THE HONOURABLE LADY SMITH
Introduction
1.
This is an appeal from a Judgment of a majority of the members of an the
Employment Tribunal sitting at Glasgow, Employment Judge Rosemary Sorrell, one
of the lay members dissenting, registered on 14 September 2010, finding that
the Claimant was unfairly dismissed and awarding him compensation of
£33,518.75.
2.
For convenience, we will continue referring to parties as Claimant and Respondent.
3.
The Claimant represented himself before the Tribunal and was represented
by Mr J Macmillan, solicitor, before us. The Respondent was
represented by Mr C Mackenzie, advocate, before the Tribunal and by
Mr Napier QC before us.
Background
4.
The Respondent operates an aircraft engine overhaul facility at Prestwick, Ayrshire. The Claimant began a four year apprenticeship in August 2002,
along with four others. His apprenticeship contract was signed on 27 August 2002. The relevant provisions relating to duration were:
“1. Date of Commencement of Apprenticeship
Your period of apprenticeship will be deemed to have commenced
on Thursday 29 August 2002………..
2. Duration
Your contract of Apprenticeship …..will endure for four years
….and will expire automatically on the Friday 25 August 2006 without the
necessity of notice to or by either party.”
The Claimant attained his trade qualifications by June 2009. He
carried on working for the Respondent on his apprentice’s rate of pay until the
start of the autumn university semester in 2009. The Claimant had no
entitlement to employment with the Respondent after the termination of his
apprenticeship. That is spelt out in two of the contractual provisions:
“ 2. Duration
…………
Please note that it is usual for all apprentices to be offered a
full time permanent contract at the successful conclusion of the apprenticeship.
It is however not a right to receive permanent employment. (see section 13 of
this contract).
…………………………
13. Waiver of Statutory Rights
………………
Please note that the Company is under no obligation to re-employ
you upon the completion of your apprenticeship, and if they choose to re-employ
you, they will be entitled to employ you in any position, which choice shall be
at the sole option of the Company.”
5.
At one point in 2005, the Respondent’s head of Human Resources, Andrea
Clydesdale, advised the Claimant that the Respondent would be prepared to
sponsor him during an engineering degree course after he completed his
apprenticeship. He decided to accept. The relevant contract was in the form
of a letter, the terms of which the Claimant signed as having accepted, on
18 July 2006:
“University Sponsorship
I am pleased to confirm that the Company will sponsor you during
the 3 year B. Eng. Honours course at Glasgow University.
The following conditions of sponsorship will apply:-
Your sponsorship will commence on 26 September 2006 and
will continue over a period of 3 years, subject to satisfactory results
being achieved at university and during industrial training.
During periods at University
A sponsorship of £1,200 per term (2 terms per year) will be paid
at the beginning of each term with effect from the first term in 2006.
During Industrial Training in the Company
The Company will provide facilities for training during periods
of industrial training.
Payment will be at the rate of £17,902/ per annum, paid
fortnightly by credit transfer direct to your bank account.
Holiday Entitlement
Holiday entitlement will be related to the periods of industrial
training and be calculated on the basis of 2.42 days per calendar month.
Breaks in the academic session will be excluded from this
entitlement and students will not normally be expected to return to the
Company.
Holiday Bonus
A holiday bonus will be paid in full based on the basic
industrial training rate.
On completion of the degree course, you commit to offering your
services for continued employment with GE Caledonian Limited for a period of 2 years.
Should you resign from the Company within this period, a refund of the
sponsorship award will be made.
All other terms and conditions of employment will apply.
Please confirm you (sic) acceptance of this offer on the terms
and conditions as contained in the above letter by signing the duplicate copy
and returning it to the undersigned.
Yours sincerely
“Laura Nicholson”
Laura Nicholson
HR Representative.”
6.
Laura Nicholson was the successor to Andrea Clydesdale.
7.
The Claimant’s fellow apprentices had, following completion of their
apprenticeship contracts, been offered and accepted full time permanent
contracts of employment as skilled engineers.
8.
The Claimant undertook a year’s study at Glasgow University and then
asked the Respondent if they would agree to his transferring to Strathclyde University, to study for a degree that was more practically based. They
agreed to his request.
9.
By 2009, the Claimant was in debt. His degree course had one more year
to run. Towards the end of the summer recess, on 31 August 2009, he emailed Laura Nicholson in the following terms:
“Just to let you know I have some personal issues that are
interfering with my ability to focus at University at this time and am
concerned that this could affect my ability to cope with my studies. Therefore
after much thought I have decided to take a year off from University to resolve
these issues to allow me to better cope with the pressures of university in the
future. Please let me know if need to discuss further.”
10.
Laura Nicholson responded by email of the same date, saying:
“This is something we need to discuss further. We have spent a
lot of money putting you through university to date and you cannot make that
type of decision without discussing with the Company. I also need to know what
you intend to do for the year you plan to take out.”
11.
The Claimant replied in an email of the same date in which he stated he
intended “working for GE during this time off.”
12.
Laura Nicholson responded, again on 31 August:
“We need to discuss further, we have no open positions at the
moment to offer anyone.”
13.
The Claimant was subsequently invited to a meeting with
Laura Nicholson on 21 September 2009 at which he was accompanied by
Mr Russell. Ms Nicholson explained that the Claimant was not on the Respondent’s
‘headcount’ as he was a student.
14.
She said that the Claimant was, by refusing to return to university,
breaking his contract. She asked if the Claimant had any significant reasons
for not returning to university but he did not respond. She said that from the
Respondent’s point of view, the Claimant had three options which were to
return to university, accept an internship (which they were prepared to offer)
or resign.
15.
The Claimant was not prepared to consider any of those options. He
asserted that his contract did not require him to complete the university
course.
16.
He was not content with matters and emailed Laura Nicholson on 21 September 2009. In that email he stated:
“I just want to return to my full time position within the
company.”
17.
Laura Nicholson responded on 23 September, explaining that it
was very difficult for the Respondent to discuss matters with him when he had
not offered any reasonable explanation of why he was not able to go back to
university and adding:
“…your current industrial training will end on 2nd
October 2009 and in accordance with the terms of your student contract you are
expected to return to university to complete your degree. You do not currently
have a full time position with GE. As an alternative to continuing as a
student we have given you the opportunity to carry out a year’s intern
placement. You have refused this opportunity on various occasions, so we therefore
assume that, unless we hear from you to the contrary that you will continue
under your sponsorship contract and return to university in October.”
18.
By email dated 23 September 2009, the Claimant provided some detail
of his ‘personal reasons’ explaining that they were financial ones. He also
advised that he had told the university that he was not returning and would
complete the course when he saw fit. At the end of the email he stated:
“…all I am asking is that I have my full time position back.”
19.
Laura Nicholson responded indicating that she was happy to meet to
discuss his reasons further but:
“…the issue from our perspective is that you do not have a full
time role, your previous role was as an apprentice and the current contractual
agreement is that you work on a placement basis during the summer holiday
period only.”
20.
Laura Nicholson met again with the Claimant on 24 September
2009. They discussed his circumstances. She indicated that the offer of an
internship contract was still open. The Claimant did not accept that offer.
The Respondent treated the sponsorship contract as having been terminated at
the request of the Claimant, as from 5 October 2009.
Respondent’s form ET3
21.
The Respondent’s position in the ET3 was that the Claimant did not have
a contract of employment but was employed on a student contract. That being
so, the Employment Tribunal had no jurisdiction; the Claimant was not dismissed
from a contract of employment. Esto they were wrong about that and he
was dismissed, the dismissal was, in all the circumstances, a fair one.
22.
The Respondent, accordingly, gave clear notice that they considered that
the principal issue was that of whether or not the Claimant was employed under
a contract of employment, their position being that his student contract did
not constitute such a contract and, that being so, the Tribunal had no
jurisdiction to entertain his complaint..
Relevant law
23.
Two matters arise. The first relates to the nature of a contract
of employment. It is a contract of service and can be distinguished from a
training contract under which the individual who receives training is under no
obligation to perform services for the party who commits to its provision.
When determining whether or not a person was employed under a contract of
employment or whether the contract was in respect of some other arrangement
(such as training), an Employment Tribunal requires to ask what was the
principal object of the contract in question? Thus, in the case of M&P
Steelcraft Ltd v Ellis and another [2008] IRLR 355, Elias P cautioned
against separating out and focussing on individual features (paragraph 78)
and against taking too narrow a view, bearing in mind that the crucial question
was what was the purpose of the relationship. At paragraph 84, he said:
“In our judgment, the employment tribunal in this case committed
essentially the same error. They did not consider the relationship in the round
to determine its real objective but focused on the terms of engagement between
the employer and the prisoner, which, taken in isolation were, we accept,
consistent with a contract of service being in place.”
24.
He relied on Lord Denning MR in Wiltshire Police Authority v Wynn
[1981] QB 95, at p. 656E:
“If the primary purpose was work for the master – and teaching
the trade was only a secondary purpose – it was a contract of service. But if
teaching the trade was the primary purpose – and work for the master was only
secondary – then it was a contract of apprenticeship.”
and on Dunn LJ, in the same case,
where, at p.660, he said:
“In my judgment the Employment Appeal Tribunal failed to give
sufficient weight to the question, what is the nature or substance of the
relation created? Ever since the settlement cases of the 18th and
19th centuries, the common law has held that the court must look at
the principal object of the contract in deciding whether or not a contract of
service exists. Where the primary object of the contract is teaching or
learning then there is no contract of service……….The fact that the conditions
of engagement are consistent with a contract for service is not decisive if the
principal object of the relationship is teaching and learning.”
25.
An Employment Tribunal has no jurisdiction to entertain a complaint of
unfair dismissal other than where an employee has been dismissed under a
contract of employment (Employment Rights Act 1996 s.94-5 and 98); it
has no jurisdiction in respect of disputes arising from the termination of a
training contract. It is, further, trite that the making of a concession
cannot confer jurisdiction on an Employment Tribunal if the dispute in fact
relates to a contract of a type over which it has no jurisdiction.
26.
Secondly, if a person is employed under a series of short, fixed term
contracts, it does not follow that he is continuously employed by the
employer. Whilst there may be circumstances in which, on the facts of a
particular case, a series of such contracts can be shown to amount to
continuous employment, it does not arise as an issue in the present case.
The Employment Tribunal’s Judgment
27.
The Employment Tribunal recorded that the Respondent’s position was that
the Claimant had a student contract, not a contract of employment, and that the
Respondent was not under any obligation to take him into their employment in
the circumstances which had occurred, namely that he had decided not to
complete his university course.
28.
They noted that the Respondent submitted that he was in material breach
of that student contract and that his case was misconceived.
29.
At paragraph 16(h), the Tribunal record what is plainly an esto
position (which reflects the Respondent’s case of which notice was given in the
ET3) to the effect that if, contrary to the Respondent’s principal argument,
the Tribunal was persuaded that there was a contract of employment then it was
accepted that, applying the normal principles of the law of contract, where an
employer accepts a material breach by the employee and brings an end to the
contract, the employee is thereby dismissed. It was not, however, accepted
that if there was a contract of employment in this case, that dismissal was
unfair.
30.
When it came to considering their decision, the Employment Tribunal
dealt, however, only with the esto case. They did not address the
fundamental question of whether or not they had jurisdiction, bearing in mind
that the Respondent’s primary argument was that the Claimant was, at the
relevant time, on a student contract, not a contract of employment. They went
straight to what we will, for convenience, refer to as s.98(2) and s.98(4)
considerations (potentially fair reason for dismissal and fairness of dismissal
- see Tribunal’s reasons at paragraph 25). They did so, it appears, on
the basis of what they refer to as a concession on behalf of the Respondent
that the Claimant was dismissed but they fail to take account of the context in
which that concession was made, namely, in the context of the esto
position to which we have referred. In so doing, they failed to address the
question of whether or not the Claimant was actually employed under a contract
of employment at all.
31.
The Tribunal’s factual analysis includes that the Claimant “was not
advised at any stage by the respondent that he would be jeopardising his full
time permanent position with the respondent by deciding to go to University”
(paragraph 3(j)).
32.
At paragraph 27, which was relied on by Mr Macmillan as
supporting his submissions, the majority of the Tribunal said:
“27. The majority of the Tribunal does not accept that the
student sponsorship letter represented the sole contractual relationship
between the claimant and the respondent. It was a letter setting out the terms
and conditions of the student sponsorship that formed a part of the claimant’s
continuing employment. The respondent did not dispute the claimant was an
employee. References made in the sponsorship letter to “All other terms and
conditions of employment will apply” and that “On completion of the degree
course, you commit to offering your services for continued employment with GE
Caledonian Ltd for a period of 2 years” are clear statements that the
claimant would have a continuing contract of employment with the respondent
throughout and after his course of study. Evidence was also heard from the
respondent that upon completion of his degree, the respondent was likely to
have offered the claimant a permanent position in the company.”
33.
The Tribunal thus proceeded on the basis that the Claimant had a
continuing contract of employment throughout the years he was at university and
that it was subsisting as at October 2009.
The appeal
34.
Mr Napier submitted that the Claimant’s contract was plainly a training
contract, not a contract of employment. The Respondent was not, under its
terms, obliged to employ the Claimant at all, even during the industrial
training periods. That was clear and it meant that the Tribunal had no
jurisdiction; they should have but had not addressed that important issue.
Whilst some of the wording of the contract could have been clearer, it was
evident from the contract as a whole that it was not a contract of employment.
The reference to “continued” employment in the third last paragraph was otiose
and cannot have meant that the Claimant was in continuous employment throughout
the years he was at university since he was clearly not working for the Respondent
during the university terms and, further, there would have been no need for
setting out the Claimant’s obligation to offer his services at the end of his
degree course if in fact he was already in the Respondent’s employment. It was
far fetched to suggest that it meant that it was agreed that he was already in
the Respondent’s employment. As for the phrase “All other terms and conditions
of employment will apply”, it was, perhaps, ambiguous but certainly did not
provide a sufficient basis for any case that the Claimant was employed under a
contract of employment.
35.
Regarding paragraph 27 of the Tribunal’s Judgment, it showed first,
that they had fastened on to individual aspects and failed to stand back to
look at the whole of the relationship created by the contract. Also, where
they referred to the Respondent not disputing that the Claimant was an
employee, that cannot have been a reference to any concession. Rather, it was
clear that they were stating what was their interpretation of the student
contract. No such concession had been made.
36.
Regarding the basis on which the Claimant worked from June to September
2009, that was either on an extension of his apprenticeship contract or on a
casual basis but that did not matter. His status changed when he took up the
student contract.
37.
Mr Napier submitted that the facts were clear and we could
determine the issue which had not been addressed by the Tribunal. We should do
so by holding that the contract was not a contract of employment and that the Tribunal
had, accordingly, no jurisdiction.
38.
For the Claimant, Mr Macmillan referred to the Respondent being a
‘major global provider’ and to the Claimant having been sixteen years old when
he began his apprenticeship, twenty years old when it ended and
twenty three years old when the contract was terminated. He referred to
the Claimant as having been treated differently because he was of star
quality. The relevance of these observations to the issue we had to determine
was not apparent. He said that in July 2006, when his apprenticeship ended, he
had moved on to something else and even if it was casual employment, that was
employment.
39.
He referred to the terms of the sponsorship contract and submitted that
it was to be interpreted as showing that the Respondent “expected” the Claimant
to work for the Respondent during the summer breaks between academic sessions.
Although pressed, he put his submission no higher than that the Claimant was
“expected” to work for the Respondent each summer. He at no point suggested
that he was obliged to do so. He submitted that the Claimant was an employee
during the summer periods, given that he received pay, holiday and holiday
bonuses. Mr Macmillan’s approach was to submit that there were
two contractual relationships. One was the relationship between the Respondent
and the Claimant qua student. The other was that the Respondent was the
employer of the Claimant during the summer periods. That, he submitted, was
what the Tribunal had concluded at paragraph 27. Nor was that an unusual
situation. It was comparable to seasonal work. The Respondent had committed
to employing the Claimant each summer in the hope that he would return to work
for them for two years at the end of his degree course. Mr Macmillan
accepted that, during university terms, the Claimant was free to work
elsewhere, including for a competitor of the Respondent.
40.
Mr Macmillan referred to a letter dated 2 October 2009 from
the Respondent’s Mr Dreghorn, in response to various questions raised by
the Claimant. It referred to him having had ‘paid employment placements’
during the summer. The language was, he submitted, strongly suggestive of a
continuing contractual relationship.
41.
Mr Macmillan sought to distinguish Ellis on the basis that
it involved a different set of facts. He did not demur from Mr Napier proposed
means of disposal. In particular, he did not submit that there should be a
remit.
Discussion and Decision
42.
The Tribunal ought to have recognised that jurisdiction was an issue in
this case and, before turning to the s.98(2) and 98(4) issues, asked themselves
what was the objective of the contractual relationship between the parties? In
particular, given the stance adopted by the Respondent, they required to ask
whether it was for training because if it was then it was not a contract of
employment (Wiltshire Police Authority; Ellis).
43.
We are satisfied that the clear purpose and objective of the ‘University
Sponsorship’ contract was to provide training and education to the Claimant.
The arrangement that is set out is that he was to attend at university for
academic education during the two university semesters – for which he would
receive a monetary award of a total of £2,400 each year – and he could, but was
not obliged to, take up practical industrial training with the Respondent
during the long summer break. Whilst there was an expectation that he would
take up an industrial training placement with the Respondent each summer, it
was not a matter of him being obliged to do so. If he did, then he would be
paid and receive pro rata holiday leave during the summer period. Then,
at the end of his degree course, he was obliged to offer his services to the
Respondent for two years. The Respondent was under no obligation to offer him
a job. If they accepted his offer to work for them, he required to do so for a
minimum of two years if he was to avoid having to repay his sponsorship award.
That arrangement bore all the hallmarks of a training contract. The
overarching and primary purpose was, plainly, to advance the Claimant’s
training and education all with a view to him obtaining a further
qualification, namely a university degree. Whilst the phrase ‘continued
employment’ seems inappropriate and the reference to terms and conditions of
employment may be ambiguous, we do not see that they, in any way, detract from
what was the clear and plain objective of the contract. To focus on them, as
did the Tribunal in paragraph 27, is to fall into the trap for the unwary
adverted to by Elias P in the case of Ellis.
44.
On the facts found by the Tribunal, we do not consider that there is
sufficient to enable us to conclude that the Claimant was employed under a
contract of employment during the summer industrial training placements – the
question of the nature and extent of any mutuality of obligation during those
periods was not, for instance, addressed. Even if we are wrong about that,
however, at best for the Claimant, that would demonstrate that he worked under
short fixed term contracts during the summers of 2007, 2008 and 2009. That of
itself could not, in law, demonstrate that the sponsorship contract amounted to
continuous employment so as to show that the Tribunal had jurisdiction.
Disposal
45.
In these circumstances we will pronounce an order upholding the appeal,
finding that the Employment Tribunal had no jurisdiction to entertain the
Claimant’s complaint and dismissing his claim.
Minority View
46.
Mr Thomson disagreed with the majority. He would have refused the appeal
for the reasons given by the majority of the Employment Tribunal. In
particular, he did not accept that the term “continued employment” in the
Student Contract was “otiose” or “ambiguous”. That term, together with the
terms “Should you resign from the Company within this period” and “All other
terms and conditions of employment will apply” were, he considered, clear,
unambiguous and express terms constituting a continuing contract of employment
throughout and after his course of study. The facts in Ellis
were, he said, not comparable.
