United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J BOYD (of Counsel) Instructed by: Messrs Nigel Holden & Co Solicitors Richmond House Richmond Terrance Blackburn Lancs BB1 7BQ
For the Respondent	MR J BOWIE (representative)

SUMMARY

Working Time Regulations

Issue as to whether Appellant was worker within s230(3)(b) of Employment Rights Act 1996 . The Employment Tribunal did not address question of personal obligation to work. Remitted to same Tribunal – Sinclair Roche applied: adjustment to quantum to allow for argument that mileage allowance was expense not remuneration.


 


THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This has been the hearing of an appeal by the Respondent, Value Cable Ltd, trading as Retail Outlet Design, against two Decisions of the Employment Tribunal at Manchester, one on liability, after a hearing on 7 May 2004, in Reasons sent to the parties on 24 June 2004, and one by way of a Decision on remedy, after a hearing on 8 July 2004, in Reasons sent to the parties on 19 July 2004. The Applicant was, below and before us, represented by his stepfather, Mr James Bowie, who has clearly considerable grasp of the law and practice in this area, and, before us, was extremely helpful, courteous and persuasive, as we have no doubt he was also before the Tribunal. The Respondents were represented below at the Liability Decision, although not at the Remedy Decision, by Mr Boyd of Counsel, who has appeared also before us.
2. The unanimous Decision of the Tribunal at the Liability Hearing, the subject of appeal before us, is that the Applicant, Mr Berry, was a worker within the meaning of the Working Time Regulations 1998, and was therefore entitled to holiday pay. The Decision on remedy was that there had been unauthorised deductions from wages in the sum of £4,402.97. To use that kind of phraseology, with which of course we are all familiar, namely to refer to 'unauthorised deductions from wages', masks, and creates a shorthand for, what is really in issue in this case, because, looked at from any kind of reality, to talk of wages in relation to what Mr Berry was doing, and, indeed, for that matter, holiday pay, subject always of course to what is required by the Working Time Regulations 1998, is inapt. The practice, as we understand it, was that the Respondents had work which required to be done, construction work etc, and that most work done by the Applicant was done on a priced job basis; and that effective lump sums were, more or less, as we understand it, laid down by the Respondent Company.
3. When it comes to calculation of holiday pay, on the basis that he is found to be entitled to it, then of course his holiday pay has to be calculated by reference to the sums that he was paid, which, for these purposes, have been described as wages. But it does not appear likely that the parties at the time would have been thinking in terms of wages; and, indeed, it would certainly not appear that either party would have concluded that the Applicant was an employee. He himself, it seems, provided his own tax returns on the basis that he was a contractor, receiving sums from the Respondent Company, and setting off his expenses and paying tax accordingly.
4. The issue as to whether such a person is entitled to holiday pay falls to be decided by reference to whether, notwithstanding that he may not be an employee and may even be self-employed, he is a worker, as defined by section 230(3) of the Employment Rights Act 1996. The Tribunal correctly recited the law in paragraph 6 of its Decision, as follows:

"…a 'worker' means an individual who has entered into or works under –

(a) a contract of employment

(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."

5. For the purposes of the Decision by this Tribunal, the central question was not whether he was an employee, because it appears to have been accepted that he was not, and, indeed, was not whether he was self-employed. The issue was whether he fell within section 230(3)(b) by virtue of having undertaken to do, or perform personally, any work or services for the Respondent. That was the issue to be decided. It appears that insufficient groundwork was laid by the Respondents in their witness statements, and Mr Bowie has told us that he had not, or at any rate had not necessarily, appreciated, that there would be an issue as to what has been called substitution (that is the right for Mr Berry to have someone else do the work in his stead) prior to the hearing. But it is clear that in a letter explaining the Respondents' case, sent prior to the hearing, dated 17 December 2003, from Mr Rushton, the Managing Director of the Respondent Company, to Mr Bowie, the following was, among other things, stated by Mr Rushton as being the fact, in relation to Mr Berry:

"He worked without direct supervision, was free to commence the contracts at a time of his won choosing and could take as many or as little hours to carry out the same. In order to complete the contracts in a shorter period of time, he was free to utilise other operatives should he wish. The only stipulation laid down being, that the contracts were carried out to a satisfactory standard of workmanship and completed in a timescale mutually convenient with our clients."

This meant that it was plainly an issue before the Tribunal as to whether, within section 230(3)(b), the Applicant was obliged to undertake the work personally.

6. It is clear that the Decision in Byrne Brothers (Formwork) Ltd v Baird
   [2002] IRLR 96 was cited to the Tribunal, because it is referred to in its Decision at paragraphs 4 and 6 of the Reasons (although not by reference to the report in the IRLR). Byrne itself, of course, expressly refers back to the leading authority in the area of Carmichael v National Power plc [2000] IRLR 343 in the House of Lords. So far as Byrne is concerned, the issue there of personal service was specifically canvassed by the Employment Appeal Tribunal, and, in particular, in paragraphs 10 following; and the requirement of an obligation of personal service was there addressed. There has been subsequent consideration of that issue in Staffordshire Sentinel Newspapers Ltd v Potter [2004] IRLR 752.
7. The Tribunal records that submission of the Applicant, no doubt made by Mr Bowie at the hearing (see paragraph 5 of the Reasons), that the Applicant "was required to carry out the work personally". But the Tribunal does not address that submission further or, on the face of it, reach any conclusion as to whether that submission, which was plainly challenged, both as confirmed by Mr Boyd of Counsel, and as appears from Mr Rushton's letter, in the balance of its Decision. In a very careful assessment of the terms and conditions upon which Mr Berry worked, as set out first of all by way of what are described as "relevant features of his employment" (although of course it was not employment) in paragraph 4, and then by way of balancing factors in paragraph 6 of its Decision, the Tribunal addresses what it considers to be the central matters for its consideration; and it concludes that balancing act in paragraph 7 of its Decision, as follows:

"Weighing up these considerations, the Tribunal is unanimously of the opinion that the applicant was subject to a lack of flexibility, and a substantial degree of control and restrictions which is incompatible with the kind of "arms-length and independent" nature of true self-employed status."

That is the language of an exercise which has been well familiar to courts and employment tribunals over the years, ever since the seminal case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, relating to when and whether an applicant or claimant or plaintiff is employed or self-employed.

8. But that was not, with respect to the Tribunal, the issue, or at any rate the material issue in this case. The issue is whether the Applicant was a worker within section 230(3)(b), notwithstanding that he was not an employee, and whether or not he was self-employed; and that issue is not addressed by the Tribunal in the Reasons. That is the primary basis of complaint by Mr Boyd of Counsel on this appeal. He makes a number of subsidiary points, by reference to criticism of the Tribunal's conclusions in paragraph 6 of its Decision, based upon its findings of fact in paragraph 4, so far as the various features are concerned, and would take issue with the conclusion which the Tribunal reached in paragraph 7, by reference to factual matters which are, he says, incorrect because they inaccurately or inadequately reflect evidence which was given before the Tribunal. Examples of these are whether all the work, as opposed to simply the work on the gantries (which were said to be a small part of the requirements of work to be carried out by the Applicant) were to a strict specification (see paragraph 3(g); whether, although in fact the Applicant did not have public liability insurance (paragraph 4(m)) the Respondents nevertheless thought he did have insurance, as to which, it is suggested, evidence was given; whether the Applicant produced his own material, as to which, again, it is suggested evidence was given; and how far what is said in paragraph 4(o), so far as his not being permitted to take anyone, other than his co-workers, in the van, accorded with the evidence that was given.
9. But all those matters, which may well be of substance, cannot be pursued before us today because we do not have either any notes of evidence, or any agreed statement between the parties, pursuant to paragraph 7 of the Practice Direction, which would enable us to reach any conclusion as to whether any of those submissions are right. No doubt if the matter is to go back to an employment tribunal, there can be a proper canvassing of any of those issues which remain relevant to the outstanding issue at the employment tribunal.
10. But the central point and primary submission made by Mr Boyd is, as we have indicated, that the Tribunal did not ask, or answer, the question as to whether the work that he undertook had to be undertaken by him personally; and, as we have indicated, it is plain that, although the Tribunal records the existence of Mr Bowie's submission to that effect, there is no finding as to whether, and if so why, that submission is right. Mr Bowie has sought to persuade us that although, as he accepts, the Tribunal did not, on its face, reach a conclusion in relation to that question, which he accepts to be central, nevertheless they took it as obvious and/or did answer the question impliedly. He refers to two matters, which interrelate. First, he refers to the finding of fact at paragraph 4(j) of the Tribunal's Decision:

"If the applicant was unable to attend by reason of sickness etc, he was required to notify the Contracts Manager who would then send out one of the respondent's employees to cover the work."

This is a finding which the Tribunal will have derived from a combination of the documentation before it and oral evidence, as to which, of course, once again we do not have any notes of evidence and therefore are unable to reach any conclusions, notwithstanding Mr Bowie's invitation to us to do so, paragraph 7 of the Practice Direction not having been followed by him either. He refers to evidence that he says was given by Mr Evans, the Contract Manager of the Respondent.

11. The second matter, which interrelates, is a document sent by Mr Evans to Mr Berry, dated 1 August 2002, which stated as follows:

"We are in a position to offer you continuity of work and in return require that you are contactable at all timers by phone. We require seven days notice should you not be available for work at any time."

Mr Bowie submits that the finding by the Tribunal, by reference to that letter of 1 August 2002, is sufficient for us to be able to conclude that the Tribunal did in fact accept his submission, recorded in paragraph 5, notwithstanding the submission to the contrary, and, of course, notwithstanding the content of Mr Rushton's letter, to which we have referred. He submitted to us (we permitted him to do so, although it plainly referred to evidence of which we have no knowledge) that Mr Evans either accepted, or would have accepted that the basis for his assertion, which formed the basis of paragraph 4(j) of the Tribunal's Decision, was that the Respondent would not have been prepared to permit work to be done by anyone whom they had not pre-checked. Such an assertion, if accepted by the Tribunal, would, on the face of it, be wholly inconsistent with the statement by Mr Rushton in the letter of 17 December, which we have cited.

12. We are satisfied that this is a case in which the Tribunal, for whatever reason, did not, on the face of the Decision, ask and answer the crucial question. We must, therefore, conclude that the incorrect approach in law was adopted by the Tribunal, and that this appeal ought to be allowed in that regard. But, we would still move on to the question as to the consequence of quashing the Decision, namely whether or not there should be a remission, and, if so, a remission where. If we were satisfied that, although the Tribunal did not ask or answer the right question nevertheless had it done so the answer is obvious, or there was, we were satisfied, an implied answer to the correct question, then we would be entitled to substitute our own view to the same effect as the Tribunal's Decision, ie to say that if they had addressed the correct approach they would be bound to have come to the same conclusion. We are unable to reach that conclusion. Mr Bowie has told us that, in fact, he did not cross-examine Mr Rushton on the passage in the letter of 17 December, to which we have referred. But, in any event, without disbelieving that evidence of Mr Rushton, it appears to us difficult for the Tribunal to have come to a conclusion that Mr Berry was obliged to carry out all work personally. Of course that would leave open the possibility, by reference to the authorities to which we have referred, including Staffordshire Sentinel Newspapers Ltd v Potter, that, even if there was some limited power of delegation, nevertheless on balance there was still an obligation to perform the work personally. But all those issues, and the marrying up of the content of Mr Evans' evidence and his letter which the content of Mr Rushton's evidence, would need to have been done, and would need, in our judgment, now to be done, before a conclusion could be reached as to whether Mr Berry indeed was obliged to carry out the work personally.
13. There is, it seems to us, the possibility that Mr Berry would need to comply with paragraph 4(j) of the Tribunal's Decision if he were sick, and were not able to attend at all, but that a circumstance such as is illustrated by Mr Rushton's letter would still enable him to employ or engage others to do part of his work, and that, if that were indeed permitted, contrary to what Mr Bowie suggests to be the case, then that might well mean that he was not, within section 230(3)(b), obliged to perform the work personally. This must be a matter to be decided by the Tribunal and not by us. In those circumstances, as we cannot foresee what the answer would be to the question, and that we are satisfied that further evidence would be needed, this case must be remitted.
14. The issue, then, is whether to remit to the same or a different tribunal. Mr Boyd has submitted that the remission should be to a different tribunal because this Tribunal, although he makes no criticism whatever of the Tribunal by way of partiality or bias or otherwise, will have committed itself to a conclusion from which it might find it difficult to resile. Mr Bowie submits that the matter should go back to the same Tribunal to answer the unanswered question.
15. Plainly, if the matter went back to the same Tribunal, the same Tribunal would be able to base itself on the evidence it has heard, by reference, of course, to its own notes of evidence, and there would simply need to be supplementation of that evidence by such further evidence as either party, under the guidance of the Tribunal, considers necessary, no doubt including cross-examination of Mr Rushton as appropriate; and one would have thought that Mr Evans, Mr Rushton and Mr Berry will all need to give short further evidence. If the matter were to go back to a different tribunal, although of course this is a short case, and would be likely to be finished in a day, even if it had to start again from scratch, nevertheless it would have to start again, which clearly should be avoided if such can properly be avoided.
16. We have reminded ourselves of the guidance given by this Appeal Tribunal in Sinclair Roche & Temperley v Heard [2004] IRLR 763 at paragraphs 45 – 47. Bearing in mind, and without repeating, the considerations that are there set out, we are satisfied that this is not a case in which the Tribunal's first Decision is "wholly flawed": it is simply that they have not, as the Tribunal had not in Sinclair Roche, finished their job. They have set out features which they considered to be relevant; they may have erred in relation to some of them, and n doubt there can be an opportunity to readdress them on those features, insofar as they are relevant and are incorrectly based upon evidence that was given. But there is the further question to be asked and answered, which this Tribunal has not asked or answered, and we are entirely satisfied that, with the guidance of this judgment, this Tribunal will be able to answer that question, and that it could answer the question either way. We are satisfied that what we have referred to in Sinclair Roche as the tribunal's professionalism in approaching its renewed task, free of preconceptions and with an open mind, will enable it to do so, and to bear in mind the guidance that we now give, and either reach the same conclusion, but for different reasons, or a different conclusion.
17. It is, in those circumstances, appropriate for us to remit this Decision, which we quash, to the same Tribunal for further consideration. The issue for decision we have set out at the outset of our judgment, leading to the conclusion as to whether, irrespective of employment or self-employed status, this employee was a worker within the meaning of the Working Time Regulations 1998, as defined by section 230(3)(b) of the Employment Rights Act 1996.
18. So far as the appeal on Remedy is concerned, this has more or less resolved itself in the course of argument, as a result of helpful cooperation between the parties. The submission made by Mr Boyd was that the Tribunal erred in including, in the calculation of holiday pay, mileage allowance; and in paragraph 2 of the Extended Reasons of the Tribunal on the Remedy Decision, it is certainly true to say that the conclusions of this Tribunal were extremely brief, and relatively unreasoned. The Tribunal's Decision reads as follows:

"In relation to the issue of what in fact constituted the applicant's wages, the Tribunal regards the tax return to be irrelevant [That is the tax return in which the Applicant had returned his expenses]. In scrutinising the applicant's pay slips… it is apparent that no separate items of expenses were paid to the applicant. On certain pay slips a figure appeared for mileage allowance, but it is apparent that this was also subject to tax. In effect, we find that this sum was part of the applicant's wages."

Neither party drew to the attention of the Tribunal the relevant authority of London Borough of Southwark v O'Brien [1996] IRLR 420, which was a decision of this Appeal Tribunal, given by Mummery P, as he then was, absolutely on the issue as to when a mileage allowance forms part of wages, and when it should be regarded as expenses. We would have been satisfied that the issue as to whether the expenses, if expenses they were, were taxable would not have been determinative, and should not have been so regarded by this Tribunal, and, equally, as set out in the decision London Borough of Southwark v O'Brien, that payment of a mileage allowance did not cease to be in respect of expenses because it was found to be, as it was put by Mummery P, generous, ie not accurately reflecting the actual mileage incurred.

19. In those circumstances, we were concerned as to whether the Tribunal was correct in including mileage allowance in remuneration (using the word remuneration, rather than the word wages, for the reasons summarised earlier in this judgment). But Mr Bowie has unlocked the answer for us, which has resolved both our concerns, and, to be fair, also Mr Boyd's, which would otherwise have arisen by reference, for example, to the appearance on the payslips of a column for mileage allowance, and the fact that there plainly was, therefore, something that, within London Borough of Southwark v O'Brien, could be said to constitute and expense reimbursement. The answer appears to be that, on occasion, Mr Berry would operate on different bases. Where there was a lump sum agreed for a job, that would enable him to allocate such amount as he thought appropriate to expense, hence the tax return. But there were occasions on which jobs were priced on a different basis, and there would then be a mileage allowance paid. That explains the appearance on the payslip of a provision for mileage allowance, although in fact in the one payslip which we have seen there was a zero figure entered against the mileage allowance because, as it now is clear to us, that timesheet related to a fully-priced job.
20. Mr Bowie has calculated the amount of what he accepts to be mileage allowance, and hence to be expenses excluded from remuneration, which falls within the sum of £4,442.97 otherwise awarded by the Tribunal, as being £157.70; and he accepts that that figure must fall to be deducted from the sum otherwise awarded. In the light of his explanation, Mr Boyd fairly accepted that that was an answer to his case, and hence the appeal on remedy fell away, and the sum of £4,442.97 falls to be reduced to £4,285.27 if the liability conclusion of this Tribunal remains, after its reconsideration by this Tribunal.
21. The result will be, consequently, that we allow the appeal on remedy to the extent of reducing the sum as indicated, and consequently, when remitting this issue of liability to the Tribunal, the Tribunal will not have to consider the question of remedy; it will know that it either decides that no sum is payable by way of holiday pay, because the Applicant was not a worker, or that if the Applicant, the Tribunal having reconsidered its Decision, was a worker, then the sum it will award will be the sum of £4,285.17