United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Mr Ian Skeate (of Counsel) Instructed by: Messrs Jolliffe & Co Solicitors Exchange House White Friars Chester CH1 1DP
For the Respondents	Mr Paul Draycott (of Counsel) Instructed by: Carlisle Community Law Centre 8 Spencer Street Carlisle Cumbria CA1 1BG


 


SUMMARY

Unfair Dismissal – Exclusions including worker/jurisdiction

Definition of employee. The issues of the Appeal Tribunal's power to overturn the Employment Tribunal.


 



 


HIS HONOUR JUDGE PUGSLEY

1. The Appellant contends that the Employment Tribunal sitting at Carlisle had misdirected themselves in reaching a decision that Mr Watt and Mr Cameron were employees of Forest Mere Lodges Limited.
2. Since reserving our decision, we have received a letter from those acting for the Claimants, the Respondents to the appeal, referring us to a case decided in the Employment Appeal Tribunal namely Corus Hotels Plc v Williams [2006] UK EAT/0014/06/DM. It is said that that case, a decision of the President, Elias J, is helpful in that it is authority for the finding that even though the conclusions section of a Tribunal's decision may be sparse and does not necessarily summarise all the matters which led to its decision, a decision can be upheld if reading the decision as a whole the Tribunal's conclusion on the relevant issue could be fairly ascertained. That decision, it is said, goes on to say that a Tribunal's decision can be upheld if it is plain what they are implicitly saying is clear in the course of the written reasons.

3. On receipt of that letter, I caused letters to be sent to both parties asking if they had any submissions on the matter. The Appellants to the appeal make it clear in correspondence they did not consider that a further case could be submitted at this stage.

3. No further submissions have been made. It is I think right to say that the case of Corus is helpful in setting out in succinct form that it is inappropriate to remit a matter back to the Employment Tribunal, if inevitably they will reach the same decision. Although that decision sets out the matter with helpful clarity, we do not take the view that that decision does any more than state the law in a particularly succinct way. It has long been the custom of those sitting at the Employment Appeal Tribunal not to tooth comb through a decision and to send it back where it is clear that it will be an empty exercise, because the Tribunal is inevitably going to reach the same decision. The fact of that letter has delayed the drafting of this decision because it was unclear whether the parties would make further submissions, but they have decided not to do so.

5. The issue that was before the Employment Tribunal was whether the two Claimants were employees of the Respondent company. The Tribunal set out its findings in paragraph 3 onwards, where they said having considered the oral and written evidence before it and the submissions made on behalf of the parties, the Tribunal make the following findings of fact.

4. The relevant part of the decision is as follows:

"3 The Facts

Having considered the oral and written evidence before it and the submissions made on behalf of the parties, the Tribunal makes the following findings of fact:-

3.1 The respondent develops and manages a residential mobile home site at Lakeland View, Netherton, Cumbria. Mr Hughes, who gave evidence to the Tribunal, has been company secretary since 27 June 2003. One of his roles is monitoring the management of the Respondent's work force which includes those the Respondent consider to be employees and those they consider to be self-employed contractors. He said 'in particular I oversee the engagement of such self-employed contractors and, indeed, the employment of new staff to the respondent'. He is, however, based in Cheshire and whilst he would speak to Mark Flynn and the sales girls on a daily basis he would perhaps go there once a week or a fortnight. He was not involved in taking on the claimants. This was left to Paul Joyce, Park Manager at the time, who did not give evidence to the Tribunal.

3.2 The respondent bought Lakeland View in September 2003 and intended to develop 119 mobile residential park homes over a period of about 6 years.

3.3 It was common ground that there were three types of people working on the site. There were those the respondent considered to be employees and issued them with contracts of employment (an example of Mr Mark Flynn's was in the bundle at page 136-139). There were also two sales assistants who were considered to be employees. The respondent started to develop Lakeland View in Spring of 2004 and engaged two sub-contractors 'Metcalfes' and 'Lawsons Plant Hire' to undertake the heavy construction work, such as excavating the existing concrete bases and digging trenches to house utility services. These contractors brought in workers to fulfil their contracts. The Claimants fell into a third category.

3.4 Paul Joyce, who had been appointed as Park Manager in December 2003, was given the task of finding labourers to carry out general labouring work and ground works. The Respondent decided to take these people on as self-employed contractors. When asked in cross-examination if this was because it was cheaper, Mr Hughes replied 'it is cheaper - but that was not the main reason it was flexibility as well, we didn't know how long each phase of development would last'.

3.5 By the time the claimants stopped working for the respondents in November 2005 there were seven such labourers (including the two claimants) and it was Paul Holloway (the managing director) who decided that three should be 'paid off' (as Mark Flynn put it) at that time.

3.6 The positions were not advertised and the Park manager just "spread the word" in the local area about the available work.

Gordon Watt

3.7 Steven Malpas, Gordon Watt's half brother, was operating plant on behalf of Lawsons at the site and told the claimant about the available work.

3.8 Mr Watt went to the site in August, spoke to Paul Joyce and was told that he would be paid £5 per hour. When asked when he could start he told them he could start immediately. The tribunal accepted his evidence that when he started there was no discussion about his being self employed and that at this stage he thought he was employed and that in terms of tax and national insurance he 'thought they were going to sort it out' and 'didn't want to ask - as he had just bought a house'. He was paid cash in hand 'probably up until October' and thereafter by cheque.

3.9 When Gordon Watt started, Paul Joyce would calculate the hours that the claimant worked in his head and then fax these hours through to head office to enable the claimant to be paid. The claimant was unhappy about this and asked his brother to give him some timesheets. These he adapted and examples were before the tribunal (pages 55-60). These were headed 'Gordon O Watt - Dumper and Roller Driver, General Labourer for Hire'. They had the column for date, location, together with total hours worked. There was a heading for the hourly rate and the total pay. The first one of these was for the week starting 9 August 2004. There was nothing from this to show any provision for deductions for tax or national insurance. Also before the Tribunal (61 and 62) were documents that showed the amount paid to the claimant for a week's work. The first is from 6 to 10 September for 43½ hours at £5 per hour, totalling £217.50. This states 'labour only at £5 per hour' and signed by the Claimant and countersigned by Paul Joyce the Park Manager. A similar document is at page 62 in respect of 23 to 29 October 2004.

3.10 The Tribunal find that once the claimant started to receive payments from the respondent for amounts that were exactly the same as the amount claimed (i.e. with no deductions) he knew or ought to have known that the respondent at least considered him to be self employed even though the Tribunal accept his evidence that this was not expressly said to him when he first joined.

3.11 The situation was formalised in November of 2004 when Paul Joyce asked the claimant for a CIS card. He replied that he had never heard of this and had no idea what he was talking about. It was Paul Joyce who told him to go to the tax office to get one straightaway as he was self employed.

3.12 The claimant did go to the tax office and was issued with a CIS card.

3.13 From that point onwards tax was deducted at source at the rate of 18% and the claimant was required to submit a self-assessment form at the end of the tax year. Although this rate is lower than the basic rate, because of the claimant's personal circumstances and his income, following the submission of the assessment form, he received a tax rebate. He also started to pay his own national insurance contributions having received a request from the Inland Revenue.

3.14 Although the Claimant said that he had no choice in the matter and was just doing what he was told because he wanted a job, the Tribunal are satisfied that from at this point at least, both parties considered him to be self employed.

Andrew Cameron

3.15 Mr Andrew Cameron also found out about the work for the respondent through word of mouth and having spoken to Paul Joyce, started at the Netherton site on 1 November 2004.

3.16 He was told that he would be working 8.00 am to 5.00 pm Mondays to Thursdays, 8.00 am to 4.00 pm on Fridays and 8.00 am to 12 noon on Saturdays but that he would be paid all day Saturday. On the first day he was asked by Paul Joyce if he had a CIS card. He did not know what this was and he was told he needed to go to the tax office to get one. He did so and became registered. The claimant said 'I do not recall there being any specific conversation about me being self employed but it may have been mentioned'. Although the Tribunal did not hear evidence from Paul Joyce they consider that it was more likely than not that this matter was mentioned to the Claimant during the conversation about CIS registration and are satisfied that from the start of his work for the Respondents this Claimant considered himself to be self employed, as did the Respondent.

3.17 Mr Cameron was paid by reference to a time sheet which Paul and later Mark would complete. They would fill in the hours he had worked, he would sign it and then he would be paid for those hours. 18% would be deducted at source from tax under the CIS scheme.

The CIS Scheme

3.18 This was set up by the Inland Revenue to prevent tax avoidance by subcontractors working in the building industry. It operates by a registration card or a tax certificate and enables the main contractor to deduct tax at source even though the Inland Revenue considers these subcontractors to be self employed. It is the responsibility of the subcontractors to pay their own national insurance contributions to the Inland Revenue and to file a self assessment form at the end of the tax year. They are then liable for any excess tax above the amount deducted or (as in the case of both claimants) receive a rebate.

Working Arrangements

3.19 Both claimants undertook general labouring duties and driving of dumper trucks.

3.20 When both claimants started they were responsible to Paul Joyce. Mark Flynn originally started working for the respondents as a self employed bricklayer. They were however impressed with him and he became employed as the contract/construction manager in May of 2005. After that time he was in charge of the claimant's work. He accepted that it was his main responsibility to organise what happened on the site. He would allocate particular jobs to particular workers, oversee how the work was done and check it off when it was finished. When a particular piece of work was finished he would then tell the worker to move on to the next job. At the beginning of each week he would work out a programme and decide who to allocate to which particular piece of work.

3.21 The respondent supplied the claimants with all equipment other than their work boots. It is evidence from the 'invoices' before the tribunal (56-60) that for the first two months at least Mr Watt generally worked from 8.00 to 4.30 pm or 5.00 pm from Monday to Friday and that he sometimes worked Saturdays. He said (and this was accepted by the tribunal) that in November when he registered for CIS and at the same time as Mr Cameron started these hours were regularized to 8.00 am to 5.00 pm Monday to Thursday, 9.00 am to 4.00 pm on Fridays and 8.00 am until 12 noon on Saturdays.

3.22 The claimants were also given set breaks, paid breaks of 15 minutes in the morning and in the afternoon and unpaid 30 minute lunch breaks. These were the hours that the claimants were told to work by the respondents. It was not their own decision to take breaks at these times.

3.23 The claimants received no sick pay nor paid holidays, not were they part of a company pension scheme.

3.24 Mr Cameron accepted under cross-examination that if he did not want to work on any particular day for any reason whatsoever he could phone (preferably the night before but it would be possible on the morning of the day in question) to inform the respondents that he would not be working that day. Mr Watt's evidence was that he did not do this and would not do so unless he had a good reason, for example sickness. He was not able to say whether it was possible for him to do so.

3.25 At some point one of the CIS workers named Barry was ringing up so often to say that he would not work on Mondays that the respondent introduced a prohibition to prevent those workers who did nor work every day during the week, working on Saturdays. By this time they were effectively being paid double time because they were paid a full days' wages for working up until midday.

3.26 It was the evidence of Mr Watt that if they phoned up on the day itself then Paul Joyce was not happy about it. Mr Watt conceded that he himself often did not work Saturdays. Originally, it was because he objected to working for £5 an hour for Saturday work.

3.27 During all the time that the claimants worked there, there was always work for them to do and they were never in a position where the respondent did not want them to work, right up until the time then the relationship was ended.

3.28 If there was bad weather then the workers were given the choice of staying and working in the bad weather or going home. In the latter case, they would not be paid.

3.29 It was the evidence of the claimants that if they wanted to stop working for the respondents they would be expected to give some notice. They accepted that there was nothing in writing about this and Mr Cameron referred to it as a 'gentlemen's agreement'.

3.30 Whilst there were no paid holidays, both claimants said that they would give notice that there taking holidays and if it were for a longer period they would give more notice. Mr Flynn said that he did ask if they would let him know as soon as possible because of his work plan and he asked for as much notice a possible.

3.31 If the claimants were off they were not expected to provide a replacement and although Mr Flynn said they could have done in practice this never happened. Mr Flynn accepted in cross-examination that the CIS workers operated differently from the other contractors, for example, those dealing with plumbing or electrics or water in that they had no set break times and different workers could attend the site on behalf of the subcontractors.

3.32 The tribunal had before it two references written by the respondent and signed by Mark Flynn. He said they were drafted by one of the sales women in the office Carla Pearson who was a friend of Andrew Cameron. Mr Watts' reference (47) says:

'Gordon Watt has been in employment with us for 18 months. He has been punctual, reliable and works well in a team environment. He has good communication skills and would be a credit to any company.'

Mr Cameron's reference read:

'Andrew Cameron has been employed with out company for just over a year. Andrew is a conscientious and hardworking employee, his timekeeping is excellent and he uses his initiative at any given time. Andrew also enjoyed a good relationship with both his workmates and managers.

Andrew would be an asset to any company that decides to employee (sic) him.

We as a company are sorry that he had to let Andrew go, but we would be very willing once a vacancy arises to have Andrew employed with us again.'

3.33 When cross-examined about these letters Mr Flynn said that he had signed them but not drafted them and that everybody knew they were self employed. He had given them the references because he wanted them to get jobs and was sorry that he had had to lay them off."

5. The Tribunal set out the law in paragraph 4.1 of the decision. They quoted the case of Hewlett Packard Ltd v O'Murphy [2002] IRLR 4 and identified four essential elements:-

• a contract

• an obligation on the worker to provide work personally

• mutuality of obligation

• an element of control over the work by the employer

The Tribunal then directed itself according to the well known case of Hall (Inspector of Taxes) v Lorimer in which they agreed with the views set out at first instance of Mummery J when he said the issue was to paint a picture rather than a mechanical exercise of running through items on a check list.

8. The Tribunal then referred to the submissions of the parties and they came to the following conclusions:-

"Conclusions

Was there a contract?

8 It was clear that there was a contract of some sort between the parties, indeed it was the respondent's case that the claimants worked under contracts for service as independent contractors.

Was there the necessary control?

9 It was also clear that the respondent controlled the way that the claimants worked. Their supervisor directed what work they should do, how they should do it, checked the work when it had been finished and then allocated the next task. But as Mr Skeate pointed out it is the nature of this kind of work (general labouring) that the work would be supervised and directed regardless of the status of the worker. This factor in itself is not conclusive.

Was there an obligation to provide work personally?

10 There was no evidence to support the proposition that if the claimants had not been available, they could have provided a substitute. Their evidence was that they could not do so and did not do so. The evidence of the respondent's witness was that they did not do so but could have done. The evidence of the way the work occurred does not support this. If a worker was not available, it was the respondent who found someone else or reallocated the work.

Other relevant factors

11 The other factors that the tribunal considered supported the claimants' case that they were employees were;

• The respondent provided all their tools apart from work boots and they worked on the respondent's site.

• There were set break times (two of which were paid).

• The claimants worked consistent hours (set by the respondent) over a relatively long period.

• They were not set tasks to be completed for a fee, but were allocated work throughout the working day.

• They were paid a full day's pay for half a day on Saturdays.

• There were periods when they were not provided with work.

• Apart from the way they paid tax, they did not appear to be in business on their own account.

• The respondent had the power to appoint and 'dismiss' the claimants and did so, referring to 'laying them off'.

12 The other factors that supported the respondent's case were:-

• There was no sick pay, holiday pay or pension.

• There was no written contract of employment.

• The Revenue treated the claimants as self-employed.

• It was the apparent intention of both parties at the start of the relationship that the claimants should be self-employed.

• There was nothing to prevent the claimants working for others (although in practice they did not do so).

• There was no retainer if they were not working.

13 Taking into account considered all the matters dealt with above, the tribunal were satisfied that most of the evidence pointed to the fact that the claimants were both employees. Taking a broad approach, the way the relationship functioned looked more like a contract of service than a contract for services. And as Mrs Hunter submitted, an employer who is seeking to avoid the unfair dismissal provisions, should not be able to rely on other breaches of employment protection legislation (for example failing to provide paid holiday and a statement of terms) to support his assertion that someone is not an employee.

Mutuality of obligation

14 Notwithstanding all the other matters that it had considered, if there was no mutuality of obligation, the claimants could not be employees. The question of mutuality of obligation is fundamental; without it there can be no contract of employment.

15 It was the respondent's case that because the claimants could phone on the day that they might have been working to say that they were not doing so (for any reason), mutuality was not present. From the respondent's side, there was no obligation to provide work but in practice there was plenty of work until the events that caused this litigation.

16 Mrs Hunter argued that what happened in practice; the fact that the claimants worked week in week out for over twelve months; work was not sporadic, but regular and consistent; that they received pay for work they undertook and were only absent from work through pre-arranged holiday and ill-health, pointed towards the necessary mutuality of obligation.

17 The tribunal spent a good deal of time considering this matter. The cases referred to and indeed the question of mutuality normally arises in rather different situations to this one. Most are cases of casual, irregular or sporadic work. In some cases a 'global' contract is found spanning separate engagements when what is required is an exchange of mutual promises for future performance. In this case, the claimants' working patterns were consistent and unbroken. Even if a worker did not work on a particular day, there was an expectation that he would be working later and that work would be provided.

18 The tribunal concluded that there was the necessary mutuality of obligation. Whilst the Claimants may have been able to phone to say they would not be working on a given day, the very fact that they had to do so, that the assumption was that they would be working if they did not phone, points towards mutuality of obligation. The tribunal also considered the fact that when workers did not work on certain days during the week, the sanction of not being allowed to work on Saturdays was imposed. This also points towards an employer/employee relationship.

19 Finally, when the respondents decided they did not have enough work, they did not simply cease to offer it to the so-called contractors but had a meeting to decide which workers to 'lay off'. The way the relationship ended also points towards the necessary mutuality of obligation being present.

20 Both claimants were therefore employees and entitled to claim unfair dismissal.

21 Even though Mr Watt had started working before Mr Cameron, in slightly different circumstances, the tribunal conclude that this had no impact on the situation, the status of both men was the same."

The Historical Background

6. Older employment cases used to refer to Industrial Tribunals, as they were then known, as

industrial juries. Of course, in some ways such a description was a misnomer, in that juries are not required, and indeed not encouraged, to give reasons for their decisions. A jury simply has to say guilty or not guilty to each count of the indictment. That stark verdict applies where they are considering a straightforward case of theft of a tin of salmon from a supermarket or a conspiracy count, which can deal with several defendants and which requires a jury to evaluate often complicated and complex issues over a considerable period of time. Tribunals however, are required to set out their findings of fact and the directions of law they have applied with a considerable degree of particularity.

7. Yet a plethora of cases in both the Court of Appeal in the House of Lords have pointed out that each case has its own chemistry; that however well drafted a decision is with hindsight it is probable that it can be improved; that appellate courts should resist the attempt to re-try the case on its facts in the guise of subjecting the original decision to myopic scrutiny and faulting the reasoning therein. The most comprehensive criticism of appellate courts is to be found in the speech of Lord Hoffman in Piglowska v Piglowski [1999] 3 AII ER at 632.
8. It is against this background that one notes that over 50 years ago in the case of Stevenson Jordan & Harrison Ltd v Macdonald & Evans [1952] 1 Times Law Report 101 at 111, Lord Justice Denning said this: 

"It is almost impossible to give a precise definition of the distinction. It is often easy to recognise the contract of service when you see it but difficult to say where in the difference lies. A ships master, a chauffer, and a reporter on the staff of a newspaper are all employed under a contract of service; but a ships pilot, a taxi man, and a newspaper contributor are employed under contract for service."

9. In the last 50 years, various tests have been formulated in such cases as Ready Mix Concrete South East Ltd v Ministry of Pensions & National Insurance [1968] 1 All England 433 in which McKenna J formulated the well known multiple test. Recent cases emphasise the extent to which a person is carrying out work on their own account, see Global Plant Ltd v Secretary State for Health and Social Security [1972] 1 QB 139. The matter has been considered in a plethora of authorities. Perhaps the most pithy test, it was said, is the question posed by Bristow J in Withers v Flackwell Heath Supporters Club Ltd [1981] IRLR 307 as to what the applicant's honest answer to the question "are you your own boss?"
10. The essence of the dictum of Mummery J in Hall v Lorimer is that it expresses in somewhat ornate language the plain truth that there is no simple way of going through a check list and saying these matters can be totalled up, and if there is a bigger score for employment or against employment, that should dictate the result. It conjures up a position of looking at a picture and showing that if one only looks at part of the picture, one loses the perspective of seeing the complete image.
11. The essence of Appellant's case is the Employment Tribunal have failed to grasp the issues in this case, with particular reference to the test of mutuality of obligation. It is said that the Employment Tribunal wrongly equated an expectation that if a worker did not work on a particular day, further work would be provided and he would turn up and perform that work with an obligation on the Respondent to offer that work and for the worker to do it. It is said that the Tribunal failed to take into account the Tribunal's finding that if a worker could choose not to continue to work if it started to rain and he could go home.
12. Mr Skeate_, in both his oral argument and in his written submissions, has developed that theme citing various authorities to the effect that in this case the Tribunal did not consider the question of mutuality of obligation with such care as the topic demanded and deserved.
13. The Respondents point out that whilst it is true the Tribunal never in terms said that an expectation of work had matured and distilled into a legal obligation, that was nevertheless clearly implicit and that the Tribunal were entitled to find that a course of dealings could satisfy the requirements of mutuality of obligation as set out in Ready Mix Concrete, and they point out that in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, which was approved by the House of Lords in Carmichael v National Power [1999] ICR 1226, that the possibility that an expectation could harden into an enforceable contract was well established in both the judgments of Stephenson LJ and Dillon LJ.
14. Subsumed within the contentions of the Appellant, so attractively put forward by Mr Skeate, is an underlying implicit premise which never quite surfaces as an express submission; namely that if one finding of fact on the aspect of the relationship is more consistent with self employment than employment, that is conclusive as to the status of the individual. We consider that is to fall into the trap which Mummery J sought to prevent by his analogy of looking at and painting the picture. It is only by looking at the whole portrait not a smaller part of it, that one can focus and obtain a true perspective. It is inevitable that in areas like the present case, some matters will point to self employment others to employment.
15. We consider that the issue of employment or self employment of course has added concerns since the introduction of the Employment Protection and Equality Legislation, but it is a matter in one guise or another that has gone as long back as to the interpretation of the Workmen's Compensation Act 1897.

Conclusions

16. We do not attempt to add to this topic any decision that purports to lay down any further test as to what constitutes employment and what constitutes self employment. This matter has been comprehensively determined and decided. What we do, however, point out is that there is no misdirection of law in this decision at all. What is being said is that the Tribunal failed to apply their own directions; we cannot accept this. The Tribunal have given clear and cogent reasons why they reached the decision they did. They had the opportunity to weigh up as they do the two different contentions. At the end of the day we consider there is no misdirection, that they looked at this case on its own merits and that what this case is really about is an attempt to say that we should view the facts they found in a different way than the Tribunal did.
17. We reject that contention. We find no error of the law and we find that there are reasonable grounds for the Tribunal coming to the conclusion they did. They accepted in their decision, perfectly properly, that there were some matters which supported the Respondent's case and some matters that supported the Claimants' case. These are all set out in paragraph 11 and in paragraph 12, and in paragraph 13 the Tribunal took a broad approach and made, if we may say so, the good jury point that an employer who is seeking to avoid the unfair dismissal provisions should not be able to rely on other breaches of employment protected legislation (for example failing to provide holiday and a statement of terms) to support his assertion that someone is not an employee.
18. Our conclusion is that this appeal fails. It is trite law to say that in many areas of employment law and indeed in many areas of other aspects of law, there is a rule which put at its more frivolous is known as the Elephant Test; you can recognise something you cannot describe or define. We find that the Tribunal set out the law, there were cogent reasons for their reaching the decision they did and that it would be quite wrong for us to set that aside and to supply our own view or to send it back for the Tribunal formalistically to reach the same view by possibly making such amendments as to find the fixed expectations crystallised into a legal obligation. This was clearly a matter that they had in mind and in those circumstances this appeal is dismissed.