United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS ANNETTE GUMBS (of Counsel) Instructed by: Birchall Blackburn 4 Hough Lane Leyland Lancashire PR25 2SD
For the Respondent	MR ORLANDO HOLLOWAY (of Counsel) Instructed by: Squire Sanders Hammonds LLP Solicitors 2 Park Lane Leeds West Yorkshire LS3 1ES


 


SUMMARY

JURISDICTIONAL POINTS – Worker, employee or neither

The Claimant worked for the Respondent as a market researcher under a succession of individual assignments. The Employment Judge erred in law in holding that there was "no mutuality of obligation during the course of any individual assignment". He based his conclusion principally upon a finding that the assignment could be terminated on either side without its being completed. Held: the Employment Judge erred in law. There was a contract in respect of each assignment; there was "mutuality of obligation", sufficient to create a contract of employment, even if the contract was terminable at will. McMeechan v Secretary of State for Employment [1997] ICR 549 (CA) and Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471 followed. Little v BMI Chiltern Hospital [2009] UKEAT/0021/09 not followed.


 


HIS HONOUR JUDGE DAVID RICHARDSON

1. This is an appeal by Mr Clifford Drake ("the Claimant") against a judgment of the Employment Tribunal (Employment Judge Hewitt sitting alone) dated 1 August 2011. By his judgment the Employment Judge held that the Claimant was not an employee of IPSOS MORI UK Limited ("the Respondent"). The Claimant had brought a claim of unfair dismissal. Only an employee can bring such a claim; accordingly his claim was dismissed.
2. The Claimant worked on an "assignment by assignment" basis for the Respondent as an interviewer from 2 February 2005 until 5 November 2010 when the Respondent removed him from its panel of interviewers. He argues that each individual assignment was a contract of employment. If so, it is common ground that he has sufficient continuity of service to bring a claim for unfair dismissal. The Respondent's case was that the Claimant was a worker for the purposes of employment legislation, but not an employee.
3. The Employment Judge held that the Claimant was not an employee because "there was no mutuality of obligation either from one assignment to another or during the course of any individual assignment". The Claimant argues that there was mutuality of obligation during each individual assignment.

The material before the Tribunal

4. It is convenient first to summarise relevant material before the Tribunal, drawing upon the Employment Judge's judgment and documents to which he referred. In this summary I will concentrate on material relating to the issue on which the Employment Judge decided the case – namely, lack of mutuality of obligation.
5. The Respondent carries on business in market research. It draws upon a panel of interviewers to undertake the work. An interviewer will visit members of the public in their home; identify someone who fits Respondent's criteria; persuade that person to be interviewed; and carry out the interview.
6. At the outset the Claimant attended a 2-day basic training session. It was explained to him that he would be engaged on an assignment basis only, that there was no obligation on him to accept work and no obligation on the Respondent to offer assignments. The Claimant was not issued with a contract of employment or any statement of terms and conditions of employment. Indeed there was no contractual document as such. There were, however, some potentially relevant guides; and a handbook for interviewers.
7. There was a document entitled "Finance and Administrative Guidance for Freelance Interviewers" dated May 2001. The Employment Judge quoted the following passage:

"Your status as an interviewer

As a market research interviewer for IPSOS MORI, you are considered to be working on an assignment basis only. You are not an employee but a "worker". This is because we have no obligation to offer you work and you are free to accept or reject the work offered."

8. There was a further document entitled "Interviewer Handbook", which the Employment Judge described as "a mixture of guidance and instructions". It contains the following passages which the Employment Judge did not quote:

"Booking work

When a new job has been confirmed your RC may phone you to offer work.

Note that there is no obligation on IPSOS MORI to offer work to any individual interviewer.

No interviewer is obliged to accept the work offered.

.....

Once you have accepted the job, it is considered as a verbal contract that you will complete the job within the deadline and according to the survey specifications."

9. The "Interviewer Handbook" also contained a diagram entitled "the stages of a survey". Stage 4 was entitled "Work offered to interviewers – the Verbal Contract". The Employment Judge did not refer to this diagram.
10. The Claimant's evidence was that he considered himself to have a verbal contract once he accepted an assignment – so that he was obliged to complete the assignment. However, the Respondent's evidence was to the contrary. Its witnesses said:

"Mr Drake was at liberty to accept or decline any assignment offered to him. Once accepted, Mr Drake was under no obligation to complete an assignment. Mr Drake only ever had a verbal agreement to undertake work, there was no punishment for not completing work, even once it had been accepted."

"...if an interviewer accepts the work they have entered into a verbal agreement with IPSOS MORI, at this stage there is still no obligation for the work to be completed and often interviewers return work they have verbally accepted. The only obligation is a moral one...."

11. There was evidence before the Employment Judge, which he accepted, to the following effect.

"6.11 Throughout his period with the respondent, the claimant typically (though not always) completed his assignments. That was not the case with all interviewers and the respondent's own evidence is that the claimant was from time to time approached and asked to complete assignments for other interviewers who had failed to complete.

6.12 Interviewers who do not complete their assignments or carry out the assignments in an unsatisfactory manner are not subject to the respondent's disciplinary procedures. If considered appropriate additional training is offered; the only other sanction available to the respondent is the removal of the interviewer from its panel.

6.13 Interviewers cannot delegate their work. If, for whatever reason, an interviewer is unable to complete an assignment, the procedure is that this is reported to the respondent who would then appoint another approved interviewer to complete the task."

This was the principal material before the Tribunal directly relevant to the question whether there was mutuality of obligation.

12. There was considerable evidence concerning the extent to which interviewers were subject to the control of the Respondent: the Employment Judge referred to this evidence (see paragraph 6.14 of his reasons) but, by reason of his conclusion on the question of mutuality, he did not fully set it out or evaluate it.
13. There was evidence of other matters which were potentially relevant to whether any contract between the Claimant and the Respondents was a contract of employment. It seems to have been a term of the contract that the Claimant would be paid after deduction of tax and national insurance under the PAYE system which applies to employees and office-holders. This, of course, would follow as a matter of law if the Claimant were an employee; it would appear to be anomalous if he was not an employee. Again, by reason of his conclusion on the question of mutuality, the Employment Judge did not evaluate this evidence.

Statutory provisions

14. Section 230(1)-(2) of the Employment Rights Act 1996 provides:

"(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.

(2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing."

Submissions before the Tribunal

15. Ms Gumbs, who appeared at the Tribunal for the Claimant, submitted on his behalf that each time he accepted an assignment he entered into a verbal contract to complete the work within a deadline in accordance with the survey specification in return for payment. She referred to the Interviewer Handbook with its references to a "verbal contract". Thus, she submitted, mutuality of obligation was established in respect of each assignment accepted by the Claimant.
16. She further submitted that (1) even if the Respondent in practice permitted work to be returned, this did not mean that there was no mutuality of obligation – it was equally consistent with a pragmatic choice by the Respondent not to enforce a breach of contract; and (2) even if the contract was terminable at will, this was still consistent with mutuality of obligation subsisting (see Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471, Elias J, paragraph 13).
17. The Respondent's pleaded case, in its ET3, was that the Claimant was a "worker" not an employee. Mr Parascandolo, who appeared at the Tribunal for the Respondent, submitted that there was no mutuality of obligation within individual assignments. This was sufficient, he submitted, to distinguish cases such as Cornwall County Council v Prater [2006] IRLR 362, where it was held that a contract of employment could subsist within an individual assignment.

The Employment Judge's reasons

18. So far as relevant to this appeal, the Employment Judge's reasoning is as follows.

"8.3 What is clear from the authorities and particularly from the case of Carmichael is that mutuality of obligation is the irreducible minimum to create a contract of service.

8.6 The respondent's evidence, which the Tribunal accepts, is that not only was there no obligation to provide further work upon completion of a particular assignment, it was open to it at any time to remove an assignment, just as it was open to an interviewer (the claimant included) to return an assignment. There was no contractual obligation on either side for the assignment to be completed by the person to whom it was originally allocated.

8.7 Albeit infrequently, on the claimant's own admission, there were occasions when he didn't complete his assignment. Moreover, when asked about his employment status, the claimant's evidence was that he believed it changed some two years before the relationship ended, the reason for that belief being that he was accepting more work, the additional work being in the form of reissues that had been returned by other interviewers. In the Tribunal's view, this is supportive of the respondent's case that work on any particular assignment could, and indeed was, on occasion reallocated, whether at the behest of the respondent or the interviewer.

8.8 The Tribunal is satisfied on the evidence that there was no mutuality of obligation either from one assignment to another or during the course of any individual assignment."

Submissions on appeal

19. On behalf of the Claimant, Ms Gumbs submitted that the Employment Judge's conclusion on the question of mutuality was perverse and insufficiently reasoned. She argued that the Employment Judge did not deal with the references to a "verbal contract" in the Respondent's own handbook; reached a conclusion inconsistent with the Respondent's position, set out in its documentation and in its ET3, that he was a "worker"; and did not deal with her contention that at the very least there was a contract terminable at will in respect of each assignment.
20. On behalf of the Respondent Mr Holloway submitted that the Employment Judge was entitled to reach the conclusion that there was no mutuality of obligation. The Interviewer's Handbook was 3 years out of date and was not a contractual document; the Employment Judge was entitled to accept evidence that there was in practice no obligation to complete work; his reasoning was not required to deal with every submission made, so long as the parties could see why he reached his conclusions; and his reasoning and conclusion could not be described as irrational or perverse. Mr Holloway referred to well-known authorities on the approach which the Appeal Tribunal should take to arguments based on insufficiency of reasons and perversity: see Meek v Birmingham DC [1987] IRLR 250; Piggott Bros & Co Ltd v Jackson [1991] IRLR 309; and Yeboah v Crofton [2002] IRLR 634.
21. In the course of submissions I was taken, either directly or by reference, to many of the leading cases on what constitutes a contract of employment, with particular reference to those cases concerning a succession of individual assignments. Ms Gumbs placed particular reliance upon Stephenson v Delphi Systems. Mr Holloway placed particular reliance on Little v BMI Chiltern Hospital [2009] UKEAT/0021/09.

Discussion and conclusions

Legal background

22. It is important, when considering the question whether an individual was an employee, to keep two linked questions in mind. Firstly, was there a contract between the parties at all? Secondly, if so, having regard to its terms was it a contract of employment?
23. If there was no contract at all, the person concerned cannot be an employee. If there was a contract, it will still be necessary for the tribunal (or court) to consider the nature and extent of the parties' obligations in order to determine whether the contract was a contract of employment. The principles which the tribunal will apply are classically set out 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."

24. That these are the governing principles was recently re-affirmed by the Supreme Court: Autoclenz v Belcher [2011] ICR (paragraph 18).
25. Where individuals are engaged to work for specific sessions or specific assignments their case may be put in one of two ways. It may be argued that there is an overall, "umbrella" contract of employment governing the relationship; or it may be argued that there were successive ad hoc contracts of employment for individual sessions or assignments.
26. In this case the Claimant's claim was put exclusively on the basis that there were successive contracts of employment for individual assignments. Such contracts of employment are creatures known to law. Leading modern decisions in the Court of Appeal include McMeechan v Secretary of State for Employment [1997] ICR 549 (CA) (see paras 10, 14, 33-37) and Cornwall County Council v Prater [2006] IRLR 362 (CA) (see paras 40, 43, 49-51).
27. In many cases a person who works under numerous contracts of employment for individual assignments or individual periods of time – a casual employee – will not acquire a right not to be unfairly dismissed (or other rights which depend on a year or more of service) because the requirements of continuity of employment will not be satisfied: see sections 210-219 of the Employment Rights Act 1996. Sometimes, however, a casual employee may have worked so regularly and for such a period as to acquire continuity under those provisions. Such an employee will, to the eyes of anyone other than an employment lawyer, scarcely appear casual any longer; and it is not inherently surprising that such an employee should acquire employment rights.

Mutuality – was there a contract at all?

28. The concept of mutuality, upon which the Employment Judge relied when deciding this case, is not found in the classic, Ready Mixed Concrete, definition. It arises in the cases in two ways.
29. Firstly, and to my mind most importantly, it is used with reference to the question whether there was a contract between the parties at all.
30. Thus in Stevenson v Delphi Diesel Systems Limited [2003] ICR 471 Elias J, giving the judgment of the Appeal Tribunal, said the following:

11. The significance of mutuality is that it determines whether there is a contract in existence at all. The significance of control is that it determines whether, if there is a contract in place, it can properly be classified as a contract of service, rather than some other kind of contract.

12. The issue of whether there is a contract at all arises most frequently in situations where a person works for an employer, but only on a casual basis from time to time. It is often necessary then to show that the contract continues to exist in the gaps between the periods of employment. Cases frequently have had to decide whether there is an over-arching contract or what is sometimes called an "umbrella contract" which remains in existence even when the individual concerned is not working. It is in that context in particular that courts have emphasised the need to demonstrate some mutuality of obligation between the parties but, as I have indicated, all that is being done is to say that there must be something from which a contract can properly be inferred. Without some mutuality, amounting to what is sometimes called the "irreducible minimum of obligation", no contract exists.

13. The question of mutuality of obligation, however, poses no difficulties during the period when the individual is actually working. For the period of such employment a contract must, in our view, clearly exist. For that duration the individual clearly undertakes to work and the employer in turn undertakes to pay for the work done. This is so, even if the contract is terminable on either side at will. Unless and until the power to terminate is exercised, these mutual obligations (to work on the one hand and to be paid on the other) will continue to exist and will provide the fundamental mutual obligations.

14. The issue whether the employed person is required to accept work if offered, or whether the employer is obliged to offer work as available is irrelevant to the question whether a contract exists at all during the period when the work is actually being performed. The only question then is whether there is sufficient control to give rise to a conclusion that the contractual relationship which does exist is one of a contract of service or not."

Later he said:

"It seems to us that in fact however short the assignment, there will be the necessary mutuality of obligation so as to establish the existence of a contract with someone, when work is accepted and the obligation to pay arises."

31. I would only add one respectful caveat to the passage in Stephenson. The Ready Mixed Concrete case shows that the existence of sufficient control is an important element of the test for a contract of employment; but it is not the only element. The contract must be a contract to do work personally in return for remuneration; and other provisions of the contract must not be inconsistent with a contract of service. Elias J, when he said that "the only question" was the question of control, took this as read in his reasoning: he was referring to a case where "work was accepted and the obligation to pay arises".
32. Applying the reasoning in Stephenson to the case in hand, I have no doubt that there was a contract in place – and the requisite mutuality - when the Claimant was actually undertaking an assignment for the Respondent. The fact that the assignment could be brought to an end does not mean that there was no contract in existence while the assignment was continuing. Plainly there was a contract while the assignment was continuing: there was an agreement to undertake work in return for payment. When the Respondent in its Handbook described the acceptance of an assignment as a "contract" it was correct. The fact that either side might terminate the contract at will does not mean that there was no contract. If, therefore, the Employment Judge was using the concept of mutuality in this primary sense, he was to my mind certainly wrong. I will consider his reasoning later in this judgment.

Mutuality – was it a contract of employment?

33. There is, however a secondary sense in which the concept of mutuality is sometimes used. In this secondary sense it is not relevant to the question whether there was a contract at all, but to the question whether the contract was a contract of employment. After a review of the authorities it was described by Langstaff J in Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 at paragraph 40 as "a requirement of mutuality specific to contracts of employment". And in paragraph 48 he said:

"It cannot simply be control that determines whether a contract is a contract of employment or not. The contract must necessarily relate to mutual obligations to work, and to pay for (or provide) it: to what is known in labour economics as the "wage-work bargain".

34. In this secondary sense the concept of mutuality is used with reference to the nature of the contract – particularly, it seems to me, with reference to the first test in the Ready Mixed Concrete case. The emphasis is not really on mutuality as such; but on the nature of the bargain between the parties. Speaking for myself I would prefer to use the concept of mutuality only in relation to the question whether a contract existed between the parties; but it is inescapable that the concept of mutuality sometimes creeps into the question whether the contract is a contract of employment.
35. It is difficult to see why the fact that a contract is terminable at will should be determinative of the question whether the contract is a contract of employment. Agreements to do work personally in exchange for remuneration are of many kinds; casual agreements may be less common now than they once were; but I do not think there is any doubt that casual labour, which may quite often be terminable at will, can be (and historically often has been) provided pursuant to a contract of employment. It would, moreover, be remarkable if a contract which otherwise satisfies the tests for a contract of employment could be taken out of that classification merely by providing that it is terminable at will.
36. In McMeechan v Secretary of State for Employment [1997] ICR 549 Mr McMeechan was a temporary worker on the books of an employment agency, fulfilling a series of engagements. There was no duty to provide him with work between engagements. The conditions applicable to each engagement provided that the agency could instruct him to end an assignment with a client at any time without giving a reason (see para 8 of the judgment). It was argued for the Secretary of State that there was insufficient mutuality. The Court of Appeal held that each engagement actually worked constituted a contract of employment. The fact that the agency could instruct him to end an assignment at any time was treated, if anything, as a factor in support of the existence of the contract of employment: see para 42.
37. Likewise, in Stephenson itself, Elias J said (para 34):

"The Tribunal concluded that there was no mutuality of obligation because the Appellant could at any time walk off the job. However, there is no reason why there cannot be the mutuality of obligation for the duration of the working relationship merely because in the future there may be no obligation to accept further work, or because of a right to terminate the current work at will: see the McMeechan case."

38. It is true that Elias J's own preferred use of the concept of mutuality related to the question whether there was a contract at all. But the Appeal Tribunal's rejection of the Tribunal's conclusion that there was no mutuality such as to found a contract of employment carries with it the conclusion that a right to terminate the current work is not inconsistent with the existence of a contract of employment; and the citation of McMeechan is apposite in this context.
39. There is, however, one decision of the Appeal Tribunal which can be said to point in the other direction. This is Little v BMI Chiltern Hospital. Mr Little was a hospital bank porter. He had worked at the same hospital for 15 years, doing 20-30 hours per week. The written agreement under which he worked provided for him to be an independent contractor, working "as and when". He had actually turned down an opportunity to be a contracted member of staff. He could be, and occasionally was, sent home part way through a shift if his services were no longer required, and he was not then entitled to payment. He could leave early himself (though, as the Employment Judge said, he would not endear himself by doing so). The Appeal Tribunal (His Honour Judge Peter Clark) (paragraph 21) distinguished Prater on the basis that Mr Little's work could be withdrawn during his shift. He said:

"The work could be withdrawn during Mr Little's shift and he was not entitled to payment for the remainder of the shift. As Mrs Moss realistically accepted, there was no obligation on the Respondent to provide the Claimant with work under the contract. In these circumstances I agree with Mr Ritchie that the Judge was entitled to conclude that, as the parties plainly agreed, there was no mutuality of obligation even on the basis of a succession of individual assignments each amounting to separate contracts of service. Although there was a contract in the Stephenson sense, it was in fact and law a contract for freelance services ..."

40. It does not appear that McMeechan was cited in Little; and if Little were treated as authority for the proposition that a right to terminate the current work at will is inconsistent with a contract of employment it would be contrary to the result and reasoning in McMeechan and to the expressed view of the Appeal Tribunal in Stephenson. Moreover, for the reasons I have given, I do not think the proposition would be correct. I consider that McMeechan (a decision of the Court of Appeal) and Stephenson should be followed.

The Employment Judge's reasoning

41. Against this background, I turn to the reasoning of the Employment Judge.
42. I am conscious that the question whether there was a contract, and if so whether it was a contract of employment, is a question of fact for the Tribunal in respect of which the Appeal Tribunal, which is vested with a power to intervene only if there is an error of law in the Tribunal's reasoning. In my judgment there are such errors.
43. The Employment Judge has treated as decisive his finding that there was "no contractual obligation on either side for the assignment to be completed by the person to whom it was originally allocated". It is not entirely clear from his reasoning whether he thought that there was no contract between the parties at all (which is what is generally meant by "irreducible minimum of obligation") or whether he thought there was a contract, but one with minimal obligations.
44. Although it is possible that the Employment Judge meant there was no contractual obligation at all between the parties, I think this is unlikely. If he thought so, then for the reasons I have already given I think his judgment was certainly wrong in law. Moreover he would have failed to deal with a key feature of the case – the Respondent's own handbook said there was a contract. I have no doubt that there were successive agreements between the parties whereby, in return for remuneration, the Claimant provided his services in conducting market research assignments.
45. It is, I think, much more likely that the Employment Judge took the view that either side could withdraw a particular assignment prior to completion – in effect, that the contract was terminable at will. It is then likely that he treated this as a determining factor in concluding that the contract was not a contract of employment, perhaps influenced by Little which was cited to him. If so, for the reasons I have given, I consider that this was an error of law.
46. For these reasons I do not think the Employment Judge's decision can stand.
47. I do not, however, consider that the Appeal Tribunal is entitled to substitute its own decision on the question whether the Claimant was employed under successive contracts of employment. Findings are required on the conditions set out in the Ready Mixed Concrete case.
48. I have already made plain my finding that when the Claimant was actually fulfilling assignments between himself and the Respondent he was working pursuant to contracts. I consider that the contrary is unarguable.
49. It is, however, important to make findings as to the terms of the contracts.
50. It seems plain (but the Employment Judge will need to find) that under each contract the Claimant was obliged to work personally for the Respondent unless and until he returned or completed the assignment or the Respondent withdrew it. That, in accordance with Ready Mixed Concrete, is an important factor.
51. It is then necessary for the Tribunal to make findings about the extent to which the terms of each contract placed obligations on the Claimant to work under the control of the Respondent. This, in accordance with Ready Mixed Concrete, is another important factor. The Employment Judge has made no findings about the extent to which the Respondent was, and was not, entitled to control the Claimant in the performance of his work.
52. It is finally necessary for the Employment Judge to make findings as to whether other other terms are consistent with the contracts being contracts of employment.
53. Having made findings concerning these matters the Employment Judge must then stand back and decide, with reasons, whether he finds the assignments to have been carried out under a series of contracts of employment, as the Claimant contends, or merely under a series of contracts for services, as the Respondent contends.
54. I must finally consider whether the matter should be remitted to the same or to a different Employment Judge. The Appeal Tribunal approaches this question in accordance with principles set out in Sinclair Roche Temperley v Heard [2004] IRLR 763. This case is important to the parties; the hearing before the Employment Judge was short; by the time the matter is reconsidered substantial time will have elapsed since the evidence was heard; a hearing for further submissions would in any event be desirable after this length of time; and while I have no doubt that the Employment Judge will approach the matter conscientiously it will not be easy to recapture the evidence in a short case which took place more than a year before. I think the best course is to order a fresh hearing.