Appeal No. UKEAT/0144/07/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 21 June 2007

Before
HIS HONOUR JUDGE PETER CLARK
MR K EDMONDSON JP
MR P GAMMON MBE

HARLOW DISTRICT COUNCIL	APPELLANT

1) SJ O’MAHONY
2) APS RECRUITMENT LIMITED	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR M LANE
(of Counsel)
Instructed by:
Harlow District Council Legal Services
Civic Centre
The Water Gardens
Harlow
Essex CM20 1WG	
For the 1st Respondent

For the 2nd Respondent	MS B AHMED
(of Counsel)
Instructed by:
Messrs O H Parsons & Partners
3rd Floor
Sovereign House 
212-214 Shaftesbury Avenue
London WC2H 8PR

MS T WALKES-BROWN
(Representative)	

SUMMARY
Contract of Employment – Definition of employee
Triangular relationship – whether ET entitled to conclude that there was to be implied a contract of employment between worker and end-user.  See Dacas. Muscat. James v Greewich BC.  They were.  Adequacy of reasons.  Conclusion by ET plainly right.

HIS HONOUR JUDGE PETER CLARK

1.	The parties to this matter which has been proceeding in the Stratford Employment Tribunal were Mr O’Mahony, Claimant, and (1) Harlow District Council “HDC”, and (2) APS Recruitment Ltd, Respondents.  We shall describe those parties as the Claimant, HDC and APS respectively.
	
2.	The appeal before us is brought by HDC against a reserved judgment of a Tribunal chaired by Mr J Simpson, sitting on 9 November 2006.  By that judgment (the liability judgment) with reasons registered on 21 December, the Tribunal held (1) that the Claimant was employed by HDC, and (2) unfairly dismissed by HDC.  The appeal centres on the first finding by the Tribunal.  Following a subsequent remedies hearing, held on 8 January 2007, the same Tribunal ordered reinstatement by HDC and made certain consequential orders.  That remedies judgment, dated 12 January, is not of itself the subject of any appeal.

Overview
3.	The issue in this appeal is whether the Tribunal was wrong in law in concluding that there is to be implied a contract between HDC and the Claimant;  it is common ground that no express contract existed between those parties, and if so, whether that was a contract of employment giving rise to statutory protection for the Claimant against unfair dismissal by HDC.  There is a further issue as to whether the Tribunal gave adequate reasons for their conclusion.

4.	The case features the now familiar triangular relationship involving worker, agency and end-user.  The question as to whether a contract of employment falls to be implied between the worker and end-user has been the subject of considerable judicial debate.  The relevant cases in the Court of Appeal are Franks v Reuters [2003] IRLR 423, Brook Street Bureau v Dacas [2004] IRLR 358 and Cable & Wireless v Muscat [2006] IRLR 354.  Those authorities have recently been considered by Elias P, in James v Greenwich Council [2007] IRLR 168 and by Bean J in Craigie v Haringey London Borough Council [2007] (UKEAT/0556/06) 12 January 2007.  I have also had call to consider the present state of the law in Astbury v Gist (2007) (UKEAT/0619/06) 28 March 2007 and Heatherwood & Wrexham Park Hospitals NHS Trust v Kulubowila [2007] (UKEAT/0633/06) 29 March 2007.  For present purposes we do not intend to further that debate, rather to seek to apply the principles emerging from those cases, with the assistance of counsel, to the particular facts of the present case.

The facts
5.	In their form ET3 response to the Claimant’s claim of unfair dismissal, HDC said this:

“HDC had an agreement with a recruitment agency … (APS) to supply a variety of people to carry out and fulfil roles within Operational Services of HDC.  In approximately December 2004/January 2005 HDC asked APS to supply a competent plasterer.  APS then contacted us with details of persons they thought to be suitable and one of the persons referred was the Claimant.” 

6.	The Tribunal found that HDC’s Housing Department used approximately 200 workers, of which 13 were supervisors.  The Operations Manager of that department was Ms Dwan.  Most of the workers were directly employed by HDC.  The remainder were engaged as “agency workers” through one of three employment agencies which included APS.  In December 2004 Ms Dwan was informed by a supervisor, Mr Mckenzie, that an additional plasterer was required.  Mr Mckenzie contacted APS to find an appropriate person.  The Claimant registered with APS in January 2005.  APS provided a form of contract to which he paid little attention.

7.	Ms Walker-Brown has attached to the skeleton argument lodged on behalf of APS a draft standard form of contract between APS and a temporary worker.  However, it is dated March 2006 and we note is Issue 2.  She has been unable to produce Issue1, which most probably was given to the Claimant.  The document which she produces was not before the Employment Tribunal.  Therefore we accept Mr Lane’s submission that we should not admit that document on appeal under the new evidence rule.

8.	The Claimant was invited to interview by HDC and saw Mr Mckenzie and another employee of HDC, Nikki Chick.  There was some uncertainty as to the rate of pay for the job.  Initially APS informed him in writing that the rate would be £12.50 per hour.  Shortly afterwards he received a second document showing the rate as £11.50 per hour.  When he queried this alteration he was told that the reduction represented APS’s administration charges in handling the payroll for HDC.  He commenced work for HDC on 18 January 2005 at the initial rate of £11.50 per hour later increased.  Thereafter, the Claimant had no direct contact with APS, although they paid his wages.

9.	He attended for work on a regular five-day week, reporting directly to Mr Mckenzie who gave him his instructions.  He drew materials from the HDC stores, was issued by HDC with uniform trousers and jacket, together with safety boots and protective clothing.  Some of the items of clothing bore HDC’s logo.  He provided his own small hand tools but was provided with larger tools, such as picks and shovels and kango hammers by HDC.  He was required to take a driving test by HDC, who then provided him with a vehicle bearing the HDC logo.  He was required to wear an HDC identity badge.  HDC also provided him with a mobile phone in March 2006.

10.	After about one month a worker left and Mr Mckenzie offered the Claimant that person’s position driving a larger vehicle.  This new arrangement was entered into directly between Mr Mckenzie and the Claimant without the involvement of APS.  The Claimant also negotiated an increase in his pay direct with Mr Mckenzie, not through APS.  Some times Mr Mckenzie asked the Claimant to work overtime.  On one occasion Mr Mckenzie disciplined him over the laying of a concrete path.  He administered an informal warning.  On another occasion the Claimant raised a grievance about his workload with another HDC supervisor, Mr Eames, which resulted in its reduction.  If the Claimant was unwell he notified Mr Mckenzie of his absence by telephone.  If he wished to take holiday he was required to submit a request two weeks in advance, so that his work could be rescheduled.  HDC had the right to refuse a holiday request.

11.	The Claimant completed weekly timesheets on a document produced by HDC, which were countersigned by Mr Mckenzie.  He submitted then to APS, who paid him, and invoiced HDC at a higher hourly rate.  The terms and conditions of contract between HDC and APS were before the Tribunal.  In respect of the introduction of temporary workers, the agreement as to charges is contained in clause 2.1 which provides:

“The client (HDC) agrees to pay the hourly charge plus VAT advised by the employment business (APS) at the time of the assignment.  Verification and signature of the employment business’ timesheet each week constitutes acceptance that a temporary worker has worked satisfactorily for the hours stated.” 

12.	We should also refer to clause 1 and clause 10.  Clause 1,

“Acceptance.  These terms and conditions are accepted by the client in respect of the provision of personnel services on the interview of or the engagement under a contract or services of a temporary worker assigned by the employment business (temporary worker).” 

And clause 10 begins:
“Temporary workers are engaged by the employment business under contracts for services.  They are deemed to be under the supervision direction and control of the client from the time they report to take up duties and for the duration of the assignment.” 

The Claimant ceased working for HDC on 5 May 2006.

The Tribunal decision
13.	The Tribunal directed themselves to a number of the decided cases including Dacas, (paragraph 12 of their reasons).  They considered the various tests for distinguishing a contract of service from a contract for services, including the classic test formulated by McKenna J in the Ready Mixed Concrete case [1998] 2QB 497.  Having considered the law, they expressed their conclusions at paragraph 16 of their reasons, finding that the Claimant was employed by HDC under a contract of employment and they found that as an employee he was dismissed by HDC and that dismissal was unfair.

The appeal
14.	Mr Lane, who did not appear below, contends that the Tribunal’s reasoning was not Meek-compliant.  There was no express agreement between HDC and the Claimant.  If the Tribunal found an implied contract between those parties, they did not explain why they so found.  It was not necessary to imply a contract applying the Aramis test referred to in Muscat, see paragraphs 43 and 51.  He submits that the proper course is to allow this appeal and remit the matter for rehearing before a fresh Employment Tribunal.

15.	Ms Ahmed resists that approach.  She submits that the Tribunal has fully found the relevant facts.  They plainly had in mind the relevant law.  Their conclusions, if not ideally reasoned, are plainly sustainable in law.

Conclusion
16.	We accept Mr Lane’s submission that the Tribunal has not clearly reasoned their finding that a contract existed between HDC and the Claimant.  However, we are reminded by Ms Ahmed of the guidance of the Court of Appeal in English v Emery Reimbold [2002]EWCA Civ 605.  At paragraph 89 the Master of the Rolls, giving the judgment of the court said this:

“There were shortcomings in the judgment in this case.  On a number of occasions we have had to consider the underlying material to which the judge referred in order to understand his reasoning.  On one occasion, the significance of the fact that the milking cups were perpetually full of milk, we failed to follow his reasoning even with the benefit of the underlying material.  At the end of the exercise, however, we have been able to identify reasons for the judge’s conclusions, which cogently justify his decision.  While he did not express all of these with clarity in his judgment he made sufficient reference to the evidence that had weighed with him to enable us, after considering that evidence, to follow that reasoning with confidence.” 

17.	In the present case we are satisfied that the findings of fact inexorably lead to the conclusion reached by the Tribunal being sustainable in law.  Our analysis is as follows.  

18.	(1) Looking at clause 1 of the agreement between APS and HDC, it envisages the engagement by HDC of the temporary worker under a contract for services.  It is permissible for a worker to be engaged by both the end user, HDC (clause 1) and the agency (clause 10).  

19.	(2) Even if there was no contract between the Claimant and HDC initially, it may be possible to infer a contract based on the conduct of the parties.  In James the President said, at paragraph 58:

“When the arrangements are genuine and when implemented accurately, represented the actual relationship between the parties, as is largely to be the case where there was no pre-existing contract between worker and end user.  Then we suspect that it will be a rare case where there will be evidence entitling the Tribunal to imply a contract between the worker and the end user.  If any such a contract is to be inferred, there must, subsequent to a relationship commencing, be some words or conduct which entitle the Tribunal to conclude that the agency arrangements no longer dictate or adequately reflect how the work is actually being performed, and that the reality of the relationship is only consistent with the implication of the contract.  It will be necessary to show that the worker is working not pursuant to the agency arrangements, but because of mutual obligations binding worker and end user which are incompatible with those arrangements.” 

We respectfully adopt that analysis.

20.	(3) Cases may arise where the agency acts as agent, not just for the worker but also the end user.  So Mummery LJ opined in Dacas, paragraph 52.  That contention failed on the facts in Astbury v Gist.
21.	(4) The fact that the agency pays the wages of the worker on behalf of the end user, here HDC, is not fatal to the existence of an implied contract of service between the worker and end user.  Munty J’s view to the contrary in Dacas was not shared by Mummery LJ and Sedley LJ in that case, and that majority view was endorsed by the Court of Appeal in Muscat, paragraph 35.

22.	(5) Applying those principles to the facts as found in the present case, we are quite satisfied that assuming in favour of HDC there was no contract between HDC and the Claimant, contrary to our construction of clause 1 of the agreement between HDC and APS, at the outset, the conduct of those parties during the period January 2005 to May 2006 points ineluctably to the conclusion that the reality of the relationship is consistent only with a contract between them, see James.

23.	We arrive at that conclusion by reference to the following features in the factual matrix: 

(a) HDC asked APS to find them a plasterer.  That is entirely consistent with APS acting as agent for HDC in obtaining personnel; 
(b) HDC interviewed the Claimant before taking him on.  He was then subject to the control of his supervisor, Mr Mckenzie; 
(c) The Claimant had no further contact with APS or its representatives, save that he submitted timesheets countersigned by Mr Mckenzie and APS paid his wages, we are satisfied, as agent for HDC, see Muscat; 
(e) The Claimant negotiated a pay increase directly with Mr Mckenzie on behalf of HDC, not with APS; 
(e) He was provided with HDC clothing, protective equipment and a vehicle to carry out his work; 
(f) He was subject to discipline by HDC and raised a grievance with HDC about his working conditions; 
(g) He was asked directly by Mr Mckenzie to work overtime when required; 
(h) He needed HDC permission to take holidays and notified them when he was absent through sickness.

24.	If follows from the forgoing, albeit not expressly articulated in the Tribunal’s reasons, that they permissibly found that a contract was necessarily to be implied to reflect the reality of the relationship between the Claimant and HDC as it developed, and that that contract was a contract of employment, whether applying the control test, the business organisation test, the economic reality test or that formulated by McKenna J in the Ready Mixed Concrete case.

25.	Since there is no appeal against, (a) the Tribunal’s finding of unfair dismissal, or (b) the remedy awarded, it follows that this appeal fails and is dismissed.