Appeal No. UKEAT/0691/03/DM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 16 June 2004
Judgment delivered on 3 August 2004

Before
HIS HONOUR JUDGE PETER CLARK
MR B R GIBBS
MR D G LEWIS

MORRIS HOMES (NORTH) LTD	APPELLANT

1) GRAHAM DAVID BATTY 2) MARTIN JOSEPH DOYLE	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR J BOWERS QC
(Of Counsel)
Instructed by:
Messrs Halliwell Laudau
Solicitors
St James Court
Brown Street
Manchester
M2 2JF	
For the Respondent	MR A HOGARTH QC
(Of Counsel)
Instructed by:
Messrs Walker Morris
Solicitors
Kings Court
12 King Street
Leeds
LS1 2HL	

SUMMARY

Meaning of worker – WTR Reg 2(1) - incorporation of written standard terms and conditions - Appeal allowed and case remitted for rehearing.

HIS HONOUR JUDGE PETER CLARK

1.	The question in this appeal, brought by the Respondent before an Employment Tribunal sitting at Manchester under the chairmanship of Mr J E Goodman, Morris Homes (North) Ltd, against that Employment Tribunal’s reserved decision, promulgated with Extended Reasons on 21 July 2003, is whether the Employment Tribunal was entitled, as a matter of law, to conclude that the 2 Applicants, Messrs Batty and Doyle, were ‘workers’ within the meaning of Regulation 2 of the Working Time Regulations 1998 so that they were entitled to receive holiday pay in accordance with those regulations from the Respondents.  A cross-appeal by the Applicants is no longer live.  We shall continue to describe the parties as they appeared below.

The Facts
2.	The Employment Tribunal found the following facts.  

The Respondent builds new homes.  Mr Doyle is a skilled bricklayer and Mr Batty his assistant.  Mr Doyle began working for the Respondent in 1995 or 1996 as part of a gang consisting of himself, a Mr Mitchell and a Mr Woods.  Subsequently Mitchell left the gang, as later did Woods, in March 1999.  Mr Batty then joined forces with Mr Doyle on 21 May 1999 and they operated as a 2-man gang, working on the Respondent’s sites, until 31 January 2003.  During that period they worked exclusively for the Respondent.

3.	The Respondent’s method of payment was to pay each of the gangs (in June 2003 they had 92 bricklayers working for them, split into 29 gangs) a fixed fee for undertaking the bricklaying work on each plot.  The agreed amount would be paid by weekly instalments, depending on how much work was done that week and divided between the gang members in proportions which they agreed amongst themselves.

4.	The Applicants were engaged on the basis of CIS4 cards, with the Respondent deducting tax at the rate of 18 per cent.  The Applicants were responsible for any further tax due on their earnings to the Inland Revenue.

5.	Paperwork relating to the payments due to the Applicants was provided by the Respondent on its own documentation.  Completion of that paperwork was supervised by the Respondent’s site foreman, who would occasionally make alterations to the figures proposed by the Applicants following discussion with Mr Doyle.

6.	In late 2000 the Respondent incorporated on the reverse side of the remittance forms which accompanied the Respondent’s payments to the gangs certain terms and conditions headed “Standard Form Labour Only Bricklaying Agreement”.  Relevant terms included the following:
“6	The Company agrees:
(d)	Members of the Bricklaying Gang will be determined by the said Gang and the Company will have no right to interfere with the makeup of the Gang or with the split of payment determined by the Gang.
(e)	If the said gang wish to bring in additional or/and substitute workers to complete the task, the Company will have no right to prevent this.”

7.	After reading an article about bricklayers winning a claim for holiday pay Mr Doyle spoke to a member of the Respondent’s Human Resources team who said that he was not entitled to holiday pay (the position asserted at Clause 3 of the Company’s standard conditions).  Subsequently the Applicants left and worked elsewhere.  It was common ground that they never received holiday pay from the Respondent.

The Employment Tribunal decision
8.	The Employment Tribunal directed themselves to the definition of worker in Regulation 2 as:
“an individual who as entered into or works under (or where the employment has ceased, worked under)
(a)	a contract of employment or
(b)	any other contract … 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 professional business undertaking carried on by the individual
and any reference to a worker’s contract shall be construed accordingly.”

9.	It was not suggested that the Applicants fell within the definition under limb (a).  So far as limb (b) was concerned, the first issue was that of personal service.

10.	Pausing there, it is clear on the authorities that an unlimited contractual power to provide a substitute to do the work (even if, as here, these Applicants never engaged a substitute) is inconsistent with a contract to perform personally any work or services.  See Byrne Brothers v Baird [2002] ICR 667 (EAT), paragraphs 13-14; applying Express & Echo Ltd v Tanton [1999] ICR 693, 700C (per Peter Gibson LJ) and MacFarlane v Glasgow City Council [2001] IRLR 7, per Lindsay P, paragraph 13.

11.	The Employment Tribunal found that even if Clause 6 of the standard terms in the present case formed part of the contract between the parties, these Applicants were nevertheless workers.  Mr Hogarth QC, for the Applicants, very properly does not seek to uphold that part of the Employment Tribunal’s reasoning.  It is inconsistent with those earlier authorities and, more recently, the judgments in the Court of Appeal in Redrow Homes v Roberts [2004] EWCA Civ 469.  Thus, the critical question in this appeal concerns the Employment Tribunal’s finding as to whether or not the Respondent’s standard terms were incorporated in the contract made between these parties.

12.	At paragraph 21 of their reasons the Employment Tribunal deal both with the question of incorporation of terms and a second issue as to whether, if it was a contract for personal services, the Applicants were providing work to a client or customer.  We should set out that reasoning in full:
“21.	We are not entirely satisfied that the way in which the respondent sought to introduce the terms of its Agreement upon the applicants amounted to a legally binding arrangement between the parties.  There was no express acceptance from either applicant of those terms nor was their attention specifically directed to the Agreement, which appeared on the back of a document dealing principally with payment of remuneration.  However, even if the terms of that Agreement were legally incorporated into the relationship between the parties, we are not satisfied that it was the parties’ intention that all of those terms would apply since it is quite clear that the Respondent did not seek to impose upon the applicants the insurance requirement contained in paragraph 5(e) of the Agreement.  Furthermore, we do not consider that the provisions of paragraph 6(d) and/or (e) of the respondent’s Agreement preclude individuals such as the applicants working within a gang from providing services “personally” to the respondent or - having regard to the way in which the contract was actually performed by the applicants - demonstrate that the applicants were providing work to “a client or customer”.

13.	Finally, the Employment Tribunal set out a number of features of the evidence which, they held, indicated that the Applicants were providing their services as ‘workers’.  These are listed at paragraph 22 of their Extended Reasons.

The Appeal
14.	Mr Bowers QC for the Respondent raises 3 issues in this appeal:

(1)	what were the terms of the relationship between the parties?

(2)	did the Applicants personally provide services for the Respondents?

(3)	were the Applicants carrying on a business undertaking, providing services to the Respondent as their customer?

The First Issue
15.	This raises the incorporation question.  Mr Bowers’ first submission is that the Employment Tribunal failed to make a clear determination as to whether or not the Respondent’s standard terms were incorporated into the relevant contracts.  They use the expression, in paragraph 31 of the EWR, “we are not entirely satisfied …”.  Whilst we acknowledge that such wording is not entirely felicitous, we accept Mr Hogarth’s submission that on a fair reading the Employment Tribunal were merely stating that the Respondent had not, in their judgment, discharged the onus, which lay on them, of proving that the standard terms had been incorporated.

16.	However, a more telling point made by Mr Bowers is that in their reasoning the Employment Tribunal have not dealt with a submission, plainly put by Counsel then appearing for the Respondent, that the written terms merely codified the existing practice.  Mr Hogarth has taken us through the standard terms in order to demonstrate that they were new and could not be regarded as putting into writing that which went before.  Nevertheless, we accept Mr Bowers’ proposition that the Employment Tribunal ought to have dealt with the point expressly.

17.	That brings us to the substantive question; was the Employment Tribunal entitled to conclude that the standard terms were not incorporated into the contract?  The difficulty here is that the Employment Tribunal have simply not addressed the relevant questions as a matter of standard contract law.  They are:

(1)	Did the Applicants know that there was writing or printing on the back of the documents which they received from the Respondent from late 2000?

If not, then they are not bound.

(2)	If they knew that the writing or printing contained or referred to conditions, then they are bound.

(3)	Did the Respondent do what was reasonably sufficient to give the other party notice of the conditions (no reference is made to the conditions on the face of the document)?

If so and if the Applicants knew that there was writing or printing on the back of the document, but did not know it contained conditions, then the conditions will be become the terms of the contract between them.

We take that summary from Chitty on Contracts, 29th Edition, paragraph 12-013.

19.	Both Mr Bowers and Mr Hogarth confidently assert that applying those tests the printed conditions were/were not incorporated.  We share that level of confidence with neither party.  In our judgment the question of incorporation, as well as the Respondent’s argument, which will require further factual findings, that the standard terms codified existing practice, require determination by a fresh Employment Tribunal on remission.

The Second Issue
20.	This issue only arises if the Employment Tribunal on remission finds that the standard terms were not incorporated into the contract.  Mr Bowers’ submissions as to the personal service issue are predicated on the standard terms applying; if they do, it is conceded by Mr Hogarth on behalf of the Applicants that the personal service element is absent, in which case these claims must fail.

The Third Issue
21.	We agree with Mr Bowers that in their reasons the Employment Tribunal has failed to deal separately and distinctly with the business undertakings exception in limb (b) of the worker definition.  That simply reinforces our earlier conclusion on the first issue that this appeal must be allowed and the case remitted to a fresh Employment Tribunal for rehearing.  We so order.