United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR MARK SAHU (of Counsel) Instructed by: Messrs Gisby Harrison Solicitors Goffs Oak House Goffs Lane Goffs Oak Chessant Hearts EN7 5HG
For the Respondent	MS LAUREN HARKIN (Solicitor) Messrs Lemon & Co Solicitors 34 Regent Circus Swindon Wiltshire, SN1 1PY


 


SUMMARY

UNFAIR DISMISSAL: Exclusions including worker/jurisdiction

JURISDICTIONAL POINTS: Worker, employee or neither

The employee was a waitress at the Appellant's Italian restaurant in Bath. The Employment Tribunal found that she was an employee and had been unfairly dismissed. The appeal was directed at the former finding. She was able to choose her own holiday; and there was a 6-week period in which there was no work for her; but the Employment Tribunal found that the Appellants were bound to offer her work; and she was bound to accept it absent a reasonable explanation.

Held that the Employment Tribunal had applied the correct tests and were entitled to find that there was sufficient mutuality of obligation and that she was an employee.

HIS HONOUR JUDGE BURKE QC

The Nature of the Appeal

1. In this appeal Bath Spa Experience Limited, trading as Il Tocco d'Italia, the Respondents before the Employment Tribunal, challenge that Tribunal's decision that the Claimant before it, Miss Mirella Lamarina, was an employee at the date of what the Tribunal found was her unfair dismissal on 9 March 2007. The Tribunal, sitting at Bristol and chaired by Employment Judge Owen, heard Miss Lamarina's claim that she had been unfairly dismissed and had been the victim of sex discrimination over three days in September and December 2007. Their judgment was sent with reasons to the parties on 14 January 2008. The Tribunal concluded that Miss Lamarina was an employee, that she had been unfairly dismissed and that there had not been any discrimination. She was awarded just under £5,500 by way of compensation for unfair dismissal.
2. We will, in this judgment, call the parties "Claimant" and "Respondent" as they were before the Tribunal.
3. The Tribunal's conclusions that, on the basis that the Claimant was an employee, she was dismissed on 9 March 2007, which such dismissal was both automatically unfair - for there had been no attempt to follow any form of procedure - and substantively unfair are not challenged. The appeal relates only to the Tribunal's conclusion that the Claimant was an employee and not a worker providing services to the Respondent but not under a contract of employment with them. It was the Respondent's case that she was such a worker only, not an employee and not entitled to claim unfair dismissal.

The Facts

4. We take the facts from the Tribunal's findings. The Respondent owned and ran an Italian restaurant in Bath. The Claimant started to work for them in April 2005, initially on a casual basis because she was not then intending to stay in Bath. However she did stay in Bath and worked regularly for the Respondent until December 2006.
5. The Tribunal's findings of fact are to be found at various places in their judgment rather than in one separately identified section; therefore we will give the paragraph numbers in which the findings are to be found in the judgment as we set them out. So far as relevant, they were:-

1) The Claimant as a waitress rendered personal services in return for money. Paragraph 9.

2) She was treated as one of a core of staff who had regular work and who were supplemented by others brought in as needed. If no others were needed, work was spread between the core staff. Paragraphs 9, 14, 15 and 24.

3) Between April and 12 July 2005 the Claimant worked 94 shifts, there being two shifts per day of normally three to four hours each (presumably, although the Tribunal do not say so expressly, because the restaurant was open at lunchtimes and evenings). From July 2005 to 2 April 2006 she worked 1,100 hours; and, from 9 April 2006 to 8 December 2006 (when she last actually worked), she worked 1,000 hours. She worked on average 30 hours per week (i.e. between eight and ten shifts per week). Paragraphs 2 and 23.

4) The Claimant and her colleagues were paid weekly; they received weekly pay slips. Tax was deducted by the Respondent on a PAYE basis. As to National Insurance, the pay slips referred to "Employers NIC". There is no express finding as to whether employee's NIC was deducted by the Respondent. Paragraph 11.

5) When the Claimant's relationship with the Respondent came to an end, she was given a P45 form. Paragraph 11.

6) In correspondence in January 2007 relating to a grievance lodged by the Claimant, the Respondent's managing director, Mr Gronow, referred to her as an employee. The evidence demonstrated that, in numerous respects, Mr Gronow's approach was that the Claimant was an employee to whom he could give instructions. Paragraph 12.

7) None of the waiting staff had a statement of terms and conditions of employment or a contract of employment. Paragraph 10.

8) The Claimant and other core staff got regular work, normally amounting to several shifts per week. Paragraph 15.

9) The Claimant had three weeks paid holiday. Paragraph 15.

10) In addition to paid holiday there were six weeks out of 88 in which no work was available and in which the Claimant was not paid. The Tribunal did not identify the dates of those weeks. Eighty-eight weeks from 12 April 2005 would have been 20 December 2006 and would therefore have included approximately two weeks after the Claimant last worked, in a period in which she was complaining that she was not being offered work or enough work, after she had informed the Respondent on 19 October 2006 that she was pregnant. Paragraphs 2 and 15.

11) The Respondent regarded themselves as having an ongoing obligation to offer work to the Claimant. She was only entitled to turn down an offer of work if she could give an explanation (by which the Tribunal obviously meant a good or sensible or reasonable as opposed to an unreasonable explanation). Paragraph 16.

12) The Respondent required the Claimant and her colleagues to wear predominantly black clothing and issued T-shirts, although they were not always worn. Paragraph 18.

13) Mr Gronow believed he was entitled to control his staff. While they were free to work elsewhere if not working for him, he said that he would not tolerate their working for another restaurant even if not required to work by the Respondent. He had reprimanded the Claimant for working in another restaurant. Paragraph 19.

14) The Respondent required core staff to accept rostering on Sundays; and the staff could not reject Sunday rostering without permission. The Claimant insisted that she would not work on Sundays; and eventually the Respondent accepted her insistence. Paragraph 20.

15) Employees were able to choose when they went on holiday. Paragraph 21.

16) The Claimant could not be described as running her own self-employed business - she was not her own boss. Paragraph 18.

17) The core waiting staff could swap rostered duties between themselves; the Respondent disapproved of external substitutes being used; and that happened only occasionally. Paragraphs 24 and 25.

18) The Claimant lodged a grievance on 22 December 2006. When she did so the Respondent brought in an employment consultant, Mr Lucking, to deal with it. After taking evidence, including from the Claimant, he issued a decision on 9 March 2007 in which he concluded that the Claimant was not an employee. Paragraphs 2, 3 and 26.

19) By that time the restaurant had been closed from January 2007, because of flood damage; it closed until some date later in March. Paragraph 28.

20) On 9 March, Mr Gronow sent Mr Lucking's decision to the Claimant with an email which, in effect, told her that she was not an employee and terminated the relationship between them. The Tribunal found that by that email, on the basis that the Claimant was an employee, the Respondent dismissed her. Paragraphs 28 and 32.

The Tribunal's Conclusion

6. At paragraph 8 of their Judgment the Tribunal correctly said there were several different tests which could be applied to the assessment of the Claimant's status, i.e. to the question whether she was an employee or not. They identified five tests, (1) what were the practical arrangements and the tax situation; (2) was the Claimant a casual worker as the Respondent contended or was there mutuality of obligation; (3) what was the economic reality of the arrangements between the parties; (4) the control test; (5) organisational factors.
7. As to the first test they set out the findings which we have summarised above at paragraph 5 at subparas 1 and 4 to 7 above. As to the second test, they directed themselves at paragraph 13, consistent with the decision of the House of Lords in Carmichael v National Power Plc [2000] IRLR 43, that for the Claimant to be an employee there must be mutuality of obligation. They found at paragraph 13 that, once the Claimant settled in Bath, she ceased to be a casual worker and became one of the core staff obtaining regular work. They set out the facts which we have summarised at subparas. 3 and 8-11 above. They concluded, at paragraph 1, that there was a high degree of mutual obligation and that it would be completely inconsistent with the evidence and the reality of the arrangements to describe the Claimant's position as that of a casual worker.
8. As to the third test, they set out the findings of fact which we have summarised at subparas. 12 and 16 above, and as to the fourth test, they set out the findings of fact at subparas. 13 to 15 above. As to the fifth test, they set out the findings of fact we have summarised at subparas. 12 and 17 and referred to the finding that, in the weeks in which she was not working, the Claimant was not paid.
9. At paragraph 26 the Tribunal brought the result of all these tests together. They said:

"Having applied the various tests, we have to reach a conclusion. As already noted, there are factors here which assist the respondent's argument. There were several weeks over a twenty one month period when the claimant was given no work at all. Hours varied and there was no pay for weeks when there was no work, save for when the claimant was given holiday pay. Taken overall, however, we are entirely satisfied that Ms Lamarina was an employee and not a worker. The evidence has taken us beyond "balance of probability" and when all factors are taken into account, it would be perverse for us to find that this claimant was only a "worker". We disagree fundamentally with the opposite conclusion reached by Mr Lucking."

10. They then went on, now uncontroversially if their conclusion at paragraph 26 was correct, to find that the Claimant had been dismissed on 9 March 2007 and the dismissal was unfair.

The Submissions

11. Mr Sahu's submissions - and we say this without criticism - do not follow the grounds as set out in the Notice of Appeal or the lines of the skeleton argument, neither of which bears his name. The absence of his name is significant only in that the skeleton argument adopts a mode of expression in more than one place, e.g. by describing a conclusion of the Tribunal as "completely nonsensical" which was offensive, did not amount to argument and went beyond what was appropriate. We hope that the author will not again use such language in a formal submission to a court or tribunal. What we propose to do is to set out, in summary form, Mr Sahu's submissions as put before us in his oral argument.
12. (i) Mr Sahu put at the forefront of his argument the decision of the Court of Appeal in the well-known case of O'Kelly v Trusthouse Forte Plc [1983] ICR 728 which concerned banqueting staff at the Grosvenor House Hotel in London who were described as "regular casuals" and were found by the Tribunal to be under no overall or umbrella contract with THF and not to be employees. The EAT had held that each individual engagement constituted a separate contract of employment; the Court of Appeal restored the Tribunal's decision. Mr Sahu submitted that the facts of the present case were closely analogous with those of O'Kelly; the Claimant was one of the core staff of the restaurant who received work regularly and preferentially to other casuals but was not entitled to work if there was no work and who worked on a variable basis in a very similar fashion to the claimants in O'Kelly; but the Tribunal had failed to take that decision into account, and had thereby misdirected themselves in reaching the conclusion set out in paragraph 26.

(ii) We drew Mr Sahu's attention to the clear statements by Lord Donaldson MR and Fox LJ in O'Kelly that, when a tribunal had to decide an issue whether a claimant was an employee or a worker not under a contract of employment, in the absence of any contractual documentation, if the Tribunal applied the correct tests to the resolution of that issue, their determination was one of fact. Mr Sahu very fairly accepted that the Tribunal in the present case had applied the right tests and that the Tribunal's conclusion was thereafter one of fact; but he submitted, alternatively to his first submission, that in the light of the close comparison between the facts in O'Kelly and the facts in the present case the Tribunal's conclusion in paragraph 26 was perverse.

(iii) Mr Sahu next submitted that the Tribunal ought to have applied a further test, namely what was the intention of the parties; while accepting that what a party thinks is the position is neither necessary nor sufficient to a resolution of the issue, he argued that the question of the parties' intention was a relevant matter which, wrongly in law, was by the Tribunal "left hanging in the air".

(iv) Fourthly, Mr Sahu submitted that it was perverse of the Tribunal to attach significance to the fact that the Claimant was paid on a PAYE basis (paragraph 11 of the Decision). It does not follow from that fact, he submitted, that the Claimant was an employee; the regular casuals in O'Kelly were paid on that basis but were not employees.

(v) Next Mr Sahu attacked as perverse the finding in paragraph 16 that the Claimant was entitled to turn down work but only if she could give an explanation; he accepted that, if the finding that she could only turn down work if she gave an explanation was supportable, that gave rise to sufficient mutuality of obligation; but, he submitted, the second half of the relevant sentence was not supported by evidence and was perverse.

(vi) Relying on the House of Lords' decision in Carmichael Mr Sahu submitted that the Tribunal erred in concluding that there was mutuality of obligation in the present case in that they did not take into account that there was no obligation to offer work. We pointed out that the Tribunal expressly found at paragraph 16 that there was such an obligation. Mr Sahu submitted, alternatively, that that conclusion was perverse and that the evidence did not satisfy either the requirements of mutuality of obligation as set out in Carmichael or the test as set out by the EAT in Wilson v Circular Distributors [2006] IRLR 38, which, he argued, was in any event inconsistent with Carmichael.

(vii) Mr Sahu submitted that the Tribunal's conclusion as to control in paragraph 21 was perverse. The Tribunal had perversely decided to disagree with Mr Lucking's conclusion without giving any reasons and without recognising that he was an independent employment consultant and substituted their own view for Mr Lucking's view, without identifying why they did so or criticising his report.

(viii) The Tribunal failed to take sufficiently into account the finding that there was a period of six weeks when a claimant was not provided with any work and was not paid; the Tribunal should have drawn the inference from that finding that the Claimant did not have the status of an employee but did not explain why they did not do so.

(ix) The Tribunal had misdirected themselves in considering whether the Claimant was "her own boss or not" in applying the economic reality test, particularly in the light of the decision of the Employment Appeal Tribunal in James v Redcats (Brands) Limited EAT/0475/06, Elias P presiding.

13. We do not regard it as necessary to set out in detail Ms Harkin's concise and straightforward arguments in response to Mr Sahu's submissions. In summary she submitted that the Tribunal had applied the correct tests, that the authorities established that what remained for the Tribunal thereafter was a decision of fact and that no perversity was demonstrated, still less overwhelmingly demonstrated as required by the well-known passage in the Judgment of Mummery LJ in Yeboah v Crofton [2002] IRLR 634, at paragraph 93.

Our Conclusions

14. Subject to Mr Sahu's third point, we agree with Ms Harkin's submission that the Tribunal identified and applied the correct tests to the issue before them; and as to the third point, Mr Sahu was unable to point to any authority which supported the proposition that the intention of the parties was a separate test which a Tribunal is bound to apply in deciding, in the absence of any contractual documentation, whether a claimant is an employee or a non-employed worker. To a degree, it might be said that all tests are designed to reveal, if possible, any common intention of the parties or to produce a result which reflects any such intention; but in the present case no suggestion has been made that there was any such common intention or that there was evidence that the parties ever put their mind to the crucial issue. Usually in cases such as this the Tribunal has to determine the issue by application of the correct tests to the facts, without any help from the parties as to their intentions - which in any event would be likely to be self-serving statements which, unless they agreed, would be unlikely to be of great assistance. Furthermore, in this case, the argument that the Tribunal should have applied a further test is not pleaded in the Notice of Appeal, as Mr Sahu accepted; no application to amend was made. For these reasons we reject Mr Sahu's third point.
15. Once the correct tests are applied, the decision for the Tribunal is, indeed, one of fact. That that is so is clear from the judgments of Lord Donaldson MR and Fox LJ in O'Kelly (at pages 762 A-E and 259-260 B respectively) and from the decision of the Privy Council in Lee v Chung [1990] IRLR 236, at paragraph 12. We have already recorded Mr Sahu's acceptance of that principle. In those circumstances any similarity or close similarity between the facts of O'Kelly and those of the present case is irrelevant, save insofar as it supports a case of perversity. We have not discovered any point of law arising out of O'Kelly which the Tribunal in the present case failed to apply. Absent misdirection of law, it is entirely open to a tribunal, if it applies the correct tests, to reach on the facts before them a different result from that achieved by a different tribunal on similar facts. In the absence of any relevant proposition of law taken from O'Kelly or otherwise which it could be said that the Tribunal in the present case failed to apply, the fact that they did not refer to O'Kelly in their judgment cannot give rise to any successful ground of appeal.
16. We therefore neither need nor intend to carry out a close comparison of the detailed facts of O'Kelly as against those of the present case; it is however worth pointing out, as Ms Harkin drew to our attention, that in O'Kelly the regular casuals had the absolute right to choose whether or not to accept an offer or work; on the Tribunal's finding in the present case the Claimant did not have that absolute right.
17. We are entirely satisfied that the alternative, that the Tribunal's general conclusion in paragraph 26 was perverse, cannot succeed. The Tribunal investigated the facts in detail; they considered and set out in their findings all important aspects of the Claimant's job and the arrangements between her and the Respondent. Those facts included not only that the Claimant had regular and consistent work, save for a six-week period when there was no work for her, but also that the Respondent regarded themselves as being under an ongoing obligation to offer work to her and that she was not free to pick and choose whether she did the work offered (paragraph 16). On the Tribunal's findings of fact, including but not limited to those which we have specifically referred, we have no doubt that it was open to the Tribunal to conclude that the Claimant was an employee.
18. As to the fourth submission, that the Tribunal erred in attaching significance to the Claimant being paid on a PAYE basis, in our judgment the Tribunal were entitled to consider the practical arrangements between the parties and to record as part of those arrangements that the Claimant was paid on that basis. Mr Sahu is right to point out that fact could not, of itself, have been determinative of the issue as to the Claimant's status; but there is nothing in the judgment to suggest that the Tribunal regarded that fact in that way; it was simply one of the basket of factors which they were entitled to consider. There is no error of law or perversity to be found in the Tribunal's judgment in this area.
19. Mr Sahu's next submission, that the second half of the fourth sentence in paragraph 16 of the Tribunal's judgment was perverse because there was no evidence to support it, could not succeed. Ms Harkin did not accept that there was no evidence to support it. The Respondent had not made any effort to obtain the Tribunal's Notes of Evidence or any part of them - or if they had, they were not put before us. In the absence of any notes which supported Mr Sahu's submission, we have no alternative but to reject it. A perversity argument based on the absence of a particular piece of evidence cannot successfully be made in the absence of notes of the relevant areas of the evidence, unless the absence of that evidence is undisputed.
20. We turn to mutuality. In the course of argument Mr Sahu gracefully retreated from his first position, that the Tribunal had not considered the evidence that there was no obligation to offer work; for in paragraph 16 they plainly found that there was such an obligation and, again, in the absence of notes that finding cannot be undermined as perverse. We have already explained, in the previous paragraph, why, in our judgment, the Tribunal's conclusion in the fourth sentence of paragraph 16 also cannot be shown to have been perverse. The Tribunal's findings establish an obligation to provide work on the one hand and an obligation to accept it, in the absence of a (reasonable) explanation, on the other. As Mr Sahu conceded, that was sufficient to entitle the Tribunal to conclude that there was mutuality of obligation.
21. It is, therefore, unnecessary for us to resolve the interesting question raised by Mr Sahu as to whether the EAT's decision in Wilson (see above) that an absence of mutuality is not established by an absence of any obligation of the employer to provide work alone; there must also be an absence of obligation on the part of the employee, when work is offered, to accept it. See paragraph 12 of the Judgment in Wilson. Any argument that paragraph contains a proposition which is inconsistent with or goes further than the House of Lords decision in Carmichael must await another day. In this case the Tribunal found sufficient obligation on both sides to enable them, as they did, to find that there was sufficient mutuality.
22. Mr Sahu's next point relates to the Tribunal's conclusion as to control. He submitted that what was set out in paragraphs 18 to 21 of their judgment pointed away from control and that the Tribunal's conclusion that in certain areas there was a high degree of control was unexplained. Ms Harkin pointed out that Mr Gronow had said that he would not allow any of his staff to work in another restaurant and had told the Claimant off for doing so, that he insisted on rostering core staff for Sundays and that the Claimant had had to enter into a negotiation with him in respect of that; but on the other hand the Tribunal recognised that core staff were able to choose their holidays without prior approval. The Tribunal regarded that as part of the inconsistent pattern of control; they did not say that there was a high degree of control in every area; they found that there were certain areas in which Mr Gronow asserted a high degree of control; on the Tribunal's factual findings that could not be said to have been a perverse conclusion; and that was a factor which the Tribunal were entitled to take into account as pointing towards the Claimant being an employee as opposed to self-employed. We see no error of law on the Tribunal's part in this area either.
23. We have to say that we were somewhat surprised that Mr Sahu advanced before us (albeit towards the end of his submissions) the points made in the Notice of Appeal about Mr Lucking's report. Although the Tribunal do not expressly state that he was independent of the parties, they record that he was an employment consultant; and there was, so far as we are aware, no suggestion that he was anything other than independent, they did not need to set that out. In any event, neutral or not, Mr Lucking's conclusion was not one to which the Tribunal were bound, in our judgment, to pay any attention at all. Mr Lucking was not a formal arbitrator; he was not a judge or an employment tribunal. His conclusion was only a matter of opinion. The Tribunal were not obliged, in our judgment, in any way to explain why they disagreed with him. The Employment Tribunal had the statutory task of deciding the issue on the evidence and on the submissions made to them. They were wholly entitled and indeed bound to reach their own view, irrespective of Mr Lucking's view. The reasons for their conclusion in paragraph 26 appear very clearly from all the foregoing paragraphs.
24. Finally we come to the criticism of the Tribunal for posing, in paragraph 18 of their judgment the question whether the Claimant was "her own boss or not". That criticism was based on James (see above) which, it should be noted, was not a case in which the issue was whether the Claimant was an employee or not; the issue was whether the employee was a worker or a home worker within the provisions of the National Minimum Wage Act 1998. At paragraphs 41 to 45 Elias P said:

"41. There is no question here of [the claimant] falling within limb (a) of the statutory definition of worker; it is conceded that she is not an employee. The only issue is whether she falls under limb (b).

42. Traditionally, when courts have had to determine whether a person is employed under a contract of service or not, they tend to contrast such employees with others who are described in various ways: they are either self-employed, or working in business on their own account (Lee v Chung and Shun Shing Construction and Engineering Co Ltd. [1990] ICR 409) or working pursuant to a contract for services, or operating a small business (Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173.)

43. The cases are replete with these terms, which are often used inter-changeably. No doubt that is because when the issue in question is whether there is a contract of employment, it is not necessary to classify with any precision those who fall outside that definition. For example, in the Lee case the Privy Council approved the following observation of Cooke J in the Market Investigations case [1969] 2 QB 173:

"The fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?"

If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the answer is a contract of service"

44. Plainly if the dichotomy were always that simple, all those who are found not to be employees under a contract of employment will perforce be in business on their own account. If that were so, then limb (b) would have nothing to bite on. The exception for those contracting as a business undertaking would swallow everyone potentially falling within the clause. That obviously cannot be right.

45. Accordingly, the requirement to distinguish between employees, workers, and those engaged in a business undertaking of their own demands a more sophisticated analysis than some of the earlier cases have provided. It follows that tribunals analysing whether someone is a worker or operating his business must be very careful when considering the decisions which have looked at the question whether a person is an employee, because of the loose way in which all non-employees are often described as being in business on their own account."

Those paragraphs constitute a valuable and important reminder to tribunals that the familiarly asked question in cases such as the present case, "Was she her own boss or not?" does not necessarily produce or, on its own, justify a definitive answer. A more sophisticated analysis is required.

25. However, it is not suggested in James that the familiarly asked question should not be asked or that the answer to it can never inform the decision which the Tribunal has to make. In the present case the Tribunal, it is clear, did not base their decision on the answer to that question alone; they considered the five relevant tests and the indications derived from the application of those tests; and they reached an overall conclusion based on all that they had set out before they came to paragraph 26. Their approach, in our judgment, satisfied the call in James for a more sophisticated analysis than that arising solely from the answer to the question, "Was she her own boss of not?" We are not persuaded that what was said by Elias P in James establishes any error of law on the part of the Tribunal in the present case.

Conclusion

26. For the reasons we have set out, we can find no error of law in the Tribunal's conclusions in this case; the appeal is, therefore, dismissed.