United Kingdom Employment Appeal Tribunal

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Cite as: [2012] UKEAT 416_11_1411, [2012] UKEAT 0416_11_1411

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Appeal No. UKEAT/0416/11/RN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 13 January 2012

Judgment handed down on 14 November 2012

Before

HIS HONOUR JUDGE SEROTA QC

(SITTING ALONE)

DR M SUHAIL APPELLANT

HERTS URGENT CARE RESPONDENT

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant

MR JACQUES SYLVAIN

(Legal Representative)

Capital Solicitors LLP

Unit 2

41 Vallance Road

London

E1 5AB

For the Respondent

MR DANIEL HOBBS
(of Counsel)

Instructed by:

Pickworths Solicitors

55 Marlowes

Hemel Hempstead

Hertfordshire

HP1 1LE

SUMMARY

JURISDICTIONAL POINTS – Worker, employee or neither

The Employment Judge was entitled on the facts that she found to conclude that the Claimant was in business on his own account rather than an “employee” or “worker” within the meaning of sections 47B, 230(1) and 230(3) Employment Rights Act 1996.

HIS HONOUR JUDGE SEROTA QC

Introduction

1. This is an appeal by the Claimant from a decision of the Employment Tribunal at Watford, Employment Tribunal Judge Manley sitting alone, at a Pre‑Hearing Review (PHR) sent to the parties on 27 April 2011. The Employment Judge held that the Claimant was neither an employee nor a “worker” for the purposes of claims for PID detriment or breach of contract claims. The Claimant had made other claims for unfair dismissal, but he lacked sufficiency of service. He also made claims for discrimination on the grounds of race and for victimisation, which were withdrawn. The appeal was referred to a full hearing by HHJ David Richardson on 2 August 2011.

The facts

2. I take these largely from the decision of the Employment Tribunal. The Claimant is a registered GP, and he at the material time worked as an out‑of‑hours GP. The Respondent, as with other out‑of‑hours GP services, is a charitable company. It provides cover throughout the county of Hertfordshire, which has a population of approximately 1.2 million. The Respondent has approximately 250 GPs on its book and it regards them as self‑employed; they are treated by HMRC as self‑employed. The model used in Hertfordshire is similar to other GP out‑of‑hours services. These sprang up when the duty to provide such services was removed from GP surgeries in 2004, and the duty to provide such services was given to Primary Care Trusts. The Respondent provides its services on behalf of and by agreement with the local Primary Care Trust. Out‑of‑hours GPs work from bases throughout the county. I am told that all the bases are in hospitals save for one, which is in a GP surgery. These premises are used for other purposes during the day, but after hours they are dedicated to the after‑hours service.

3. The Employment Tribunal found that the services were provided by GPs who were otherwise employed either as self‑employed or as salaried employees in surgeries. The Claimant also works for out‑of‑hours GP services in east London and is registered with Rotherham PCT out-of-hours list. It is important to note that the out‑of‑hours GPs are not “employed” by the PCT but by the Respondent.

4. The Claimant applied to work for the Respondent in about July 2009 and completed an on-line application. He was shown the service level agreement (“SLA”), which formed the basis of his agreement with the Respondent.

5. The relevant terms of the contract are set out in full by the Employment Tribunal. The SLA contains an introduction that explains the services provided by the Respondent:

“Herts Urgent Care (HUC) contracts with General Practitioners (GPs) who must be on a PCT‑accredited list for sessional work and employs Nurse Practitioners, call handlers, drivers, receptionists, dispatchers and shift managers to deliver the services, as well as a management team.”

6. The agreement goes on:

“Payment

Payment for work is based on sessional shifts, for which there is no guarantee or obligation of work. Payment is made for hours worked, in monthly instalments in arrears. A record will be kept for all sessions worked and payments accordingly made subject to the receipt of invoices. Pay rates are published on the Herts Urgent Care Website as specified for individual shifts.

GPs are self‑employed and agree to work under this operational agreement for any work within Herts Urgent Care. Earnings are eligible for entry into the National Health Service Pension Scheme. Further details regarding payment of pension contributions can be found in Appendix 1.

Payment for any additional time beyond the planned end time of the shift will be made upon appropriate authorisation of the duty shift manager and completion of the relevant claim form. Where GPs arrive late for duty, payment will be deducted and fines incurred where appropriate. GPs will be notified when payment will be deducted. For details of late attendance and fines see appendix 2.

Taxation and National Insurance

The GP agrees that as a self‑employed professional in business on his/her own account, he/she is responsible for his/her own tax and national insurance.

Legal

Both parties hereby acknowledge that they have had an opportunity to take independent legal advice before signing this Agreement and acknowledge that if the General Practitioner chooses to take work their contractual relationship is governed by this agreement as a legally binding agreement.

Both parties acknowledge that this agreement is the whole agreement governing the contractual relationship between then with the exception of any subsequent written variations signed by both parties.

This agreement is governed by the laws of England and Wales and the English court shall have jurisdiction. Breach of any clause or clauses in this agreement will not void or annul it as a whole in any circumstances.

The General Practitioner will at all times represent himself/herself as an independent General Practitioner and will in no circumstances represent himself/herself or hold himself/herself out as a servant, agent or employee of HUC. The General Practitioner hereby acknowledges he/she a [sic] self‑employed professional in business on his/her own account and is not a part of HUC’s business in any way whatsoever. It is also acknowledged that no employer/employee relationship exists between the General Practitioner and Herts Urgent Care, and as such, the General Practitioner is not entitled to claim any redundancy pay or unfair dismissal under the Employment Rights Act 1996or any modification or re‑enactment thereof.

Accountability

GPs are accountable to the Clinical Director in respect of clinical work undertaken within the service, and responsible to the Head of Clinical Services. GPs will be expected to operate within the clinical governance framework for Herts Urgent Care.

GPs will be accountable to the shift manager for their attendance and contribution to the delivery and development of the service. During operational hours, GPs should inform the shift manager with as much warning as possible if, for reasons beyond their control, they cannot cover a shift they are responsible for and have not managed to ‘sell’ it or find an appropriate substitute.

Sessions will be worked at out‑of‑hours bases and in visiting cars or such other places that are notified in advance of the shift. In exceptional circumstances it may be necessary to relocate the site of service during shifts.”

7. There are then provisions about a code of conduct, the protection of confidential information and data protection, and then the obligations of all GPs working for Herts Urgent Care:

“1. All GPs working for Herts Urgent care must have current registration with the GMC and professional indemnity insurance. Certificates supporting this and any other documentation required by HUC must be submitted and GPs must ensure these are updated as appropriate and forwarded to maintain an accurate record of any GP working within HUC. HUC reserves the right to remove shifts and block access where this information has not been supplied. […]

11. GPs wishing to work for Herts Urgent Care will be required to apply for and complete an induction process. New GPs may be required to work a period under supervision depending on experience.

12. Herts Urgent Care reserves the right to decline any application made to work within the organisation. Once registered, there is no guarantee or obligation for work, although any GP not working for a period of three months will be required to undertake refresher training.

13. GPs will be expected to undertake 2 training sessions per year; one must include basic life support, the other relevant to topical areas such as palliative care, paediatrics etc. […]

19. The GP will be expected to bring to each session his or her own medical bag with the usual diagnostic equipment. Drugs and consumables will be provided by Herts Urgent Care. A spare equipment case will be held at each base for emergencies. The GP will be required to sign this out at the start of the shift and sign back on return. Where any equipment is found missing, HUC will seek financial recompense. Appendix 5 lists equipment supplied by HUC. […]

21. GPs are expected to work diligently to meet the workload demands of the shift, working flexibly and as part of a multi‑disciplinary team, guided by the duty shift manager.

22. Where any cause for concern regarding a GP is raised, an investigation will be carried out and will follow the process in appendix 6. Where any GP has received more than 2 complaints in a 12‑month period, a meeting will be arranged with the Clinical Director and/or Head of Clinical Services to discuss any concerns. Where more than 3 complaints are received per 100 shifts worked, a GP will have booking rights reviewed and may no longer be able to work for Herts Urgent Care.”

8. There are various appendices relating to payment, pension, shift attendances and handover, and the duties of GPs to register with the GMC. There are also website booking rules.

9. Appendix 5 deals with equipment and consumables for clinical use, and self‑employed clinicians are required to provide the tools of their trade when working shifts for the Respondent. There is a list of items to be provided by clinicians, including a stethoscope, a patella hammer, a torch, thermometer, neurological testing kit et cetera. Consumables were to be provided by the Respondent together with certain equipment.

10. Appendix 6 sets out the process for managing concerns.

11. At the end of the SLA there is an acknowledgement to be signed by the GP:

“I hereby sign to acknowledge that I have read and understood the Service Level Agreement for working with Herts Urgent Care and agree to work to the agreement.”

12. The Claimant signed his copy on or about 15 August 2009. He then underwent an induction process.

13. The Employment Tribunal described the booking system in this way (paragraph 12):

“Essentially the arrangement was that shifts became available on the first day of the month and those GP’s [sic] who were registered of whom there were around 250 could log on to the website and click so as to book shift(s). The respondent has 9 bases and also offered a home visit service which was what the claimant was most interested in carrying out. From time to time, if a GP had booked to do a home visit shift and there were insufficient home visits he or she would be asked to do other work, for instance triage either by phone or at the base.”

14. Some time in about July 2010 issues arose between the Claimant and the Respondent. The Claimant maintained that he complained about potential health and safety risks caused by drivers who would drive while using mobile phones or satellite navigation systems. I assume that the Claimant remonstrated with them in a robust way and the Respondent received complaints from drivers and staff, and in July 2010 the Claimant was informed he would not be allowed to work further shifts; in fact, the last shift he worked was on 27 June 2010.

15. On 29 September 2010 the Claimant presented his ET1 and alleged, inter alia, that he had been the subject of PID victimisation.

16. The Employment Tribunal set out the facts and the terms of the contract and directed itself as to the law. It directed itself by reference to section 230 of the Employment Rights Act 1996 (ERA), section 43K of the ERA and to a number of authorities, including Ready Mixed Concrete (South East) Ltd v Ministry of Pensions and National Insurance [1968] 1 ALL ER 433, Clark v Oxfordshire Health Authority [1998] IRLR 125, Cotswold Developments v Williams [2006] IRLR 181, Cornwall County Council v Prater [2006] IRLR 362 and James v Redcats Ltd UKEAT/0475/06.

17. The paragraph numbering in the Judgment appears to have gone awry, because there are two paragraphs numbered “18”; the first, and the second paragraph 17, read as follows:

“18. For the purposes of this claim there are important elements of the relationship between the respondent and the claimant which have to be considered. It is now well settled law that there must be mutuality of obligation. Various cases have discussed this including [Clark] and [Prater]. This means that the employer has an obligation to provide work and that the employee has an obligation to carry out that work when offered. This requirement is necessary both for the claimant to satisfy the Tribunal that he was an employee or a worker under Section 230 [sic]. I was also referred to [James]. What is suggested in those cases is that there is a minimum requirement that there must be some obligation to offer work and to carry it out for there to be a contract of service which is necessary both for the status of employee and worker. It is clear that such an obligation need only be in existence over the period of each separate (if they are separate) period of work.

17. Another important question is whether the individual has the right of substitution. That is, if he or she is unable to attend work, can they arrange for someone else to attend in their place. A right to substitution is inconsistent with an employment or the status of a worker under Section 230. However, in this case we are dealing with the extended definition of worker for the purposes of the public interest disclosure claim. That includes those who do not carry out work personally or otherwise and would seem therefore to include those people who have the right to substitution. It does not include, however, those who are in business on their own account.”

18. At paragraph 19 the Employment Judge considered that it was quite clear that the Claimant understood the arrangement he had agreed to and had entered into that agreement, or a very similar one, with other organisations. He was used to arranging his own tax and National Insurance matters, ensuring that he had his own insurance cover and travelling with his own equipment to the shifts. She noted that the service level agreement was unequivocal and made clear that the GPs were self‑employed and needed to make their own arrangement. She drew attention to the fact there was no guarantee or obligation either to provide work on the part of the Respondent or to carry out work on the part of the Claimant. She also noted the right to substitution. She noted that there were obligations placed on those GPs wishing to take shifts, but she described these as obligations (paragraph 19):

“[…] one would expect to see in an important service such as this. There is nothing to suggest, as the Claimant’s representative does that this is a sham arrangement. It is the arrangement that the Claimant agreed to and worked to when he carried out shifts for the Respondent.”

19. At paragraph 20 the Employment Judge considered the practical arrangements actually in place. The SLA contained an open offer to approximately 250 GPs for them to book shifts. They could book those shifts if they wished, but they did not need to. There were more GPs registered than were needed to cover the service on a daily basis. She continued:

“It seems to me that there is indeed a lack of mutuality of obligation. The claimant did not have to book the shifts. Indeed, if he did not attend on any occasion when he had booked there was a range of fines and penalties. Clearly General Practitioners are professional people and, as well as any commitments they might have to organisations such as the respondent when they are carrying out work, they also are registered with the GMC and subject to its regulatory procedures. The claimant carried out work elsewhere and there was no expectation by the respondent that he would book any shifts with them. It was an open offer to him as well as others and there was no obligation upon them to offer to any particular GP. Even if there was some mutuality of obligation during each shift, it would be in existence only at that time and would have been extinguished at the end of his last shift on 27 June and his claims were presented more than three months after that date.”

20. At paragraph 21 the Employment Judge considered the effect of there being a right to substitution:

“I also accept that there is a right to substitution which is inconsistent with that of status of an employee. It is entirely reasonable that that be limited to a suitably qualified individual particularly in the circumstances of a public health service. It would be ludicrous to suggest that the claimant could send any person that he wished whilst the limitation was with those registered with Herts Urgent Care, given the large pool of GPs registered there, it seems to me this does not prevent it amounting to a right to substitution. I do not accept that there was sufficient control over the way in which the claimant worked to render this a contract of service. Whilst the administrative arrangements, the booking system, payment system and so on were obviously within the control of the respondent for good management reasons, it was not in control of the actual work carried out by the claimant who was a qualified medical practitioner. For these reasons, it seems to me that the claimant cannot show me that he has a contract of service and he is not and was not whilst working for the respondent an employee.”

21. The Employment Judge then went on to consider whether the Claimant was a worker within the extended definition in section 230 of the ERA. Under section 230(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.”

Notice of Appeal and submissions in support

22. During the course of his submissions the Claimant sought to introduce a number of factual matters not in the decision of the Employment Tribunal or in my bundle, and as these were controversial I was unable to accept them.

23. He maintained that the decision was perverse and wrong in finding he was not entitled to raise his PID claims. The Claimant’s case was that there was an overarching contract and employment during each separate shift. There was sufficient mutuality of obligation; therefore, for there to be a contract of service. He described the SLA as a deceitful document; a thread of deceit ran through the agreement. He drew attention to the fact that payment was calculated by the Respondent, and he did not provide invoices; a deduction was made in respect of his NHS pension. The fact that there was a shift manager suggested a degree of control, and he stressed the importance of having had to apply to be trained, albeit the training was “minimal” and lasted nearly a couple of hours. He described the contract as being a fait accompli. He did not even arrange his own transport, and had to take the transport that was provided; this is not a matter that was referred to in the decision of the Employment Tribunal.

24. The Employment Tribunal had failed to have sufficient regard to the reality of the situation and placed too much reliance on the words of the SLA. He claimed that HMRC believed he should be treated as an employee; but there is no evidence of this, even if it were the case, it would not be relevant, and one asks forensically if HMRC considered he was an employee, why should it accept his status as self‑employed and entitlement to receive payment in gross? Dr Suhail stressed to me he did not regard himself as being in business. The Claimant asserted that as a Health Service practitioner he should be allowed to “whistleblow” if something serious were encountered. To prevent this would be taking away his basic human right and a commonsense approach to the question; why should a self‑employed doctor be gagged and prevented to disclose events that risk the health and safety of others? I note at this point in time that the Claimant was not gagged at all and was able to make disclosures. The Claimant submitted that the Respondent was obliged to offer him work if he had booked; this, in my opinion, begs the question as to whether he was obliged to book. Further, he was subject to control during the shifts and, following the decision in Prater, he was employed during those shifts. He was guaranteed the right to book each month. The Respondent had a duty to allocate the work fairly; the substitution clause was, he repeated, deceitful and a sham, and the absence of control and direction was not critical in the cases of professionals who would not be expected to be directed. In this respect, he drew attention to the decision of Morren v Swinton and Pendlebury Borough Council [1965] 1 WLR 576.

The Respondent’s submissions

25. It was submitted that, in essence, GPs were not required to work shifts they did not wish to, and the Respondent was under no obligation to offer work to any particular GP. The Claimant worked elsewhere and had considerable freedom to decide where he worked; this pointed to him not being a worker. So far as control was concerned, the running of general administrative systems was not a matter of control. The Respondent relied heavily on the finding of the Employment Tribunal that the Claimant was carrying on a business or profession. The Employment Judge at paragraph 20 had found that practical arrangements actually in place supported the SLA, and at paragraph 22 the Employment Judge found he could not meet the test of there being mutuality of obligation as there was no contract of service and he was in business on his own account. He had set up the systems that he needed to provide his services to various health providers, and he did this without being employed by any of them.

26. At the date of the hearing before the Employment Tribunal the decision in Autoclenz v Belcher and Ors [2011] UKSC 41 had yet to be decided. The case, it was submitted, held that the question of whether a contract that provided that the “worker” or “employee” should be self-employed should be approached on the basis that the practical arrangements might show that the parties did not intend such a provision to represent their true agreement. Here, the opposite was true. Reference was again made to paragraph 19 of the decision and the Claimant’s own arrangements. He worked for several similar organisations on similar terms, he arranged his own tax and National Insurance, and he arranged his own insurance cover.

27. In so far as the right or obligation in appropriate circumstances to appoint a substitute was concerned, it was apparently accepted before the Employment Tribunal that even if the Claimant did not avail himself of this provision, other GPs did, and substitution did take place, although the extent of which this happened may have been controversial. The Respondent was probably better placed to know the extent of substitution. The Claimant told me he did not substitute and that substitution was very rare, whereas the Respondent’s case was that whereas the Claimant did not avail himself of the right to substitute, a lot of other GPs did. Reliance was placed upon the fact that the Claimant also worked as a locum in east London and in Rotherham. The Employment Tribunal found no sufficient indicators of the Claimant having had the status of worker or employee during his individual assignments.

28. As was said in Autoclenz, the Employment Judge was in the best position to know what was window‑dressing and what was genuine; in this case, she was entitled to find that the SLA represented the true intentions of the parties.

The law

29. “Employees” and “workers” are entitled to complain to an Employment Tribunal if they have been subjected to a detriment by reason of having made a protected disclosure. For the purposes of this appeal I do not need to consider the ambit of the law in relation to protected and qualifying disclosures nor do I need to consider the factual basis or merits of the Claimant’s assertions. Section 47B provides that:

“A worker has the right not to be subjected to any detriment by any act […] by his employer done on the ground that the worker has made a protected disclosure.”

30. The terms “employee” and “worker” are defined in subsections 230(1) and (3) of the ERA. It will be noted that the phrase encompasses those working under a contract of employment:

“(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” (except in the phrases “shop worker” and “betting 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.”

It is not necessary to refer to the well known cases I have referred to at paragraph 16 and referred to by the Employment Tribunal.

31. In Clyde & Co LLP v van Winkelhof UKEAT/0568/11 [1], HHJ Peter Clark explains what needs to be shown for someone to be what he described as a “limb (b)” worker:

“A limb (b) worker, namely (1) there must be a contract, (2) under that contract the worker must undertake to do or perform work or services personally, (3) the work or services are to be done or performed for another party to the contract, and (4) the other party must not be a client or customer of a profession or business undertaking carried on by the putative worker.”

32. In Cotswold Developments v Williams [2006] IRLR 181 Langstaff J at paragraph 53 gave helpful guidance as to the circumstances in which someone might be regarded as a “worker”.

“53. It is clear that the statute recognises that there will be workers who are not employees, but who do undertake to do work personally for another in circumstances in which that 'other' is neither a client nor customer of theirs – and thus that the definition of who is a 'client' or 'customer' cannot depend upon the fact that the contract is being made with someone who provides personal services but not as an employee. The distinction is not that between employee and independent contractor. The paradigm case falling within the proviso to 2(b) is that of a person working within one of the established professions: solicitor and client, barrister and client, accountant, architect etc. The paradigm case of a customer and someone working in a business undertaking of his own will perhaps be that of the customer of a shop and the shop owner, or of the customer of a tradesman such as a domestic plumber, cabinet maker or portrait painter who commercially markets services as such. Thus viewed, it seems plain that a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations, will in most cases demonstrate on which side of the line a given person falls.

54. The phrase “mutuality of obligation” is most often used when the question is whether there is such a contract as will qualify a party to it for employment rights or holiday pay. In this situation, a succession of contracts of short duration under each of which the person providing the services is either an “employee” or a “worker” will not give rise to any rights unless (i) the individual instances of work are treated as part of the operation of an overriding contract; or (ii) s.212 of the Employment Rights Act applies to preserve continuity. Such an overriding contract cannot exist separately from individual assignments as a contract of employment if there is no minimum obligation under it to work at least some of those assignments. However, an overriding contract is not deprived of mutuality of obligation if the employee has the right to refuse to work or where the employer may exercise a choice to withhold work. The focus must be on whether there is some obligation upon an individual to work and some obligation on the other party to provide or pay for it.”

The law may have moved on somewhat, and greater emphasis is now placed on whether the worker is in a relationship of subordination with the person to whom he supplies services; see Hashwani v Jivraj [2012] 1 All ER 629, a case concerning discrimination on the grounds of religion. The Supreme Court drew a clear distinction between those who were in substance employed and those who were “independent providers of services who are not in a relationship of subordination with the person who receives the services”.

33. The Supreme Court decision in Autoclenz was handed down after the hearing in this case. It is helpful to have regard to the Judgment of Lord Clarke at paragraph 18:

“18. As Smith LJ explained in the Court of Appeal at para 11, the classic description of a contract of employment (or a contract of service as it used to be called) is found in the judgment of MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, 515C:

‘A contract of service exists if these 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. … 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.’

19. Three further propositions are not I think contentious:

i) As Stephenson LJ put it in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, 623, "There must … be an irreducible minimum of obligation on each side to create a contract of service".

ii) If a genuine right of substitution exists, this negates an obligation to perform work personally and is inconsistent with employee status: Express & Echo Publications Ltd v Tanton ("Tanton")[1999] ICR 693, per Peter Gibson LJ at p 699G.

iii) If a contractual right, as for example a right to substitute, exists, it does not matter that it is not used. It does not follow from the fact that a term is not enforced that such a term is not part of the agreement: see eg Tanton at p 697G.

20. The essential question in each case is what were the terms of the agreement. The position under the ordinary law of contract is clear. It was correctly summarised thus by Aikens LJ in the Court of Appeal:

‘87. … Express contracts (as opposed to those implied from conduct) can be oral, in writing or a mixture of both. Where the terms are put in writing by the parties and it is not alleged that there are any additional oral terms to it, then those written terms will, at least prima facie represent the whole of the parties' agreement. Ordinarily the parties are bound by those terms where a party has signed the contract: see eg L'Estrange v F Graucob Ltd [1934] 2 KB 394…….. If a party has not signed a contract, then there are the usual issues as to whether he was made sufficiently aware of the clauses for a court to be able to conclude that he agreed to the terms in them. That is not an issue in this case.’”

34. Lord Clarke cited the judgement of Aikens LJ to the effect that in commercial contracts “once it is established that the written terms of the contract were agreed, it is not possible to imply terms into a contract that are inconsistent with its express terms. The only way it can be argued that a contract contains a term which is inconsistent with one of its express terms is to allege that the written terms do not accurately reflect the true agreement of the parties.” Where it is asserted that a written agreement fails to reflect the agreement of the parties a court may grant rectification of the contract.

35. Lord Clarke then cites with approval the judgment of Aikens LJ .

“Aikens LJ put it correctly in the remainder of para 89 as follows:

‘But in cases of contracts concerning work and services, where one party alleges that the written contract terms do not accurately reflect the true agreement of the parties, rectification principles are not in point, because it is not generally alleged that there was a mistake in setting out the contract terms as they were. There may be several reasons why the written terms do not accurately reflect what the parties actually agreed. But in each case the question the court has to answer is: what contractual terms did the parties actually agree?’”

36. Lord Clarke clearly approved the view that the Employment Tribunal should adopt a test that focuses on the reality of the situation where written documentation may not reflect the reality of the relationship. He also approved the judgement of Elias J in Consistent Group Ltd v Kalwak [2007] IRLR 560:

“’57. The concern to which tribunals must be alive is that armies of lawyers will simply place substitution clauses, or clauses denying any obligation to accept or provide work in employment contracts, as a matter of form, even where such terms do not begin to reflect the real relationship. Peter Gibson LJ was alive to the problem. He said this (p 697G)

'Of course, it is important that the industrial tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham it will want to say so.'

58. In other words, if the reality of the situation is that no one seriously expects that a worker will seek to provide a substitute, or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship. But if these clauses genuinely reflect what might realistically be expected to occur, the fact that the rights conferred have not in fact been exercised will not render the right meaningless.

59. … Tribunals should take a sensible and robust view of these matters in order to prevent form undermining substance…’”

37. Lord Clarke stressed that in coming to a conclusion as to what the parties actually agreed, in cases where it was said that a written agreement did not reflect the true agreement the focus of the enquiry must be to discover the actual legal obligations of the parties. He approved the formulation of Smith LJ in Firthglow Ltd (t/a Protectacoat) v Szilagyi (“Szilagyi”) [2009] EWCA Civ 98, [2009] ICR 835:

“……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 the 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 worker and the fact that that right was never exercised in practice does not mean that it was not a genuine right.”

38. The critical difference between this type of case and the ordinary commercial dispute was as identified by Aikens LJ:

“34. The critical difference between this type of case and the ordinary commercial dispute is identified by Aikens LJ in para 92 as follows:

‘92. I respectfully agree with the view, emphasised by both Smith and Sedley LJJ, that the circumstances in which contracts relating to work or services are concluded are often very different from those in which commercial contracts between parties of equal bargaining power are agreed. I accept that, frequently, organisations which are offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept. In practice, in this area of the law, it may be more common for a court or tribunal to have to investigate allegations that the written contract does not represent the actual terms agreed and the court or tribunal must be realistic and worldly wise when it does so. ...’

35. So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description.”

39. An example of a case where in a medical context the right to appoint a substitute was regarded as reflecting the intention of the parties is Community Dental Centres v Sultan-Darman [2010] IRLR 1024. In that case Dr Sultan‑Darman had agreed to provide Community Dental Centres, which had a contract to provide dental services to the local Primary Care Trust, under an agreement described as a “licence agreement and contract for service”, which specifically stated his status was that of a self‑employed independent contractor dentist with full clinical freedom and accepting full clinical responsibility. The contract contained a provision requiring Dr Sultan‑Darman if he were absent to provide a locum tenens acceptable to the company. In those circumstances the EAT reversed a decision of the Employment Tribunal that he was a worker. Silber J observed:

“The unfettered right given to the Claimant to appoint a substitute without any sanction at all means that he cannot be a ‘worker’.”

40. In Hashwani the Supreme Court had to consider the meaning of the term “employee” under the Employment Equality (Religion or Belief) Regulations 2003, which was similar to the definition in the Equal Pay Act 1970:

“’Employment’ means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly […].”

41. The Supreme Court accepted a submission made by Mr Rhodri Davies QC that the course of justice of the European Community:

“[…] draws a clear distinction between those who are, in substance, employed and those who are ‘independent providers of services’ who are not in a relationship of subordination with the person who receives the services.”

42. The Claimant relied heavily on the Judgment of Parker CJ in Morren v Swinton and Pendlebury Council [1965] 2 ALL ER 349:

“The cases have over and over again stressed the importance of the factor of superintendence and control, but that it is not the determining test is quite clear. In Cassidy v Minister of Health, Somervell LJ referred to this matter, and instanced, as did Denning LJ in the later case of Stevenson, Jordan & Harrison v MacDonald & Evans, that clearly superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience. Instances of that have been given in the form of the master of a ship, an engine driver, a professional architect or, as in this case, a consulting engineer. In such cases there can be no question of the employer telling him how to do work; therefore, the absence of control and direction in that sense can be of little, if any, use as a test.”

Conclusion

43. It is clear on the findings of the Employment Tribunal that there could be no overarching contract of employment, nor could there be a joining up of individual sessions under section 212(3)(b) of the ERA: see the passage cited from the Judgment of Langstaff J in Cotswold. It is equally clear on the factual findings of the Employment Tribunal that during those individual sessions the Claimant was neither an employee nor a worker. The Employment Tribunal had material before it to justify its findings that there was no mutuality of obligation as between the Claimant and the Respondent. The substitution clause was clearly intended to have effect. There was insufficient control of the Claimant’s work. Such findings are nowhere near perverse.

44. Even were I to be wrong about there being a mutuality of obligation because the Respondent was obliged to offer work to the Claimant and the Claimant was obliged to accept that work, the finding by the Employment Tribunal that the Respondent was in business on his own account is fatal to the suggestion that he was either an employee or a worker. This finding seems to me to be crucial and conclusive. The Claimant was clearly marketing his services to whichever provider of medical services might wish to provide him with work. For his convenience this was limited to the Respondent, the service in east London and Rotherham. The Claimant was able to take work as a locum at any time he chose.

45. Although the Supreme Court in Autoclenz decided that it was not necessary to go so far as to show that written conditions were a “sham” and it was sufficient to identify the true agreement between the parties, here, the Employment Tribunal clearly found that the written agreement, the SLA, did represent the parties’ true intentions. The substitution clause was entirely reasonable as the Respondent would wish to ensure proper medical cover was available, and if the Claimant was unable to attend, it was his responsibility to find a suitably qualified substitute. The substitution clause was real and effective, and even if the Claimant did not avail himself of it, other GPs did. In Morren the Divisional Court did not say that supervision was irrelevant. The fact that the Respondent was employing doctors who would not and were not expected to be supervised and had complete clinical independence does, however, point on the facts of this case, although not decisively, to the conclusion of the Employment Tribunal that the Claimant was one of a number of GPs who worked for the Respondent and others in business on their own account. It is certainly not inconsistent with his being in business on his own account.

46. In many cases where there is an issue as to whether someone was a worker or an employee on the one hand or in business on his own account on the other, there are factors that point one way and others that point the other way. The Claimant in this case relied upon the facts as showing that he was an employee or a worker, that there was a deduction for pension made by the Respondent, the employment of a shift manager, the fact that he had to apply to be placed on the Respondent’s register, and that he received training (albeit “minimal” training lasting a couple of hours). The contract was a fait accompli, and he did not even arrange his own transport and had to take the transport provided. He did not regard himself as being in business.

47. These were all matters weighed up by the Employment Tribunal in coming to its conclusion that he was neither an employee nor a worker and that the SLA meant what it said and was intended to by the parties. The Claimant was in business on his own account.

48. In those circumstances, it seems to me that the decision of the Employment Judge cannot be faulted on the facts as found by her. In those circumstances, the appeal stands dismissed.

[1] Since this judgment was prepared this decision has been overruled by the Court of Appeal, but this aspect of the judgment was not affected.