United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS LUCY BONE (Of Counsel) Instructed by: Croner Consulting Litigation Department Wolters Kluwer (UK) Ltd Wheatfield Way Hinckley LE10 1YG
For the Respondent	MS DEBBIE GRENNAN (Of Counsel) Messrs Brewer Harding & Rowe Solicitors 6-9 Market Square Ifracombe Devon EX34 9AX

SUMMARY

Contract of Employment

The Tribunal erred in law in holding (without first resolving the issue of fact disputed between Mrs Bunker and Mr Cottingham) that a contract of employment existed between 19 December and 5 January.

The Tribunal erred in law in, or failed to give adequate reasons, for its conclusion that there was an arrangement for the purposes of section 212(3)(c) ERA 1996 between those dates.


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal by Mark Insulations Ltd hereafter ("MI") against a judgment of the Employment Tribunal sitting by Chairman (Alone) in Exeter dated 23 March 2005. MI's former employee, Mrs Bunker had complained of unfair dismissal. The Tribunal only had jurisdiction to entertain that claim if she had a sufficient period of continuous employment. The Tribunal concluded that she had. MI appeal that conclusion.

The Facts

2. MI is a family business installing home insulation products. It employs 250 people. Its chief executive is Mr Lee Cottingham. From 1983 Mrs Bunker was employed at its head office in Leicester for many years in a variety of administrative roles. But in 2003 she and her husband decided to move to Devon. On 8 December she handed in her notice saying she would be leaving on Friday 19 December. Her notice was accepted.
3. But Mr Cottingham had an idea. MI had been thinking of opening a branch in the south west. He outlined his idea to Mrs Bunker at a meeting on 16 December. She would be regional manager setting up the new office. Her husband, who had previously worked for MI would be treated as a fitter. They were interested. Mr Cottingham encouraged her to abandon job interviews she had arranged. On 19 December Mr Cottingham confirmed his offer.
4. In the evidence before the Tribunal there was a sharp divergence between Mr Cottingham and Mrs Bunker on one point, namely what was said as to whether Mrs Bunker's employment would be continuous. Mr Cottingham's evidence was as follows:

"During our discussion I offered Mr Bunker an installation role and Mrs Bunker an administrative role in which she would be responsible for various administrative tasks, the organization of crews and stock control. I made it clear that neither role would commence until Monday 5 January. I also made it clear that the company had accepted Mrs Bunker's resignation and that her employment would be terminating as planned on 19 December. I explained that Mrs Bunker's employment would not be regarded as continuing between 19 December and 5 January. This was the only basis on which I would have offered employment in the south west to her. The venture in the south west was new and therefore carried some risk for the company. Mr and Mrs Bunker accepted the offers I made them and it was agreed they would commence new employment with the company on 5 January."

5. But Mrs Bunker's evidence was very different. She said:

"That afternoon I was called to the office by Mr Cottingham. He offered me the position of regional manager for the new office. I was given two mobile phones. One was for myself and one was for Roger. At that stage I was also given a company car. It was a Rover 25. I was told that my new job title was regional manager and that I would have the company car for my use. I was also told that I would have continuous employment. These were Mr Lee Cottingham's words not mine. I had no reason to doubt him. In fact had I not been certain I was still employed I would have queried the insurance position for the car but I was content a company car would have the right insurance."

6. Those two sections from the statements of Mr Cottingham and Mrs Bunker relate in their statements to different dates. One is 16 December the other 19 December. The reality however is that whether at different meetings or the same meeting their accounts of the circumstances in which Mrs Bunker started to work for MI in the south west are radically different.
7. Mrs Bunker was paid up to 19 December including accrued holiday pay. A P45 was prepared for her. There was an issue as to whether she actually received it. Mrs Bunker was not paid between 20 December and 4 January in any way, shape or form. All but one day during that time was holiday. She did not receive any holiday pay for that period or indeed claim pay except perhaps for bank holidays.
8. Mrs Bunker did, however, receive some benefits during that period. She was given the company car which would go with her job as regional manager. She had a fuel card. She used the company car and the fuel card in relocating to Devon and in her general usage of the car. Consistently with MI's policy of only recovering private mileage where there was excessive use she was not asked to repay the cost of fuel for private mileage. The car was insured for her husband and herself. She also had a mobile phone which she could, and did use immediately.
9. There was, the Chairman found no expectation that Mrs Bunker would do any work during the Christmas break. She had said to Mr Cottingham she would keep an eye out for possible premises. And she did so; sending extracts from newspapers and yellow pages to him. But that is all. It is common ground that she began working in her new role on Monday 5 January. She received a statement of terms of employment dated 13 January 2004 and signed it on 21 January. This expressly states:

"Your period of continuous employment began on 5 January 2004."

The Statutory Provisions

10. The following are the principal statutory provisions relating to this appeal.

"210. Introductory

(1) References in any provision of this Act to a period of continuous employment are (unless provision is expressly made to the contrary) to a period computed in accordance with this Chapter…

(3) In computing an employee's period of continuous employment for the purposes of any provision of this Act, any question-

(a) whether the employee's employment is of a kind counting towards a period of continuous employment, or

(b) whether periods (consecutive or otherwise) are to be treated as forming a single period of continuous employment, shall be determined week by week; but where it is necessary to compute the length of an employee's period of employment it shall be computed in months and years of twelve months in accordance with section

(4) Subject to sections 215 to 217, a week which does not count in computing the length of a period of continuous employment breaks continuity of employment.

(5) A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous.


211 Period of continuous employment

(1) An employee's period of continuous employment for the purposes of any provision of this Act-

(a) (subject to subsections (2) and (3)) begins with the day on which the employee starts work, and
(b) ends with the day by reference to which the length of the employee's period of continuous employment is to be ascertained for the purposes of the provision.

(2) For the purposes of sections 155 and 162(1), an employee's period of continuous employment shall be treated as beginning on the employee's eighteenth birthday if that is later than the day on which the employee starts work.

(3) If an employee's period of continuous employment includes one or more periods which (by virtue of section 215, 216 or 217) while not counting in computing the length of the period do not break continuity of employment, the beginning of the period shall be treated as postponed by the number of days falling within that intervening period, or the aggregate number of days falling within those periods, calculated in accordance with the section in question.

212 Weeks counting in computing period

(1) Any week during the whole or part of which an employee's relations with his employer are governed by a contract of employment counts in computing the employee's period of employment…


(3) Subject to subsection (4), any week (not within subsection (1)) during the whole or part of which an employee is-

(a) incapable of work in consequence of sickness or injury,

(b) absent from work on account of a temporary cessation of work,

(c) absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of his employer for any purpose, or

(d) absent from work wholly or partly because of pregnancy or childbirth, counts in computing the employee's period of employment."

The Tribunal's Decision

11. It is important to note that the Chairman did not resolve the difference between Mrs Bunker and Mr Cottingham concerning what was said about continuity of employment. He said there was no direct evidence to assist him by which he clearly meant no clear documentary or independent evidence, since of course he had the evidence of the protagonists. He said:

"However, even if Mr Cottingham told the Claimant there was no continuity it does not follow he was correct. By an analogy it does not follow that a Claimant is self-employed because a Respondent says that is the position."

12. The Chairman defined the first question he had to ask as being:

"Was there a contract governing the relevant two-week period as set out in Section 212(1) of the Employment Rights Act 1996?"

He said:

"17…

On balance I find there was. I find that the discussions with the Respondent took place before her employment on 19 December came to an end. She was provided with a car she could use immediately, a fuel card and a mobile phone. Aside from one date, 22 December, the business was shut over the Christmas period and there was little she could do. I accept there was a two-week period for which she was not paid a salary and in which she did not contracted work. But she received and had the use of some benefits in that period. Furthermore there appears to have been an understanding that she would keep her eyes open for agents and areas for the new branch. It was clearly beneficial for the business to have in place a longstanding employee they could trust. Although a new contract, many employers issue a new contract to an employee taking on a new post after promotion.

18

There is a presumption in the Claimant's favour that any period of employment is continuous. There is no witness as to what was said on continuity and the documentary evidence makes points for both parties. Consequently, I find the Respondent has not done enough to refute the presumption in favour of the Claimant."

13. He went on to consider whether if there was no contract there was an arrangement within the meaning of section 212(3). He said:

"In my view there was. The purpose of offering her the new role was to set up a new branch. She was a known quantity running a new venture in an area that was relatively unknown to the Respondent. Again, although there were factors which I have dealt with above that the Respondent relies on, to suggest there is a break in continuity, equally there are factors which are in her favour, and in particularly the provision and use, at no cost to her, of a car and mobile telephone. On the balance of probabilities these factors suggest to me an arrangement within the meaning of subsection 3 was envisaged and implemented."

14. So the Chairman decided the case against MI on two grounds. Firstly, that there was a contract of employment at the relevant time, or at least that the employer had not established that there was none. Secondly, alternatively that there was an arrangement within the meaning of section 212(3). It is convenient in dealing with this appeal to set out the submissions that were made in summary and then to take those points in turn.

Submissions

15. On behalf of MI, Miss Bone submits that the Tribunal erred in law in finding that there was a contract of employment in existence between 20 December and 4 January. She submits that if the Tribunal had undertaken the task of identifying that contract it would have appreciated there could be no contract of employment. It could not be the contract which had governed employment in Leicester for Mrs Bunker's notice had been accepted. There was no suggestion that the notice was rescinded. There was no expectation she would work at Leicester again. It could not be the new contract of employment as regional manager in Devon. She was not paid for working during the relevant period neither was she paid holiday pay - a point which Miss Bone says the Tribunal has left out of the count. Rather, says Miss Bone, she was paid accrued holiday pay at 19 December, a course which is only permissible under the Working Time Regulations if a termination of employment is taking place. She submits that the necessary minimum of mutual obligation did not exist for those two weeks. There was no expectation Mrs Bunker would work. There was no agreement that she would be paid. The advance of a car, fuel allowance and mobile phone was goodwill or referable to the new job which was to start on 5 January or both.
16. Miss Bone further submits that the Tribunal was wrong to rely on the presumption of continuity under section 210(5). In her oral submissions she accepted, rightly in my view that the presumption was in principle, applicable. But she submitted that in such a case as this where there was substantial documentary and oral evidence, the Tribunal's task was to resolve the issues raised and reach conclusions. She says the Tribunal should have found the presumption to be rebutted given the signed statement of terms and conditions in January, the notice letter and the other documentary material. In any event she says the Tribunal should have resolved the issue as to what was said about continuity.
17. On behalf of Mrs Bunker, Miss Grenham submits that the presumption of continuity did apply and that the Tribunal was entitled to hold that MI had not rebutted this presumption. The Tribunal carefully reviewed the evidence. It was entitled to hold that there was an employment relationship during the two week period. She said that the use of the company car for private purposes was a benefit given to employees of the company. She said that the giving of 25 days rather than 20 days in the statement of conditions for the new job was a benefit applicable only to longstanding employees. She says that the giving of notice was overtaken by the proposals of Mr Cottingham made only shortly before the notice was to take effect. She says that this also explains the way in which the wages department dealt with accrued holiday pay and other matters. She says that there was no expectation that Mrs Bunker would work but this was because it was a holiday period. She says the Employment Appeal Tribunal is only entitled to intervene if there is an error of law. She says there is no error of law.
18. On section 212(3) issue Miss Bone submits that there is no finding that there had been any discussion or agreement in advance of the break to the effect that the parties regarded the employment relationship as continuing. This, she submits is the minimum requirement. Looked at as a whole she submits the Tribunal's decision is perverse. Miss Grenham submits that the conclusion was one to which the Tribunal was entitled to come. The Tribunal was well aware from the argument of the parties that any such arrangement had to be in place by 19 December simply because the Tribunal has not expressly dealt with that in paragraph 19 does not mean that the Tribunal was unaware of it. The Tribunal was entitled to look at matters after 19 December for the light they throw on what arrangement was made by that date. She says the Tribunal's decision is not perverse it was one to which it was entitled to come.

My Conclusions – Contract of Employment

19. The Tribunal does not expressly say that the contract which it found to exist between 20 December and 4 January was a contract of employment but this must be implicit in the finding. Nothing less than a contract of employment will suffice for this purpose. It is common ground that for a contract of employment to exist there must be mutuality of obligation. This general principle of employment law applies as much in the context of continuous employment as in any other. See McLeod & Others v Hellyer Brothers [1987] IRLR 232.
20. The Tribunal made no finding that there was any contractual obligation upon MI towards Mrs Bunker during this period. In particular there is no finding that there was any contractual obligation to pay her. She was not in fact paid even for bank holidays. The benefits bestowed on Mrs Bunker were the company car, the fuel card and the telephone. But these benefits are equivocal. They might be referable to an immediate contract of employment. They might equally be referable to an employment beginning on 5 January. The Tribunal does not make a finding that there was a contractual obligation to provide them during the two week period.
21. Equally, on the other hand the Tribunal makes no finding that there was any contractual obligation upon Mrs Bunker to do any work during this period. I appreciate the period was largely one of holiday. There was one working day during it. The furthest the Tribunal go is to say that:

"There appears to have been an understanding that she would keep her eyes open for agents and areas for the new branch."

22. In my judgment it was of real importance in this case to resolve, if possible, the dispute between Mr Cottingham and Mrs Bunker as to what was said in December. If what Mr Cottingham says is the truth then the old employment terminated by resignation on 19 December the new employment started on 5 January and there is no question of the parties agreeing any contract of employment for the period between. Conversely, if what Mrs Bunker says is true it would readily be inferred that the parties treated the resignation as rescinded even if this was never carried through into the administration of the wages department or the preparation of new terms and conditions. Then the old contract would simply run on until the new one started.
23. In the absence of findings about what took place between Mr Cottingham and Mrs Bunker can the Tribunal's finding that there was a contract of employment stand? Or can the presumption operate in favour of Mrs Bunker? I do not think so. There were facts which pointed very clearly to the ending of the old contract of employment. There is a finding that Mrs Bunker's notice was accepted. There is no finding that the notice was rescinded. There was no payment in respect of the two weeks. The statements of terms and conditions for the new job stated expressly that the employment was continuous from 5 January. The Tribunal Chairman said that he regarded the documentary evidence as making points for both parties. There may have been some documentary support about the company car for Mrs Bunker's case but the principal documents clearly pointed towards the case for MI. It was in my judgment vital for the Tribunal if at all possible to resolve the conflict between MI and Mrs Bunker.
24. I wish to say a word about the presumption. It is common ground that the presumption was engaged. But to say that the presumption was engaged is not to say that a Tribunal should readily resort to it in a case such as this where there is a good deal of evidence as to a particular alleged break in continuity. The presumption comes into its own where the evidence is lost in the mists of time, where records have been destroyed, and dates forgotten. Where, as here, there is a considerable amount of evidence as to an alleged break including a letter of resignation, a new contract and oral evidence from those concerned, the Tribunal's task will generally be to find the facts on the balance of probabilities. There will be rare occasions when the evidence is so finely balanced that the Tribunal is completely unable to make up its mind where the truth lies even on the balance of probabilities. In that rare event the Tribunal should say so and the burden of proof will decide the issue. As to this see Morris v London Iron and Steel Company Limited [1987] 2 All ER 496 at 500-501 where it was said:

"Speaking from my own experience some people find it easier to make up their minds than others and it should not be thought that a swift reliance on where the burden of proof lies and a failure to decide issues of fact in the case ought in any way to be considered an easy or convenient refuge for anybody who does find it difficult to make up his mind in a particular case. Judges should, so far as is practicable, and so far as it is in accordance with their conscientious duty make findings of fact. But it is in the exceptional case that they may be forced to reach the conclusion that they do not know which side of the line the decision ought to be."

Arrangement for the Purposes of Section 212(3)

25. The law relating to section 212(3) arrangements may be stated quite briefly. Firstly, the weeks in question must be weeks where there was no contract of employment. Secondly, they must be weeks where the employee was absent from work which in this context is well established to mean no more than that the employee was not at work. Thirdly, there must be an arrangement that he is to be regarded as continuing in the employment of his employer. The arrangement must be one which is in place in advance of the break in continuity. That is there must have been some discussion or agreement to the effect that the parties regarded the employment relationship as continuing despite the termination of the contract of employment. See Booth v USA [1999] IRLR 16 at paragraph 10.
26. It is important to note that the arrangement by which the employee is regarded as continuing in the employment of the employer does not have to be for all purposes. It can be for any purpose even if the employee is most definitely not regarded as employed for other purposes. Thus, in Taylor v Triumph Motors the employee resigned owing to domestic problems arising from his wife's ill-health. He returned to work three months later. There was an existing agreement between management and unions that for the purpose of redundancy broken up service up to a maximum of six months should be calculated as continuous service. It was held that by arrangement he was regarded as continuing in the employment of his employer for redundancy purposes.
27. Therefore, the dictum in Booth v USA, that there must have been some discussion or agreement to the effect of the parties regarded the employment relationship as continuing despite the termination of the contract of employment must be read with a little caution. The discussion does not have to establish that the employment relationship was to be regarded as continuing for all purposes - only for some purpose.
28. In this case the Chairman held that there was an arrangement within the meaning of section 212(3). But he did not spell out how this arrangement fits into the words of the Statute, which require an arrangement whereby for some purpose the employee is regarded as continuing in the employment of the employer.
29. I would add that it is in my judgment vital again to spell out what the arrangement was and how the arrangement involved Mrs Bunker in being regarded as continuing in the employment of the employer for some purpose. I can illustrate this by taking the example of the company car. Mrs Bunker said that the provision of the car and the right to use it for private mileage was an arrangement for the purposes of section 212(3). But Mr Cottingham said it was simply referable to her new job which was to start in January. It was, he said, convenient for her to take the car with her on 19 December. That was an issue which required consideration in order to decide whether any arrangement about the company car involved Mrs Bunker in being regarded as continuing in the employment of the employer for some purpose. It may also be quite closely bound up with what the parties said in December about continuity of employment.
30. In the result I am not satisfied by paragraph 19 of the Tribunal's decision that it has correctly applied its mind to the statutory test. Paragraph 19 either discloses an error of law or at the very least an inadequacy of reasoning.

Conclusions

31. For these reasons I am satisfied that the Tribunal erred in law and that its decision cannot stand. In my judgment the only course which can be taken by this Appeal Tribunal which deals only with questions of law is to remit the decision to the Tribunal. The tribunal will wish to consider for itself whether it can resolve the disputed issues of evidence between Mr Cottingham and Mrs Bunker. It would be very difficult after a period of some months for the same tribunal to undertake that task. It will therefore be remitted to a freshly constituted tribunal. That tribunal can of course be Chairman only, subject to and in accordance with the provisions of the Employment Tribunal Act 1996.