Appeal No. UKEAT/0288/06/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 2 August 2006

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
(SITTING ALONE)

(1) GMB TRADE UNION	APPELLANTS
(2) MR P KENNY 
(3) MR P McCARTHY 

(1) MR A HUGHES	RESPONDENTS	
(2) MR M BEAUMONT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellants	MR N M SIDDALL
(of Counsel)
Instructed by:
EAD Solicitors Employment Law Unit
Prospect House
Columbus Quay
LIVERPOOL
L3 4DB	
For the Respondents	MR A HUGHES
(The first Respondent in Person)	

SUMMARY

Contract of Employment – Definition of employee

Are Branch Secretaries of the GMB  trade union simply office holders or do they also work under a contract of employment?  Tribunal Chairman held that they did, and the EAT rejected the union’s appeal on the basis that it was a permissible conclusion and no material error of law was identified.  

  

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
.
1.	This is an appeal against the decision of the Tribunal Chairman (Mr.S.D.Robertson) sitting in Manchester when he held that the two Respondents to this appeal, Mr Hughes and Mr Beaumont, who are both full time Branch Secretaries of branches of the GMB trade union, were employees of that trade union within the meaning of section 230(1) of the Employment Rights Act. It followed from that finding that they are also workers as defined by section 230(3) of the Employment Rights Act, and that they were in employment within the meaning of section 82(1) of the Sex Discrimination Act.

2.	They had brought claims under statutory provisions in which their status under those three sections had to be determined and the Chairman therefore considered these issues as a preliminary matter.  The union now appeals his finding.  The union has been represented by Mr Siddall.  The two Respondents have represented themselves.  Sadly, their Counsel, Mr. Kafish Ali, who appeared on their behalf in the Employment Tribunal, is ill and not able to be present.  He had already lodged a very full, detailed and helpful skeleton argument for which I am very grateful.

The legislation 

3.	The relevant statutory provisions are as follows. Sections 230(1), 230(2), and 230(3) of the Employment Rights Act 1996 say:

“230	Employees, workers etc

(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.

(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 cased, 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 profession or business undertaking carried on by the individual;”

Section 82(1) of the Sex Discrimination Act 1975, in so far as it is relevant, says:
 
“82	General interpretation provisions

(1)	In this Act, unless the context otherwise requires—
… “employment” means employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour, and related expressions shall be construed accordingly…”

The Facts

4.	The Chairman had extensive documentation – it appears somewhere close to 550 pages - and he heard evidence from both the individuals and from the union's finance director.  He set out the background, which we can consider under a number of headings. 

5.	First, he made findings about how the union was organised and how the branches fitted into that structure. He said this:
“12	The respondent allocates its members to branches.  These may be local, or workplace/employer specific.  Each branch has a number of Officers, all of whom are elected and one of whom is the Branch Secretary (rule 37).  Every branch must have a Branch Secretary, and there is provision for appointment from outside the branch if the branch cannot fill the role.

13	The respondent is then divided into 10 regions, on a geographic basis.  (There are also 8 Sections based on industry or economic sectors, but they need not concern me further).  The branches elect a Regional Council every 4 years, from which is drawn a Regional Committee.  Management and administration of the Regions vests in the Regional Council but in practice is delegated to the Regional Committee (rules 20 and 22).  Nationally, there is an elected Central Executive Committee and final authority rests with the delegate Congress.”

6. 	He then noted that there are three different kinds of persons working within the union.  There are staff, such as administrative staff, working under contacts of employment; officers who hold office under the rules but are also described as officials under rule 17 and who are also treated as employees; and lay officials, who include workplace representatives and branch officials, including Branch Secretaries. These lay officials, who are officers within rule 18 but are not considered to be employees and do not have written contracts of employment.   Those officials who have written contracts cannot be delegates to conferences, but other officers, including Branch Secretaries, can and often are.

7.	The Chairman then summarised the rules of the branch. Briefly the position is as follows.  Rule 37 sets out the role of the branch. It has a significant function in securing and maintaining members. It has also to prepare a recruitment plan which must be registered with the regional committee. There are a number of branch officers including a President, an Equality Officer, a Youth Officer and two Auditors, as well as the Branch Secretary.  All these officers are subject to re-election every 4 years.

8.	Rules 37(11) and 37(15) confer certain powers on the regional bodies to discipline branch officers failing in their duties in various ways: 
“11	Any Branch Officer… failing to perform his/her duties to the satisfaction of the Regional Secretary and the Regional Committee may be removed from office at any time by decision of the Regional Committee, and the Regional Committee shall have full discretionary powers to authorise a new election by the Branch members or, alternatively, shall take such other action as may be deemed expedient in the interests of the Union.”
“15	The Regional Committee shall have power to suspend or remove from office any Branch Officer… in cases of incompetency, dishonesty, failure to carry out instructions or decisions of the Central Executive Council, or the Regional Council, or the Regional Committee, or for any other reason which it deems good and sufficient…”

9.	Rule 39 deals with the position of the Branch Secretary.  In essence it requires him to keep all necessary books and accounts; to maintain a register of members and forward it to the Regional Secretary when required; properly to secure and take care of the finances in his possession; and to report any neglect by the collecting stewards.  The method of payment of Branch Secretaries is unusual.  Congress determines the scale of remuneration for branch officers including Branch Secretaries.  The provision may be different depending on the size of the branch. There is even the possibility of no provision for pay being made at all.  I return to that because it is a significant part of this appeal.  In practice, full time Branch Secretaries have been given 10% of the branch fees for many years. They are neither, therefore, paid by reference to work done nor the hours they actually work.  It is effectively, as the Tribunal Chairman noted, a capitation on membership fees.  Some branches, however, are very large and payments could be substantial.  Mr Hughes apparently received around £45,000 and Mr Beaumont about £20,000. 

10.	The Chairman then considered what the Branch Secretaries actually did.  He heard from the two individuals, and accepted their evidence that the rule 39 duties only constituted a small part of their overall duties.  Mr Beaumont said it was about 10%. More important were the representation, negotiation and consultation roles which they carried out on behalf of union members, and which amounted to some 65%.

11.	The officers were thought by the union not to be employees, and therefore they were naturally not given the documents which would be given to any employee, such as written particulars of employment or any formal contractual documents.  However, from November 2002 they became eligible to join the union’s Stakeholder pension scheme, which is not, however, the same scheme to which officers who are also treated as employees belong.  

12.	Having set out that background, the Chairman referred to certain legal authorities, some of which I consider later in this Judgment.

The Chairman’s analysis

13.	The Chairman then identified the factors which had weighted with him in his assessment as to whether or not there was a contract of employment in existence. I briefly summarise these; they are set out at much greater length in his decision.  He had regard to the fact that payments were fixed in advance and that they were substantial.  Although not related to work or hours, they were in the nature of a commission.  The duties were well beyond those stipulated in rule 39 and, as I have said, as much as 90% of the duties were not within the terms of that rule.  He rejected the contention which had been advanced by Mr Siddall that these duties were undertaken as part of “voluntary acts”.  He accepted that the union had always considered that the Branch Secretaries are not employees and they had acted accordingly in terms of not giving a written contract or particulars and allowing Branch Secretaries to act as union delegates and so forth. 

14.	He noted that the Claimants had not at any time actively sought to challenge the union’s perception of their status. He observed that “the label the parties give to the relationship is a relevant but not in my view a crucial factor”. Although he did not mention them, this is in fact in line with a string of authorities e.g. Ferguson v John Dawson and Partners (Contractors) Ltd [1976] 1 WLR 1213(C.A.) and Narich Pty Ltd.v Payroll Tax Commissioner [1984] ICR 286 (P.C). He recognised that there was significant autonomy given to the Branch Secretaries, such as where, how and when they did their work. At the same time they were subject to a certain degree of regional control. Written instructions were sometimes sent about the running of the office, for example, and they could be removed from office if they failed to carry out their duties to the satisfaction of the Regional Secretary or Regional Committee as we have seen.  He observed that it is not necessary for there to be day to day control in order for a contract of service to exist: many employees will be left very much to their own devices with very little interference from superiors. 

15.	He made certain observations about particular issues which had been raised by Mr Siddall. He noted that there was nothing inconsistent with a finding that Branch Secretaries are employees even although they are subject to election. He observed that although rule 17 of the Rules gives union officials different rights and obligations to Branch Officers, that rule did not in fact stipulate that officials were to be employees, nor did their greater protection relate specifically to their status as employees. 

16.	He considered a submission, to which I will return, that the union had a power to pay nothing and that this was inconsistent with a contract of service. He drew attention to Minutes of the 1993 Congress, which made clear that Branch Secretaries will in fact be protected from any change in pay. On that basis he rejected the notion that they would, in practice, ever be subject to a situation where pay would be withdrawn. 

17.	Finally, he observed that the fact that the Branch Secretaries were members of the Stakeholder pension scheme pointed towards there being an employment relationship superimposed on the office. Mr Siddall suggested that the Tribunal had not appreciated that the pension arrangement was different from that applicable to other union officers.   We see no basis for saying that, but in any event, the key point here was that they had any pension rights at all. Insofar as they are placed in a different pension scheme to those officers considered to be employees, that is indeed consistent with the union’s view that Branch Secretaries are not employees in the normal way, and finally Mr Siddall accepted that the matter really went no further than that.

18.	The Chairman then summarised his conclusions as follows:
“39	I have concluded that the claimants were employees… They worked full-time for the respondent as Branch Secretaries in return for substantial remuneration (including pension benefits) which was fixed in advance and could not be described as an honorarium.  They worked under a sufficient degree of control by the respondent.  Their duties went well beyond what the rule book required of a Branch Secretary under rule 39.  Although the claimants carried out their duties because they were Branch Secretaries, I do not accept that the duties were defined by their office.  The reality of the situation is that the claimants were required in return for the payments made to them as full-time Branch Secretaries to perform a range of duties which for the majority of their working time were outside the duties of the office as set out in rule 39.  I am satisfied that both parties intended and understood that they would undertake this wide range of duties well beyond rule 39.  I do not accept that these wide additional duties were voluntary activism or that payment was made to the claimants in their full-time role solely for their duties of office under rule 39.  I agree that the traditional view of trade union branch officers has been that they hold an office under the rule book and are not in employment but what I must do is to look at the reality of the relationship of these individuals to the respondent, balancing the factors I have mentioned one way or the other, and having regard to the case authorities I have mentioned.  I find, having done this, and for the reasons given earlier in this paragraph, that the claimants were employed under a contract of service and they were, therefore, employees within section 230(1) of the Employment Rights Act 1996.  It follows from this that because the definition of “worker” in section 230(3) and of “employment” in section 82 of the Sex Discrimination Act 1975 includes employment under a contract of employment, the claimants satisfy those definitions also.”

Preliminary observations
19.	I make some preliminary observations in relation to this matter. First, as the Chairman noted, it was never suggested that the Claimants were employed under a contract for services working on their own account. Second, nor is it, or was it, disputed that they could properly be described as office holders under the rules of the union. The contrast was not between whether they are office holders or employees working under a contract of service, but rather whether they were office holders and at the same time worked under a contract of service.  These are not mutually exclusive, as many authorities show.  These include Johnson v Ryan & Others [2000] ICR 236 and also the recent decisions of the House of Lords in Percy v Church of Scotland Board of National Mission [2006] IRLR 199, where Lord Nicholls considered the potential relationship between office and contract in the following terms:  
“19	Sometimes the existence of an office is clear.  An office may be of ancient common law origin such as the office of Constable.  Indeed, some offices were regarded by the common law as incorporeal hereditaments belonging to the current office holder.   A Benefice in the Church of England is regarded as a freehold office belonging to the incumbent for the time being.  Or an office may be created by statute with attendant statutory functions.  A superintendent registrar at Births Deaths and Marriages is an example;  Miles v Wakefield Metropolitan District Council [1987] IRLR 193.  
20. Less clear cut are cases where an organisation, ranging from the local golf club to the huge multinational conglomerate makes provision in its constitution for particular posts or appointments, such as Chairman or Vice-President.  In a broad sense, these appointments may well be regarded as offices, but caution needs to be exercised here, lest the use of this term in this context lead to a false dichotomy.  A person either holds an office or is an employee.  He cannot be both at the same time.  This is not so.  If office is given a broad meaning, holding an office and being an employee are not inconsistent.  A person may hold an office on the terms of and pursuant to a contract of employment, or like a director of a company a person may hold an office and concurrently have a service contract.  Whether there is a contract in a particular case, and if so, what is its nature and what are its terms depends on an application of familiar general principles.  That the appointment in question is or may be described as an office is a matter to taken into account.  The weight of this feature will depend upon all the circumstances, but this feature does not of itself pre-empt the answer to the question of whether the holder of the office is an employee.  This feature does not necessarily preclude the existence of a parallel contract, but carrying out the duties of the office, even where they are statutory…”

20.	Third, office holders fall into different types, as the observations of Lord Nicholls make plain. In 102 Social Club & Institute Ltd v Bickerton [1977] ICR 911 at 918, the EAT (Mr Justice Phillips presiding) set out a number of factors to be considered in deciding whether the secretary of a members’ club might also be an employee. The features he considered to be potentially relevant are the following:
(1)	The payment made to the secretary: was it an honorarium (Shorter Oxford English Dictionary (first meaning) “an honorary reward”) or was it a salary?  In Rogers v. Booth [1937] 2 All E.R. 751, 755, Sir Wilfrid Greene M.R. said of the Salvation Army Officer who had claimed under the Workmen’s Compensation Act:

	“The circumstances that a monetary sum is paid to officers who enter into this relationship is, in my opinion, quite insufficient to change the relationship from what it otherwise would be.  It is quite obvious that, if officers are devoting the whole of their lives to this service, the Army would make provision to maintain them, and that it in effect does.  But that does not mean that the sum which is paid has any similarity to wages or salary, or any payment given contractually for services given or for services rendered.  It is a maintenance payment, to enable them to carry on the work that they have undertaken.  It appears to me, therefore, that the appellant cannot establish, not merely a contract of service, but also any contractual relationship at all which could possibly become a contract of service or be a contract of service, and, in my opinion, the appeal fails on that ground.”

So the question is whether the payment was made contractually for the services, and whether the services were rendered in return for the payment, or whether it was a mere grant or solatium.
(2)	The tribunal may wish to consider whether the payment was fixed in advance, possibly on a periodical basis, or whether it was voted at the end of the year in token of the members’ work.  The former arrangement would favour the view that the payment was a salary, the latter that it was not: though neither would be conclusive.
(3)	It is material to see whether the arrangements confer upon the secretary a right to payment or whether what is paid is a mere bounty.
(4)	The size of the payment.
(5)	Whether he is exercising the functions of an independent office (somewhat in the way that a curate or a police officer does) or is subject to the control and orders of the club.
(6)	The extent and weight of the duties performed; the smaller they are the less likely he is to be an employee.
(7)	The description given to the payment in the minute or resolution authorising it, and its treatment in the accounts, and for tax and national insurance purposes.”

21.	Fourth, in this case therefore the crucial question is whether his office within the union – and Mr Siddall accepts that it would be with the union and not merely with the branch – has superimposed upon it a contractual relationship with the union. If there is a contractual relationship then, save for one argument which I address below, it is accepted as I have indicated that it would be a contract of service.

Grounds of Appeal

Failure properly to analyse the source of duties
22.	The principal - or at least a major - ground of appeal is that the Tribunal should have focused on the duties as specified in the Rule Book. It was not legitimate to look beyond it. Alternatively, the Chairman ought to have assessed the legal relevance, if any, of work which these claimants performed which was beyond the duties specified in rule 39. It was submitted that, in fact, that work was performed voluntarily, and was not a legal obligation; or if it was pursuant to a legal obligation, it was the obligation created by the office and not the contract.  The Tribunal simply assumed that the extra duties, performed over and above rule 39, were performed pursuant to a contract.

23.	I reject this submission. First, I think that there is really no basis for saying that the duties were carried out voluntarily, that is without any legal obligation to do so at all.  The rules do not specify that the duties set out therein are exhaustive. Indeed it would be very surprising if they were. Rule 39 is directed rather to ensuring that branch documents, such as membership records, are kept in order and that monies are properly accounted for. The salary would be generous indeed for such limited functions. Moreover, it is plain that the additional duties are carried out with the acquiescence of, and sometimes at the behest of, the Regional Secretary. To describe some 90% of the duties as voluntary is, with respect, faintly ludicrous. In any event, the Chairman did make a clear finding about that. He said in terms at paragraph 39 that these were duties they had to perform:
“The reality of the situation is that the claimants were required in return for the payments made to them as full time Branch Secretaries to perform a range of duties which for the majority of their working time were outside the duties of the office, as set out in rule 39. I am satisfied that both parties intended and understood that they would undertake this wide range of duties well beyond rule 39.”

24.	That was plainly a conclusion which the Chairman was entitled to reach. Indeed I would have thought that any contrary conclusion would face the challenge of perversity.  Nor do I accept that he simply assumed without more that these duties, once established, were necessarily performed pursuant to a contract rather than pursuant to the office.  There would have been little purpose in the detailed assessment of the evidence if this had been his reasoning.  Having said that, I agree with the Chairman that the fact that so much of what they did fell out with the scope of rule 39 was a relevant - and he was entitled to think a strong -factor pointing towards there being a contract in existence.

Failure to give weight to factors pointing against a contract of service

25.	There are then a number of matters which it is said point against there being a contract. One is the absence of a written contract. Another is the absence of written particulars, and yet another is the fact that those with written contracts are not permitted to take part as delegates in various union meetings.  In truth, these are all simply the consequence of the union’s perception that Branch Secretaries were office holders and not employees.

26.	It is hardly surprising that having started from that assumption, the union acted on the basis that the assumption was correct. That is not a criticism of the union; they genuinely believed that these Branch Secretaries were not employees, and therefore they did not accord them the legal rights which they gave to other officials in the union who they did accept were employees.

27.	But all these matters have relatively limited significance. They are really an aspect of the label which the parties themselves have put on the relationship.  As the Chairman noted, that is a matter of some weight, but it is far from crucial. These independent factors are merely self-serving insofar as it is suggested that they go any further than reflecting the genuine understanding which the parties had of their own relationship (and that assumes that the claimants shared the view of the union, which is not clear.)

28.	To a similar effect, in my opinion, is the contention that the Employment Tribunal misunderstood the decision of Billany v Knutsford Conservative Club UK EAT/0065/03. Mr Siddall justifiably observes that there is a clear distinction in the rule book between persons engaged under rule 17, who are viewed as employees, and branch officials, who are seen in a totally different light. It is pointed out accurately that in the case of Billany the ET put some weight on the fact that the rules of the club drew a distinction between officers and employees, and the EAT (HHJ Birtles presiding) accepted that they were entitled to do so.  It appears that the rules in that case envisaged that a secretary would receive an honorarium but that he or she could be given a written contract of service, in which case the contractual terms would be substituted for various provisions in the rules relating to election, term of office, retirement and so forth. Insofar as those rules would have indicated how the parties perceived their own relationship, they were plainly material, but they were not decisive, and no-one suggested that they were. 

29.	In this case the Chairman had regard to the fact that Branch Secretaries were treated differently to other officials who were recognised as being employees and with contracts of service.  He took that into consideration as one of the factors to be weighed in the balance, but it was far from decisive and it does not begin to demonstrate that he wrongly exercised his discretion.  We do not see any inconsistency with the Knutsford case.  It may be that this factor was given greater weight in that decision, but weight will depend on the whole range of factors under consideration.  The significance of any particular factor will inevitably vary from case to case.

No duty to pay
30.	Finally, significant weight is placed on the fact that under rule 34, Congress could determine that nothing was paid to the Branch Secretary. The relevant rule is as follows:
“Congress shall from time to time determine scales of payment for the branch officers listed below, such scales will make different provision, including provision for no payment, depending on the membership of the branch”.

Branch Secretaries are included in the list of officers.

31.	It is said that the provision for no payment, even if in fact not exercised, is decisive of this case.  Mr Siddall submits that the right to make no payment is inconsistent with a contract of service.  He does not say that it is inconsistent with any contract remaining in force, but rather that it creates a contract sui generis.  .

32.	I think that there are a number of difficulties with this argument.  The first relates to the construction of the rules. Although it does not seem to have been considered by the Tribunal, I think it highly unlikely indeed that this rule could be used simply to reduce the pay to nothing at the whim of conference. The rule envisages that the stipulation of what is to be paid will depend on the membership of the branch. It is not an unfettered rule which allows congress to remove any payment irrespective of the size of the branch. 

33.	In any event, as Mr Siddall accepts, it does not prevent a contract being in place, at least unless and until that particular power is exercised. There is an analogy here with mutuality of obligations. The lack of any mutuality of obligation may prevent what is sometimes called an ‘umbrella’ contract being in existence. That is, if there is no duty to offer work or to accept it, then for periods when the person is not at work there is no contract in place. But where somebody is working, the mutuality exists for the duration of the actual working relationship and there is clearly a contract in place for that period. Similarly here: even if Congress has the right to remove payment, unless and until it does so, there is a duty to make a payment.  Mr Siddall submits, however, that the mere possibility that the pay can be removed (assuming that it can) prevents this being a contract of employment.  He draws an analogy with the duty to provide personal service.  If there is no such duty there can be no contract of service even if in practice the power has not been exercised: see for example, Express and Echo Publications Ltd v Tatton [1999] IRLR 367, Court of Appeal (CA).  He submits that the power to pay nothing has a similar effect.  I do not see why.  Assuming that it is possible to have a contract which requires no payment from the employer (but there must surely be some consideration from the employer or there is no contract in being), I do not see why that could not be a contract of service rather than, as Mr Siddall says, a contract sui generis.  Take this case.  He says that if Congress in fact removed the pay, that would still leave the Branch Secretaries under a contractual obligation to perform their duties until they had lawfully resigned.  Even if that were so - and I have some doubts about it - I see no reason why the fact that they were not contractually entitled to receive pay for that period ought to alter the nature of the contract. 

34.	The Tribunal dealt with this in part by concluding that as a matter of reality it was inconceivable that the pay would be removed in that way.  I would accept that if, on a proper construction of the contract, there was such a power then statements of intent as to how the power should be exercised would not be legitimate to interpret- effectively to rewrite- the contract.  It was not suggested that they gave rise to a variation of the contract.  However, for reasons I have given I do not think that the argument based on rule 34 does, as a matter of law, preclude a finding that there was a contract of service.  

Conclusions

35.	I therefore reject each of the grounds of appeal. This was a well-crafted decision where the Chairman assessed the factors clearly and carefully. He weighed them up and he reached a clear conclusion.  Although he did not in fact analyse the facts by reference to the criteria in the Bickerton case, I think this would have reinforced his view.  There was a substantial, fixed and periodical payment, control from the region, extensive duties not by any means solely defined by the rules, and in addition membership of a pension scheme.

36.	 It is very well established that it is not for this Tribunal to substitute its own view for that of the Chairman. This Tribunal can only interfere with the decision of the ET if it has misdirected itself in law or reached a decision which no reasonable tribunal properly directing itself on the relevant questions of law could have reached: see the observations of Sir John Donaldson MR in O’Kelly v Trust Houses Forte PLC [1983] IRLR 369 and 371 and repeated in many cases since. 

37.	I am satisfied that there is no semblance of any material error of law here and that this appeal therefore is unsuccessful.