EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
At the Tribunal
Before
THE SECRETARY OF STATE FOR BUSINESS INNOVATION & SKILLS APPELLANT
(2) MR C M BALDWIN
(3) MR A BALLANTYNE
(4) UNITY PERSONNEL LIMITED
(IN VOLUNTARY LIQUIDATION) (DEBARRED) RESPONDENTS
Transcript of Proceedings
JUDGMENT
APPEARANCES
For the Appellant |
MS HELEN WOLSTENHOLME (of Counsel) Instructed by: The Treasury Solicitor (Employment 4C) One Kemble Street London WC2B 4TS |
For the First & Second Respondents
For the Third Respondent
For the Fourth Respondent |
MR ABOU KAMARA (Representative) Free Representation Unit 6th Floor 289-293 High Holborn London WC1V 7HZ
No appearance or representation by or on behalf of the Third Respondent
Debarred |
SUMMARY
JURISDICTIONAL POINTS
Worker, employee or neither
Agency relationships
The Claimants were not employees of Respondent 4, on its insolvency the Secretary of State had no liability to them under s.182-188 of the Employment Rights Act 1996.
HIS HONOUR JUDGE SEROTA QC
The facts
5. Paragraph 2 contains an entire-contract clause which reads:
“2. The Contract
2.1 These Terms constitute a contract for services between the Employment Business and the Temporary Worker and they govern all Assignments undertaken by the Temporary Worker. However, no contract shall exist between the Employment Business and the Temporary Worker between Assignments.
2.2 For the avoidance of doubt, these Terms shall not give rise to a contract of employment between the Employment Business and the Temporary Worker. The Temporary Worker is engaged as a self-employed worker, although the Employment Business is required to make statutory deductions from the Temporary Worker’s remuneration in accordance with clause 4.1.
2.3 No variation or alteration to these Terms shall be valid unless the details of such variation are agreed between the Employment Business and the Temporary Worker and set out in writing and a copy of the varied terms is given to the Temporary Worker stating the date on or after which such varied terms shall apply.”
6. Paragraphs 3.1 and 3.2 read:
“3. Assignments
3.1 The Employment Business will endeavour to obtain suitable Assignments for the Temporary Worker to work as a Foundry Dresser. The Temporary Worker shall not be obliged to accept an Assignment offered by the Employment Business.
3.2 The Temporary Worker acknowledges that the nature of temporary work means that there may be periods when no suitable work is available and agrees: that the suitability of the work to be offered shall be determined solely by the Employment Business; that the Employment Business shall incur no liability to the Temporary Worker should it fail to offer opportunities to work in the above category or in any other category; and that no contract shall exist between the Temporary Worker and the Employment Business during periods when the Temporary Worker is not working on an Assignment.”
7. Paragraph 4 deals with remuneration:
“4. Remuneration
4.1 The Employment Business shall pay to the Temporary Worker remuneration calculated at a minimum hourly rate of £5.73 per hour being the minimum rate of remuneration that the Employment Business reasonably expects to achieve, for all hours worked. The actual rate will be notified on a per Assignment basis, for each hour worked during an Assignment (to the nearest quarter hour) to be paid weekly in arrears, subject to deductions in respect of PAYE pursuant to Sections 44-47 of the Income Tax (Earnings and Pensions) Act 2003 and Class 1 National Insurance Contributions and any other deductions which the Employment Business may be required by law to make.
4.2 Subject to any statutory entitlement under the relevant legislation, the Temporary Worker is not entitled to receive payment from the Employment Business or Clients for time not spent on Assignment, whether in respect of holidays, illness or absence for any other reason unless otherwise agreed.”
8. Paragraph 5.1 is headed “Statutory leave”. The agreement sets out from paragraph 5.2,
“5.2 The annual leave to be granted will be the statutory minimum provided for under the Working Time Regulations 1998.
5.3 All entitlement to leave must be taken during the course of the leave year in which it accrues and none may be carried forward to the next year.
5.4 Where a Temporary Worker wishes to take paid leave during the course of an assignment s/he should notify the Employment Business of the dates of his/her intended absence giving notice of at least twice the length of the period of leave that s/he wishes to take. In certain circumstances the Employment Business may give counter-notice to the Temporary Worker to postpone or reduce the amount of leave that the Temporary Worker wishes to take and in such circumstances the Employment Business will inform the Temporary Worker in writing giving at least the same length of notice as the period of leave that it wishes to postpone or reduce it by.”
9. Paragraph 8 reads as follows:
“8 Conduct of Assignments
8.1 The Temporary Worker is not obliged to accept any Assignment offered by the Employment Business but if s/he does so, during every Assignment and afterwards where appropriate, s/he will: -
a) Co-operate with the Client’s reasonable instructions and accept the direction, supervision and control of any responsible person in the Client’s organisation;
b) Observe any relevant rules and regulations of the Client’s establishment (including normal hours of work) to which attention has been drawn or which the Temporary Worker might reasonably be expected to ascertain;
c) Take all reasonable steps to safeguard his or her own health and safety and that of any other person who may be present or be affected by his or her actions on the Assignment and comply with the Health and Safety policies and procedures of the Client;
d) Not engage is any conduct detrimental to the interests of the Client;
e) Not at any time divulge to any person, nor use for his or her own or any other person’s benefit, any confidential information relating to the Client’s or the Employment Business’ employees, business affairs, transactions or finances.
8.2 If the Temporary Worker is unable for any reason to attend work during the course of an Assignment s/he should inform the Client and/or the Employment Business within one hour of the commencement of the Assignment or shift.
8.3 If, either before or during the course of an Assignment, the Temporary Worker becomes aware of any reason why he may not be suitable for an Assignment, he shall notify the Employment Business without delay.”
10. Paragraphs 9.1 and 9.2 read as follows:
“9 Termination
9.1 The Employment Business or the Client may terminate the Temporary Worker’s Assignment at any time without prior notice or liability.
9.2 The Temporary Worker may terminate an Assignment at any time without prior notice or liability.”
The decision of the Employment Tribunal
“I am satisfied that during the assignment at the foundry there was a mutuality of obligations between the claimants and the insolvent company. In particular the insolvent company was obliged to provide work to the claimants during the course of the assignment and the claimants were obliged to perform such work.
5.3 Although I accept that the insolvent company did not exercise day-to-day control of the claimants it nevertheless exercised some control with regard to such matters as the taking of holidays by the claimants.”
15. The Employment Judge had stated at paragraph 3 that he had been referred to a number of authorities including Ready-Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2QB 497, Montgomery v Johnson Underwood Limited [2001] ICR 819, and the decision of the Court of Appeal in Autoclenz Limited v Belcher [2010] IRLR 70.
The Notice of Appeal
19. Firstly, it is submitted that the Claimants were not employees with Unity within the meaning of s.230 of the Employment Rights Act and the Employment Judge was wrong so to find. The Employment Judge, it is then said, failed to apply the correct test determining the employee status of the Claimants in the context of their being agency workers. My attention was drawn to the cases of Montgomery v Johnson Underwood, Brook Street Bureau (UK) Ltd v Dacas [2004] ICR 1437, Bunce v Postworth Ltd t/a Skyblue [2005] IRLR 557 and Secretary of State for Trade and Industry v Alade & others UKEAT/0591/06. I was also referred to the decision of Elias J in James v Greenwich LBC [2007] 1 ICR 577.
20. Thirdly, it was submitted that the Employment Judge had failed to place sufficient weight on the terms of the written agreement; fourthly, that it was perverse for him to find that the terms did not reflect the intentions and expectations of the parties. This particular finding was not supported by any evidence at all. There was no finding that the agreement was a sham, and in this regard I was referred to the case of Tanton v Express and Echo [1999] ICR 693 CA and Secretary of State for Trade and Industry v Alade.
24. The Claimants’ submissions are essentially to rely upon the correctness of the decision of the Employment Judge. Stress was laid upon paragraph 5.4 of the agreement, regulating holiday entitlement. It was also submitted the Employment Judge was correct to find that where the Claimants were sent on assignment they were bound to carry it out. There was potentially a contract of employment between Unity and the Claimants when on assignment and thus there was sufficient mutuality and control. There was no reason, it was submitted, why an agency could not be the employer of an agency worker during the term of an assignment, and my attention was drawn to the case of McMeechan v Secretary of State for Employment [1997] ICR 549. The authorities do not say it is impossible to spell out a contract of employment with an employment agency and a worker, although it was difficult. But this was overcome in the present case by the findings of control and mutuality.
“(1) In this Act ‘employee’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
[…]
(3) In this Act ‘worker’ […] means an individual who has entered into or works under (or, where the employment has ceased, worked under) —
(a) a contract of employment, or
(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;
and any reference to a worker’s contract shall be construed accordingly.
(4) In this Act ‘employer’, in relation to an employee or a worker, means the person by whom the employee or worker is (or, whether the employment has ceased, was) employed.”
The case law
“It is not necessary to rehearse all the agency cases which have been the subject of consideration by the courts. It is plain that, whilst of course every case turns on its own particular facts, it will be an exceptional case where a contract of employment can be spelt out in the relationship between the agency and the worker.”
“A contract of service exists if three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.
[…]
As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job either by one’s own hands or by another’s is inconsistent with a contract of service, though a limited or occasional power of delegation may not be.”
30. In Montgomery v Johnson Underwood Buckley J in the Court of Appeal stated that the above passage was the best guide to the irreducible minimum required for a contract of employment, mutuality of obligation and control exercised by the employer. I could cite similar passages from, for example, Carmichael v National Power [1999] ICR 1226 and Brook Street v Dacas.
“Is it enough that the ability of the client to control the day-to-day work originates in an agreement with Skyblue? It is to be observed that the contractual term principally relied on by the appellant, clause 7(a), requiring him to accept the directions, supervision and instruction of the client, seems to be a standard term in these contracts used these days by employment agencies. A term in almost identical words was a feature of the agreement in Dacas between Mrs Dacas and the agency, as it was in Stephenson v. Delphi Diesel Systems Limited [2003 I.C.R. 417.
[…]
29. I cannot, however, accept that the mere fact that the client’s day-to-day control originates, so far as the appellant’s obligation is concerned, in a term of the contract between Skyblue and the appellant is enough to satisfy the requirement for control by Skyblue. The law has always been concerned with who in reality has the power to control what the worker does and how he does it. In the present case, during the period when the appellant was working on an assignment, it was the client, the end-user, who had the power to direct and control what he did and how he did it. That is not in dispute. Skyblue could not exercise such control over the appellant. Nothing before us in the evidence indicates that Skyblue retained any such power – unlike the situation in McMeechan: see page 553, paragraph (5)(g). Once that state of affairs arose, as it did on any assignment, Skyblue lacked the necessary control over the appellant for him to be seen as their ‘servant’, in the old ‘master and servant’ terminology, during the time he was on that assignment. That the client’s power to exercise day-to-day control over him had its origins in the agreement dated 10 November 2001 with Skyblue cannot make good that deficiency.
[…]
30. That is really fatal to his case. It means that there was and is no prospect of establishing that there was a contract of service with Skyblue, even during the periods of time when the appellant was working on an assignment.”
“In the absence of any finding that the contract was a sham (see Tanton v Express and Echo [1999] ICR 693 CA) it is not permissible to go behind the express term of the contract, particularly in circumstances where there is a whole-contract clause […] Further, the deductions of tax and National Insurance by the agency do not necessarily point to a contract of service.”
34. Smith LJ had this to say at paragraph 53:
“In my judgment the true position, consistent with Tanton, Kalwak and Szilagyi, is that where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were. Evidence of how the parties conducted themselves in practice may be so persuasive that the tribunal can draw an inference that that practice reflects the true obligations of the parties. But there mere fact that the parties conducted themselves in a particular way does not of itself mean that that conduct accurately reflects the legal rights and obligations. For example, there could well be a legal right to provide a substitute work and the fact that that right was never exercised in practice does not mean that it was not a genuine right.”
35. Aikens LJ said at paragraph 91:
“I respectfully agree with the summary of the legal position set out by Smith LJ in Protectacoat v Szilagyi, at [50], as explained in her judgment in this case at [47] to [53]. Thus, in cases where there is a dispute as to the genuineness of the written terms of a contract relating to work or services, the focus of the enquiry must be to discover the actual legal obligations of the parties. Speaking for myself, I would respectfully suggest that it is not helpful to say that a court of tribunal has to consider whether the words of the written contract represent the ‘true intention’ or the ‘true expectation’ of the parties. There is a danger that a court or tribunal might concentrate too much on what were the private intentions or expectations of the parties. What the parties privately intended or expected (either before or after the contract was agreed) may be evidence of what, objectively discerned, was actually agreed between the parties: see Lord Hoffman’s speech in the Chartbrook case at [64] to [65]. But ultimately what matters is only what was agreed, either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded. I accept, of course, that the agreement may not be express; it may be implied. But the court or tribunal’s task is still to ascertain what was agreed.”
Conclusions