Appeal No. UKEAT/0004/05

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH EH3 7HF

	At the Tribunal
	On 20 September 2005

 
Before
THE HONOURABLE LADY SMITH
MR J M KEENAN
MISS A MARTIN

 

STEVEN BACICA	APPELLANT

 

 
KENNETH McMYLES MUIR	RESPONDENT

 
 
Transcript of Proceedings
 
JUDGMENT

 

 

 

 
 
	APPEARANCES

 

 
 
For the Appellant	Mr S Bacica, In Person
43 Bath Street
EDINBURGH
EH15 1HB

 	

 
 
For the Respondent

 

 

 

Mr K M Muir, In Person
6 Broomhall Avenue
EDINBURGH
EH12 7NB

 

SUMMARY
 
WORKING TIME REGULATIONS
 
Holiday pay

Working Time Regulations; holiday pay.  Claimant sought holiday pay after working for respondent on a self employed basis.  The tribunal held that he was a worker and entitled to receive holiday pay.  The Employment Appeal Tribunal found that the tribunal had erred in their assessment of the evidence as to the circumstances of his employment which included that he worked under the CIS scheme, that he had and was free to work for other customers and had self employed accounts made up by an accountant.  He did not qualify as a worker within the meaning of the regulations.

 

THE HONOURABLE LADY SMITH:
 
Preliminaries
1.	This case concerns a claim for unpaid holiday pay that was made by the Claimant before the Employment Tribunal.
 
2.	The judgment represents the views of all three members.
 
3.	We will refer to the parties as Claimant and Respondent.
 
Introduction
4.	This is an appeal by the Respondent in those proceedings against a Decision of an Employment Tribunal, sitting at Edinburgh, Chairman Mr D L Stewart WS, registered with Extended Reasons on 28 November 2004.  The Claimant represented himself before the Tribunal and before us, as did the Respondent.
 
5.	The Claimant claimed payment in respect of unpaid holiday pay. 
 
6.	The Respondent contended that the Claimant was self-employed and, accordingly, not entitled to holiday pay.  
 
The issues
7.	The essential issue between the parties, as identified by the Employment Tribunal, was whether the Claimant was a worker for the purposes of the Working Time Regulations 1998, in which case he was entitled, in terms of regulation 13, to four weeks paid annual leave.  
 
The Judgment
8.	The Employment Tribunal decided that, in the factual circumstances, the Claimant was a worker and so was entitled to holiday pay.  They recorded that parties were agreed that, in that event, the sum due was £1,391, a figure which was subsequently corrected by the Tribunal to the sum of £1,277. 

The appeal
9.	The Respondent appeals against that decision.  
 
EAT Directions
10.	Directions sending this appeal to a full hearing were given in Chambers by The Hon Lord Johnston.
 
The legislation
11.	The relevant provisions of the legislation are those set out in, firstly, Regulation 13 of the Working Time Regulations:
 
“(1) Subject to paragraph (5), a worker is entitled to four weeks’ annual leave in each leave year.” 
 
secondly, section 230 (3) of the  Employment Rights Act 1996:-
 
“In this Act “worker”….means an individual who has entered into or works under …..
(a)	(a)         a contract of employment, or 
(b)	(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 thirdly, Regulation 2 of the Working Time Regulations which contains the same definition of ‘worker’ as that which appears in s.230 of the Employment Rights Act.  
 
Employment Tribunal directions
12.	The Tribunal directed itself by reference to the relevant legislative provisions.  They took account of the cases of Willoughby v County Home Care Ltd, Employment Appeal Tribunal, Case no :110310/99 and Filcom Ltd v Ross, Employment Appeal Tribunal 472/93 and also the case of  Redrow Homes (Yorkshire ) Ltd v Wright, 2004 IRLR 720 , a case on which they appear to have placed reliance.  
 
The facts
13.	There was, according to the Tribunal, no factual dispute between the parties.  The Claimant was a painter and decorator by trade and had sought work with the Respondent.  He commenced work with him from 22 August 2003, using his own paint brushes but with the Respondent supplying rollers, paste tables and wallpaper. He worked under the Construction Industry Scheme Regulations (“CIS”) whereby tax was deducted from his earnings at the rate of 18% and he was liable for his own National Insurance contributions. He also, at times, worked as a private hire taxi driver and, when not working with the Respondent, did “homers” for others.  An example of such work was provided in some of the documents before the Tribunal consisting of CIS certificates in respect of work carried out by the Claimant for a company called Alder Joinery Ltd, during four of the months that he was also working with the Respondent.  He had profit and loss accounts prepared by an accountant, in which relevant expenditure was set against his income and capital allowances were provided for, and he was not paid if he was not working.  As regards his arrangement with the Respondent, he had to perform the work himself and the Respondent probably would not have accepted a substitute. 
 
The Respondent was evidently clear in his own mind that he had had no intention of creating an employer/employee relationship.  He paid the Claimant £10 per hour on the basis that that was intended to provide cover for overheads and that he could not prevent the Claimant also working for others. 
 
The Employment Tribunal found that the Claimant was a worker.  They appear to have placed weight on the fact that the work required to be carried out personally by the Claimant. 
 
Respondent’s case
13.	The Respondent, in a clear and able submission, presented his appeal in a professional manner, under five heads.  Firstly, the Employment Tribunal had erred in concerning themselves solely with the question of whether the Claimant was a worker, ignoring his self-employed status.  Secondly, the Employment Tribunal accepted that the Claimant was not an employee but, if he was self-employed then, according to a document printed from the part of the Department of Trade and Industry’s (‘DTI’) website that deals with the Working Time Regulations (which was produced by him at the hearing before us), those regulations did not apply to him.  He referred to the following statement which appears in that document:
 
“If you are self-employed, running your own business and are free to work for different clients and customers, the Working Time Regulations do not apply to you.” 
 
Thirdly, he submitted that a proper analysis was that there was a contract for services provided by the Claimant’s business.  Fourthly, he said that the Claimant had come to him as a self-employed painter and decorator, with a CIS card and with other clients that he needed to be free to work for, in circumstances where there was no mutual intention to create an employment relationship, all of which supported the view that he was self-employed and not a worker.  In support of that submission, he relied on the case of Apex Masonry v DS Everitt UKEAT 0482112004 at paragraph 11 of the judgment: 
 
“We begin with the Tribunal’s finding that Mr Everitt was paid or operated on a “CIS basis”. It seems to us, interpreting the succinct terms of paragraph 4 (v) of the Decision as best we can, that the Tribunal regarded this factor as supportive of the conclusions that Mr Everitt was an employee, or at best neutral.  However, it is neither of these things.  Reference to payment on “CIS basis” is a reference to the Construction Industry Scheme operated by the Inland Revenue. This Scheme applies only where the payer considers the payee to be self-employed.  Moreover, the payee will have obtained a registration card and presented it to the payer, so the payee too is likely to be claiming the status of someone who is self-employed.” 
 
He referred also to the case of Secretary of State for Employment v McMeechan [1997] IRLR 353 a case in which there was an issue as to whether or not a Claimant was an employee and the Court of Appeal said:-
 
“The principle which it enshrines is that if there be an absence on the one side of any obligation to provide work and an absence on the other side of any obligation to do such work ….., then that provides a powerful pointer against the contract …being one of service.” 
 
and said that in the present case, no such obligation existed.  
 
Fifthly, the Respondent submitted that it was clear that the Claimant considered himself to have been self-employed and referred not only to his having a CIS card but also to his accounts and to the CIS certificates in respect of his having performed work for Alder Joinery Ltd. Under reference to his accounts, the Respondent submitted that it seemed that the Inland Revenue would require to revisit his tax and national insurance liabilities if he was in fact found to have the status of worker.  
 
Regarding the Employment Tribunal’s decision, the Respondent commented that it seemed wrong to determine that a person was a worker on the basis that they personally performed whatever work was required under a contract.  That, he said, was quite normal in the case of self-employed persons and it could not, surely, mean that they fell to be classed as workers entitled to holiday pay?  Further, if the Claimant was, in truth, saying that he could be both self-employed and a worker, then why was he not claiming a proportionate part of holiday pay from his other customers such as Alder Joinery Ltd? 
 
Finally, it was clear from the Respondent’s approach that he had carefully considered the question of the Claimant’s status at the outset and satisfied himself that he was self-employed, entitled to the benefit of the CIS scheme, not liable to be treated as an employee but entitled to the higher hourly rate paid, so as to cover his overheads, in recognition of the fact that he was working on a self-employed basis.  We were impressed at the responsible attitude of the Respondent regarding this matter and it was plain that he found it very puzzling that he should now be facing a claim for holiday pay which, to his mind, was something only payable to his employees. 
 
Claimant’s case
14.	The Claimant explained that he kept working on the CIS scheme, accepting the position regarding holiday pay until he found out that he was a worker.  The Citizens Advice Bureau had, he said, told him that he was.  He understood from, it seemed, their advice, that if he took instructions to do a job, then he was a worker.  It was clear that it was his understanding of the advice he obtained from the Citizens Advice Bureau that prompted him to make the present claim. 
 
15.	The Claimant did not seek to counter the Respondent’s submissions except to suggest that the CIS certificates in respect of his work for Alder Joinery Ltd did not relate to the period when he was performing work for the Respondent, a suggestion that he retracted when the dates on those certificates were drawn to his attention.  He explained that the ‘deductions’ figures on the certificates related to him being reimbursed for the cost of materials.  
 
The legal principles
16.	The legal principles to be applied appear to be as follows.
 
Firstly, if a person is a ‘worker’ within the meaning of regulation 13 of the Working Time Regulations, then he is entitled to holiday pay.  Secondly, for a person to be categorised as a worker for the purposes of the Regulation, he must work under a contract, he must perform that work personally and it must not be the case that the work is carried out in circumstances where the person for whom it is provided is a client or customer of a business carried on by that person.  Broadly speaking, it is evident that the statutory definition of ‘worker’ will normally exclude those who are self-employed.  The last part of the definition is a clear attempt to see that that result is achieved and it is, accordingly, not surprising that the DTI have felt able to state, on their website, that the Working Time Regulations do not apply to those who are self-employed.  Thirdly, the determination of the question of whether or not a person works on a basis that fits the definition of worker is essentially a matter of fact.  
 
The Employment Tribunal make specific reference to the case of  Redrow Homes (Yorkshire) Ltd v Wright stating that the Court of Appeal held that it was correct to conclude that the Claimant contract bricklayers were employed under contracts where they undertook personally to perform work or services for the company “and were therefore “workers” within the meaning of …..the Working Time Regulations.”  It cannot, however, be correct to suggest that the mere rendering of a service personally makes a person a “worker”.  To do so is to ignore the last clause in the definition which makes it clear that if a person renders services or performs work on the basis that the person to or for whom he does so is a customer of his business, he is not then to be regarded as a worker.  Such work or service may well be rendered on a personal basis.  It is, for instance, well within the competence of many self-employed sole traders to do so and many secure business on the basis of selling their personal skills.  
 
In carrying out an assessment of the basis on which a person works, factors such as his working on the basis of a CIS certificate, having business accounts prepared and submitted to the Inland Revenue, his being free to work for others, his in fact working for others, his being paid at a rate which includes an overheads allowance and his not being paid if not working, can all be relied on as supporting the view that he is running a business and work performed by him in the course of doing so is on the basis that the person for whom he performs it is a customer of that business.  
 
Conclusions
17.	We uphold the submissions of the Respondent and allow the appeal.  The Employment Tribunal state that there was no suggestion that the Respondent was a client or customer of a painting business carried out by the Claimant, a statement which strikes us as surprising in the circumstances of this case.  In doing so, they appear to have wholly ignored the wealth of evidence to the effect that that is exactly what the Respondent was.  The factual circumstances to which we have referred make it abundantly clear, in our view that the Claimant was carrying on business on a self-employed basis.  His accounts alone, which record that in the year ended 5 April 2004, he received income ‘From CIS Contracts’ (our emphasis) provide powerful evidence to that effect, as does the fact that he had a CIS certificate which he presented to the Respondent.  Further, the CIS certificates in respect of his earnings from Alder Joinery Ltd during the period that he was also performing work for the Respondent and the undisputed evidence that the Claimant was free to work for others and received an hourly rate which was intended to provide an element of cover for his overheads are highly relevant.  All these matters provide, in our view, clear indicators that the Claimant was running a business and that the work he performed for the Respondent was one of his business activities.  The fact that the work was performed by him personally does not detract from or negative that fact.  That being so, he is not a “worker” entitled to holiday pay.  
 
18.	We would like to record our appreciation of the courteous approach by both parties at the hearing in circumstances which cannot have been easy for them given the deterioration in what had, apparently been a good working relationship prior to the dispute over holiday pay. Their restraint and apparent determination to be as measured as possible in their submissions was impressive.  It is unfortunate that the Claimant’s trip to the Citizens’ Advice Bureau led to the bringing of the present claim since it seems that, otherwise, their relationship would not have been marred.  We can only hope that it now capable of repair.