 14(2) WTR; the second (EAT/1232/02) is brought by Redrow Homes (North West) Ltd against a decision of the Flint Employment Tribunal, promulgated on 24 September 2002, upholding similar complaints by Mr Roberts and Others. For the purpose of this judgment we shall refer to the Appellants generically as Redrow; to the Applicants as such or by name and to the two cases as the Wright case and the Roberts case.

The Facts

2. In the Wright case Mr Wright was a bricklayer by trade. Between 9 October 2000 and 23 April 2001 (the period) he worked as a bricklayer on two of Redrow's sites at Shadwell and Sandal in West Yorkshire. He worked with another bricklayer, Robert Milner. They did their own labouring.
3. The Leeds Tribunal found that Wright and Milner jointly approached Redrow for work and work was offered on Redrow's standard terms. Remuneration for the work done was on two different bases, measured work and day work. The former involved a set price for a given number of bricks laid, e.g. £200 for every 1000 bricks laid; the latter involved an hourly or daily rate for the job; e.g. £6.50 per hour or £250 per day for both men, each taking £125.
4. For the measured work Wright received in his name alone an official order form from Redrow on one of its printed forms. On the back of the form was printed the Respondent's standard trading terms. The Tribunal found that those standard terms applied both to labour-only tradesmen and contractors supplying goods and services to the Respondent.
5. At the Sandal site 96 per cent of the Applicant's work was measured work and at Shadwell 78 per cent.
6. On site Redrow provided the bricks and pre-mixed mortar, together with a forklift truck and driver, scaffolding and normally one labourer. Redrow also provided a set of drawings and the men were subject to a building programme which allowed between two to three weeks for the brickwork to be completed, depending on the size of the house under construction. Wright and Milner used their own handtools.
7. There were no set hours of work. The men were free to work elsewhere although in practice these two worked solely for Redrow throughout the period. They were paid weekly.
8. In the Roberts case the Flint Tribunal was concerned with two gangs, each of four men. All eight were Applicants claiming holiday pay. The Roberts gang consisted of three bricklayers plus a labourer, Mr Forbes. The other gang consisted of bricklayers who each undertook labouring work for the others.
9. They were paid weekly on the basis of measured work. The Redrow standard terms and conditions applied to each gang. The Tribunal accepted the evidence of Mr Davies, Redrow's site manager, that the men did the work they were employed to do.
10. The men supplied the handtools but no other materials. As in the Wright case Redrow provided a forklift truck and driver to move materials around the site; scaffolding and all necessary construction materials, including bricks. If work was unsatisfactory Mr Davies would give instructions for its rectification. Redrow provided public liability insurance and undertook all necessary risk assessments for health and safety purposes. The Applicants used Redrow's welfare facilities and took breaks with their direct employees.
11. During the relevant period in this case, from summer of 2000 until termination of the arrangements in 2001 the Applicants worked exclusively for Redrow.
12. The Tribunal found that the Applicants bore no financial risk. They were paid in respect of work done. Each held CIS4 certificates which meant that 80 per cent of their tax liability was deducted at source. They were responsible for their own national insurance payments.
13. Just before Christmas 2000 the Roberts gang was, at the request of Mr Davies, transferred from one Redrow site to another in Willaston. Eventually the arrangement ended because, the Tribunal found, the men were experiencing difficulty in obtaining sufficient materials to continue with their work. The other gang finished in February 2001 because work at the site in Wrexham where they had worked ended.

The Contractual Terms

14. The Redrow standard conditions of contract included the following material terms, applicable in all cases:

"1 That the Contractor having had an opportunity of inspecting our Conditions of Contract shall be deemed to have noted its provisions and hereby agrees to be bound by them insofar as they are applicable to his subcontract.

6 LABOUR

In respect of all operatives employed by the Contractor, the Contractor is responsible for and shall keep the Company indemnified against any claim or liability for National Insurance, Graduated Pension Contributions, Pay-As-You-Earn, Holiday Pay, Construction Industry Training Board levy, Travelling Expenses and other emoluments payable, all other payments required by Law or otherwise which may be necessary for the proper execution of the contract work whether current or introduced during the period of the contract.

The Contractor must at all times provide sufficient labour to maintain the rate of progress laid down from time to time by the Company, and shall supply such labour with all necessary tools and equipment.

On each site where the work is in progress the Contractor must maintain a competent foreman or chargehand who has complete control of all labour engaged on the work. Any instruction given to such foreman or chargehand shall be deemed to have been given to the Contractor.

20/21 SUBLETTING

No order, nor any part order issued by the Company shall be assigned, sublet or transferred without the prior consent in writing of the Company. In the event of any such assignment, subletting or transfer, the Contractor shall be responsible for securing compliance with these conditions in every respect."

Worker

15. Regulation 2(1) WTR provides:

" '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."

16. Although WTR were passed to implement EC Directive 93/104 that Directive contains no definition of worker. We have been referred to the earlier Directive 89/391 which, by Article 3(a) defines worker as "any person employed by an employer ...".
17. In fact the definition in the WTR owes more to domestic legislation. Section 167 of the Industrial Relations Act 1971 was framed in similar terms to regulation 2(1) WTR, save that the exception for customers of any business undertaking carried on by the individual was omitted. The IRA definition is reproduced in section 296 Trade Union and Labour Relations (Consolidation) Act 1992, whereas section 230(3) Employment Rights Act 1996 contains the same definition as is now to be found in regulation 2(1).
18. Some limited assistance may be derived from the extended definition of "employment" in section 82 of the Sex Discrimination Act 1975 (section 78 Race Relations Act 1976), that is:

"employment under a contract of service ... or a contract personally to execute any work or labour."

19. Having heard and considered the submissions of Counsel in these cases it seems to us that the European cases, considered en passant by the Tribunal in the Roberts case, are of no real assistance to construction. Nor are the cases on the "employment" definition in the discrimination legislation wholly determinative. We were referred to Mirror Group Newspapers v Gunning [1986] ICR 145 (CA); Kelly v Northern Ireland Housing Executive [1998] ICR 828 (HL). Of greater assistance are the EAT decisions specifically on the definition of worker in regulation 2(1) WTR; Byrne Brothers (Formwork) Ltd v Baird [2002] IRLR 96 (Mr Recorder Underhill QC) and Barlow and Nelson v PE Jones Contractors Ltd (EAT/1086/00). 4 March 2002. Unreported. Mr Recorder Langstaff QC). Counsel do not take issue with the EAT approach in either of those cases.

The Tribunal Decisions

20. Although the Leeds Tribunal in the Wright case referred to two European cases it is apparent that they directed themselves in accordance with the EAT judgment in Byrne Brothers v Baird and concluded that the Applicant's contractual relationship with Redrow fell within the definition contained in regulation 2(1)(b) WTR. It is not suggested in any of the present cases that the Applicants fell within the definition in regulation 2(1)(a); they did not work under a contract of employment, that is a contract of service.
21. In the Roberts case the Flint Tribunal found that the Applicants were being employed by the Respondent for their labour. They found that the "sub-letting" clause in the Respondent's Conditions was consistent with a contract for personal service; further, that the "Labour" Clause did not apply to the contract into which these Applicants entered with Redrow. They noted that the Applicants provided only their own handtools and were subject to a degree of control by the site manager. They did in fact work exclusively for Redrow during the relevant period. The pricing of work was consistent with the Applicants being self-employed individuals carrying on their own business. The Flint Tribunal also directed themselves in accordance with the principles enunciated in Byrne Brothers v Baird and having done so concluded that these Applicants also fell within the regulation 2(1)(b) definition of "worker".

The Appeals

22. As these appeals were conjoined we heard argument in both together. Mr Reade (instructed in the Wright case) and Mr Neaman presented the case for Redrow in tandem. Mr Hogarth (in the Roberts case) and Miss Brown responded on behalf of the Applicants respectively.
23. We accept, as Mr Reade submitted by reference to the judgment in Barlow, paragraph 14, that for the worker definition in regulation 2(1)(b) to be satisfied three requirements must be made out:

(1) the work must be done under a contract

(2) the individual must by that contract "undertake to do or perform personally any work or services".

(3) under the contract, he must do so for another party to the contract whose status is not (for present purposes) by virtue of the contract that of a customer of any business undertaking carried on by the individual. It is not suggested that Redrow was in a professional client relationship with these Applicant bricklayers.

24. It is accepted on behalf of Redrow that the first requirement was met. Thus the issue turns on (a) whether, under the contract, the Applicants undertook to do or perform personally any work or services for Redrow ("the personal service requirement") and (b) whether the business undertaking exception applied.

The Personal Service Requirement

25. In order to answer this question it is necessary to determine first what are the relevant contractual terms and secondly what do those contractual provisions mean?
26. The starting point must be the Redrow standard terms and conditions of contract. Interpretation of those terms requires the Court to ascertain what the parties using those words against the relevant background (the factual matrix) would reasonably have been understood to mean. See Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 913 C, per Lord Hoffmann.
27. On behalf of Redrow it is submitted that there is nothing in the factual matrix to these contracts or the background to them which plainly shows that the parties must have intended an obligation of personal performance. On the contrary, it is argued that the express terms of the contract are inconsistent with such an obligation.
28. Particular attention is drawn to clause 6, the Labour Clause and clause 20/21, Subletting.
29. As to the former Mr Reade submits that there is no direct obligation on the individual to perform the work himself; he could get in others to do the work on site.
30. The sub-letting clause amounts to a provision allowing for the sub-contracting of the work, with Redrow's consent.
31. It is further contended that the dominant purpose of the contract (see Gunning, page 151, per Oliver LJ) was, as Mr Reade put it, the laying of bricks to plot, not personal work by any bricklayer. Mr Neaman adds that it would be erroneous to elevate an expectation of personal service to that of a contractual obligation.
32. In these circumstances it is submitted that the personal service requirement is not made out.
33. We reject that submission. We think that Mr Hogarth is right to draw particular attention to clause 1 of the contractual terms; "the contractor ... hereby agrees to be bound by [the Conditions] insofar as they are applicable to this sub-contract". It is plain that the Conditions are drafted on the basis that "one size fits all". It is specifically envisaged that not all the terms will be appropriate to all contracts entered into by Redrow.
34. Take clause 6. LABOUR. It begins with the introduction "In respect of all operatives employed by the Contractor". These Applicants employed no-one. Each was in business on his own account. A self-employed bricklayer. Ironically, where a contractor does employ operatives he is liable for their holiday pay, the very obligation which Redrow seek to avoid in these cases.
35. Secondly, the contractor must provide sufficient labour to main the schedule of works laid down by Redrow. Again, each Applicant was providing only his own labour. The contractor must provide all necessary tools and equipment. On the facts here the Applicants provided only their own handtools. All other equipment was provided by Redrow. Thirdly, there was a requirement on the contractor to provide a competent foreman or chargehand. That provision is apt in the case of a contracting firm or individual providing a number of workers on site; it cannot apply to an individual contractor supplying his own labour, as were these Applicants in our view. In fact, supervision was provided by Redrow.
36. In these circumstances, applying clause 1 of the Conditions, we are satisfied that clause 6 did not apply to these Applicants.
37. As to the sub-letting clause, again we are satisfied that this provision applies to the contractor who, with the consent of the Respondent, sub-contracts all or part of the work. On the facts of these cases that provision is not inconsistent with a contract for personal service.
38. Looking at the factual background it is clear to us, as it was to the Tribunals below, that it was the common intention of the parties that under the contract the Applicants would provide their personal services. Indeed, in the Roberts case, Mr Davies the Redrow site manager, accepted that as far as work was concerned the Applicants did the work they were employed to do.
39. As to the purpose of the contract it was not, as Mr Reade contends, simply the laying of bricks to plot, it was to engage the labour for that purpose.
40. In our judgment the Tribunals below were correct in finding, in each case, that the personal service requirement was made out.

The Business Undertaking Exception

41. We find the analysis set out at paragraph 17(2) of the judgment in Byrne Brothers helpful here. The question is whether these Applicants fell within that intermediate class of protected worker, that is between the category of employee, properly-so-called, under regulation 2(1)(a) and those carrying on a "business undertaking".
42. In the Wright case the Tribunal found, applying the "shopping list" set out at paragraph 17(5) of the EAT judgment in Bryne Brothers that the indicia of the relationship between the bricklayers and Redrow show that the men were in a subordinate and dependent position visa-à-vis Redrow, similar to that of employees.
43. Mr Reade submits that the statutory question for the Tribunal is whether the individual is in business on his own account; not whether he is in a subordinate and dependent position.
44. In fact, the statutory question is whether the contractual relationship is one of customer of the business undertaking carried on by the individual. It seems to us that a worker within the extended definition in regulation 2(1)(b) will necessarily be in business on his own account, as opposed to being an employee, that is an individual employed under a contract of service.
45. In these circumstances we reject Mr Reade's criticism of the Leeds Tribunal's analysis of the factors contained in paragraph 17(5) of Byrne Brothers, when applied to the facts of this case.
46. In the Roberts case Mr Neaman identifies six factors relied on by the Tribunal at paragraphs 11-12 of their reasons for their conclusion that the Applicants were not carrying on a business undertaking. They were:

(1) the Applicants worked exclusively for Redrow during the relevant period;

(2) they could be ordered to rectify defective work;

(3) the method of payment;

(4) the absence of the chance to profit or the risk of loss;

(5) CIS4 certificates;

(6) fixed prices.

47. Mr Neaman has sought to challenge those findings and the significance of those factors in some detail. We have considered those challenges but have concluded that the findings of fact are for the Employment Tribunal, not for us; the Tribunal's approach to those factors seems to us to be unimpeachable. These Applicants fell properly within the intermediate category described in Byrne Brothers.
48. In these circumstances it is unnecessary to consider Mr Hogarth's further submission based on regulation 35 WTR.
49. These appeals are dismissed.