Appeal No. EAT/0945/02 SM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 17 March 2003

Before
HIS HONOUR JUDGE ANSELL
MR P GAMMON
MR B R GIBBS

FRANK STADDON LTD	APPELLANT

(1) MR J DENT	RESPONDENTS
(2) MR R McWILLIAMS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR TOM GALLAGHER
(Representative)
Instructed by:
Frank Staddon Ltd
The Rise
Wanstead
London E11 1QA	
For the Respondent	MR MICHAEL DOOLEY
(Representative)
Instructed by:
UCATT - London & South East Region
UCATT House
177 Abbeville Road
Clapham
London SW4 9RL	

HIS HONOUR JUDGE ANSELL

1	This is an appeal from a decision of an Employment Tribunal sitting at Reading on 14 June 2002, consisting of a Chairman sitting alone, who held that both Respondents to this appeal were employees of the Appellants and, in the case of Mr Dent, that he was entitled both to holiday pay which had been unpaid pursuant to the Working Time Regulations 1998 and also one week’s pay in lieu of notice.  In terms of Mr McWilliams, he was entitled to holiday pay.

2	The Notice of Appeal raises interesting issues which, if we may say so, have been very well argued today by the two representatives, Mr Gallagher on behalf of the Appellants and Mr Dooley on behalf of the employees.

3	The issues raised by him consist of: firstly, the power of the Chairman to hear this case alone, particularly the holiday pay claim; secondly, the exercise of a discretion by a Chairman to sit with members, even though he would be entitled to sit on his own; thirdly, whether the Respondents were entitled to make claims under the Working Time Regulations 1998 and, fourthly, an issue as to whether a contractually rolled up rate including holiday pay applied to these employees.

4	The facts were that Mr McWilliams, a bricklayer, had begun working for the Respondents on 28 November 2001 and he was told that his rate be £115 per day.  At some stage, a date which was not identified by the Tribunal, both employees (Mr McWilliams and Mr Dent) signed a document which was referred to in the decision as R1 Starting Sheet, in which they gave personal details and also their CIS Number, effectively their self employed tax number, to operate the CIS system.
5	After working his week in hand, Mr McWilliams received his first wage packet which showed that holiday pay was included in the £115.  There was a finding that as it was approaching Christmas he did not complain about this because in his experience in the building industry one could get sacked for making enquiries raising that issue.  Shortly thereafter, the industry closed down for their Christmas break and there was no finding that he had made any claim for payment at that time.  His evidence was that he never agreed to have his holiday pay incorporated into the daily rate of £115.

6	Mr Dent was a similar case.  He started at £115 per day.  He claimed that nothing was mentioned regarding holiday pay until he saw it as an item on his payslip some two weeks later.  His job was terminated at the end of January.  He claimed that he was entitled to a week’s notice.

7	The sheets that they both signed (“Starting Sheets”) below the personal details contained this clause:

“SUB CONTRACTORS
Please note that sub contractors will be paid by bank transfer wherever possible (provided CIS details are in order and approved).  All Holiday and Bank Holiday pay is included within the daily rate.”

8	The Chairman’s conclusions were that the Applicants were not sub contractors.  He said they were certainly workers within the ambit of Regulation 2 of the Working Time Regulations 1998 and he went on to find they were employees of the Respondent and entitled to holiday pay pursuant to the Regulations, subject to the Respondent’s argument regarding payments in any event being rolled up in the daily rate.

9	With regard to the clause, he first of all found that in any event it would not have applied to these men because they were not sub contractors. But in any event, his main finding was that there was no agreement that holiday pay was to be incorporated within the daily rate of £115: he held that the issue had not been raised with the Applicants when they commenced their employment.

10	Let me then pass on to the issues themselves and deal with them in the order that I have previously outlined.

11	First of all, the power of a Chairman to hear cases alone.  This is governed by section 4 of the Employment Tribunals Act 1996, subsection (2) and provides that specified proceedings can be heard by a Chairman alone.  They include any unlawful deduction of wages under section 23 of the Employment Rights Act 1996 and also proceedings in respect of which a Tribunal has jurisdiction by virtue of section 3 of this Act.  Section 3 was a power that confirmed jurisdiction on Employment Tribunals to deal with claims for breach of contract.

12	There is no dispute that the Chairman here would have had power to deal with the claim for notice monies.  That arises because under the Employment Rights Act 1996, section 91 claims for a failure to pay appropriate notice monies are to be taken into account in assessing liability for breach of contract.  Thus claims for notice payments are clearly breach of contract claims and therefore would fall within section 3 of the Employment Tribunals Act 1996 and therefore can be dealt with under section 4 (2) (d).

13	With regard to the Working Time Regulations 1998 claim in this case, it is now contended by the employers that the Chairman did not have jurisdiction to hear this matter alone.  We first of all point out that this was not an issue that was taken below by either side and as is generally known, we do not allow matters of law to be raised before us which were not taken below.  Exceptionally, however, we will allow matters to be raised if they go to the jurisdiction of the court to hear certain cases.  Therefore we will consider whether or not the Chairman was right in this case.  It seems to us that he had jurisdiction in one of a number of ways.  

14	First of all, under Rule 6 of the Employment Tribunal Rules of Procedure 2001, he has power to deal with issues relating to the entitlement of any party to bring or contest proceedings and there were certainly issues raised in this case as to whether or not the Applicants before the Tribunal were entitled to bring claims under the Working Time Regulations 1998.

15	Secondly, it is argued with some force by the Respondents today that the claim for holiday pay could be treated either as a contractual claim arising out of the failure to pay holiday pay or alternatively as an unlawful deduction of wages.  The argument runs that wages are defined under section 27 of the Employment Rights Act 1996 to include holiday pay “whether payable under his contract or otherwise”, and it is argued, we believe with success, that the phrase “or otherwise” also includes statutory holiday pay pursuant to the Working Time Regulations 1998.  Thus, a claim for a failure to pay holiday pay amounts to a failure to pay wages, which is either a breach of contract or alternatively an unlawful deduction of wages.  The Respondents have referred us to List Design Group v Douglas EAT/0966/00 which held that a failure to pay holiday pay could be considered to be an unlawful deduction of wages.
16	Therefore, it seems to us and we accept, that there are a number of ways in which the Chairman did have jurisdiction to deal with this matter alone.

17	May we say that it would, in our view, have been preferable if the Notice of Hearing had indicated that it was going to be dealt with by a Chairman alone.  Indeed the Notice of Hearing we have been shown refers to a hearing listed for an hour for full disposal including remedy if appropriate and it seems to us that in those circumstances it would have been preferable if the Notice of Hearing could have outlined the intention for it to be dealt with by a Chairman alone.  Indeed if the Chairman at the outset of the hearing could have briefly indicated, particularly as these parties were on one side represented by a union representative and the other by a representative from the company the reasons why the matter was being dealt with by him alone.

18	Should the Chairman have offered the parties the opportunity to make representations about the fact that he proposed to deal with the matter alone and indeed shown that he had considered whether the conditions that arise in 4 (5) of the 1996 Act arise.  Did this invalidate the proceedings?  Section 4 provides that whilst prima facie the case can be dealt with by the Chairman alone if it falls within the relevant conditions, the Chairman can exercise discretion to sit with members having regard to:

“(a)	whether there is a likelihood of a dispute arising on the facts which makes it desirable for the proceedings to be heard in accordance with subsection (1)”

In other words, with members.

19	There has been a degree of controversy within a number of cases before this Court as to the appropriate course, but the matter appears to have been settled most recently by the decision of Morgan v Brith Gof Cyf [2001] ICR 978, where the President, Mr Justice Lindsay made it clear that whilst it is desirable for a Chairman to consider the matters in section 4 (5), even if not invited to do so, it is not an error of law if he does not consider them when the point has not been raised.  Nor is it an error of law for a Chairman not to have expressed openly the considerations he might tacitly have had in mind.  That makes it clear, in our view, that the Chairman does not have to raise these matters unless requested to do so by the parties.

20	The next issue relates to whether the Respondents were entitled to bring claims under the Working Time Regulations 1998.  As we have said in dealing with the facts of the case, the Tribunal came to the view that both these employees were “workers” within the ambit of Regulation 2 of the Working Time Regulations 1998 and on the face of it entitled to holiday pay.  Indeed, in the declaration at the beginning of the decision they were referred to as “employees”.

21	The Working Time Regulations 1998 define “worker”, because it is a worker which is the key definition for the purposes of these Regulations, as

“…an individual who has entered into or works 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.”

22	The issue of self-employed workmen on building sites has been considered recently by this Court in the case of Byrne Brothers Ltd v Baird [2002] IRLR 96 where the court, Mr Recorder Underhill QC presiding, came to the view that these sort of individuals certainly fell within the definition of “worker” within Regulation 2 (1).  The headnote reads as follows:

“The structure of limb (b) in reg. 2 (1) is that the definition extends prima facie to all contracts to perform personally any work or services but is then made subject to an exception relating to the carrying on of a “business undertaking”.  The intention behind the regulation is plainly to create an intermediate class of protected worker who, on the one hand, is not an employee but, on the other hand, cannot in some narrower sense be regarded as carrying on a business.  The policy behind the inclusion of limb (b) can only have been to extend the protection accorded by the Working Time Regulations to workers who are in the same need of that type of protection as employees in the strict sense – workers, that is, who are viewed as liable, whatever their formal employment status, to be required to work excessive hours.  The reason why employees are thought to need protection is that they are a subordinate and dependent position vis-à-vis their employers.  The purpose of reg. 2 (1) (b) is to extend protection to workers who are, substantively and economically, in the same position.  Thus the essence of the intended distinction must be between, on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other, contractors who have a sufficiently arm’s-length and independent position to be treated as being able to look after themselves in the relevant aspects.”

So this decision, although not cited by the Chairman, clearly supports the view that he took about their status, and therefore their entitlement to prima facie bring a claim under the Regulations.

23	We therefore move on to the last substantial point which has taken probably more of the time of this case; namely, the issue of what is called the “rolled up rate.”  The decision of the Chairman was that firstly the clause in the starting sheet completed by the Respondents when they started work, which related to holiday pay being included within the daily rate, would not in any event have applied to these two individuals since that section was headed up “sub contractors” and that was not the status of these two gentlemen.  But in any event, the Chairman decided, as we have indicated already, that there was no agreement at the time that the contract was entered into that holiday pay was to be incorporated within their daily rate.  The Chairman was not satisfied that that document, even if the sub contractors clause could be held to apply to these two, was a document that reflected the agreement of the parties at the time the contract was entered into.

24	In support of that, the Chairman quite correctly, in our view, referred to the case of Blackburn & Ors v Gridquest Ltd t/a Select Employment & Ors [2002] IRLR 604 where the Court of Appeal dealt with the issue of a rolled up rate.  The headnote reads:

8	“…A week’s pay is the amount payable by the employer under the contract of employment for the normal working hours in a week. Only if it is agreed between employer and employee that the weekly payment includes an amount for something else, such as holiday pay, can it be held to do so. An employer cannot unilaterally decide that the week’s pay is a payment not only for the hours worked during the week but includes an element of holiday pay. The claim that holiday pay was "in fact" paid amounts to an assertion that the employer can decide unilaterally what is included in the weekly payment.
9	…Regulation 16(5) does not confer that right upon an employer. Indeed, it expressly refers to "contractual" remuneration paid in respect of a period of leave. If the worker has not agreed that the sum paid includes a sum in respect of a period of leave, it is no part of the contract that the sum includes an element of holiday pay. The remuneration under the contract is for the week’s work.”

25	Pill LJ cited, with approval, the finding of the Employment Tribunal that they did not accept that there was any express contractual agreement for the payment of an element of holiday pay by way of a rolled up rate in the case of each of the Appellants.  That is a finding very similar to that found in this case and we cannot see any grounds for distinguishing this case from the Blackburn decision.

26	There is some criticism of the Chairman’s findings in paragraph 12 where he said that the employees were reluctant to raise such an issue during the winter period when jobs are hard to come by in the construction industry for fear of losing their jobs.  It is suggested that this was the Chairman seeking to impose his own view of the building industry within the decision.  But in fact if one looks back to the facts that he found, there is in paragraph 4, certainly as far as Mr McWilliams is concerned, reference to the fact that:

4	“As it was near to Christmas he did not comment on this because in his experience in the building industry one could get sacked for making enquiries regarding such issues.”

In any event, the failure of the employees or otherwise to raise these matters does not, in our view, go to the key issue in this case which was what was agreed between the parties at the time the contract was entered into and, as we have said already, there were clear findings of fact by the Chairman that there was no agreement or meeting of minds between the parties.

27	We have been asked by Mr Dooley to consider expressing a view as to whether the so-called rolled up rate is contrary to the European Directives that led to the Working Time Regulations in this country.  We do not propose to make any comments about that aspect.  It is not necessary for this case because there is a clear finding of fact that the rolled up rate did not apply to this particular case and this issue was not raised below.

28	For the reasons that we have outlined we find, first of all, that the Chairman did have jurisdiction to deal with these matters and made clear findings of fact with which we do not propose to interfere.  Accordingly, we will dismiss this appeal.