Appeal No. UKEAT/0232/11/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 23 September 2011

Before
HIS HONOUR JUDGE PETER CLARK
(SITTING ALONE)

THE HOSPITAL MEDICAL GROUP LTD	APPELLANT

DR C WESTWOOD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	

APPEARANCES

For the Appellant	MS KATHLEEN DONNELLY
(of Counsel)
Instructed by:
The Wilkes Partnership
41 Church Street
Birmingham
B3 2RT
	
For the Respondent	MR JOHN COOK
(Solicitor)
SAS Daniels LLP
30 Greek Street
Stockport
SK3 8AD	

SUMMARY
JURISDICTIONAL POINTS – Worker, employee or neither

Employment Judge correct in finding that the limb (b) worker exception (client or customer of Claimant) did not apply to the relationship between these parties as regulated by a written contract for services.  →Worker.

HIS HONOUR JUDGE PETER CLARK
Introduction
1.	The parties in this matter before the Birmingham Employment Tribunal are Dr Westwood, Claimant, and the Hospital Medical Group Limited, Respondent.  I shall so describe them.

2.	This is the full hearing of an appeal by the Respondent against the Reserved Judgment of Employment Judge Roper, sitting alone at a PHR held on 24 February 2011, finding that the Claimant enjoyed worker (although not employee) status in his relationship with the Respondent, as defined by section 230(3)(b) of the Employment Rights Act 1996 (ERA).  Consequently, the Tribunal has jurisdiction to entertain the Claimant’s complaints of unlawful deductions from wages, accrued holiday pay and age discrimination.

3.	That Judgment was promulgated with Reasons on 10 March 2011.  There is no cross-appeal by the Claimant against the finding that he was not a section 230(3)(a) employee of the Respondent.

The facts
4.	Dr Westwood was a General Practitioner and Senior Partner in a surgery in Timperley, Cheshire.  Aside from general practice the Claimant developed an interest in undertaking minor surgery.  In 2005 he was approached by the Respondent which operates clinics specialising, among other things, in cosmetic surgery.  They wanted to engage his services, carrying out hair restoration on their clients, working for the Respondent on Saturdays only.  He began working for the Respondent in early 2006.  At the termination of his appointment, the relevant terms and conditions of service were set out in a written contract dated 1 December 2007, headed “Surgeons Contract for Services and Training” (the Agreement).  They included the following:

1.	The Agreement was for a fixed term of three years commencing on 1 November 2007, (clause 2.1) subject to certain early termination provisions and a three‑month notice provision on either side (clause 12).

2.	The Claimant was not to use any equipment or instruments provided by the company on any person not a client of the Respondent (clause 3.6).

3.	He was required to obey all lawful and reasonable directions of the Respondent (clause 3.7.2).

4.	He agreed not to provide his services within the UK to any competitors of the Respondent (clause 3.7.4) and entered into a twelve-month post-termination restrictive covenant (clause 7).

5.	He agreed that he was an independent contractor, liable for his own tortious acts and breach of contract (clause 5.1) and that he was responsible for effecting his own professional indemnity insurance (clause 5.2).

6.	He was to receive no payment when unable to work through sickness (clause 6.2).

7.	He acknowledged his obligation to preserve the confidentiality of the Respondent’s technical processes, business affairs or finances, and customer and supply information (clause 8.2).

8.	He agreed that he was responsible for payment of his own tax and National Insurance on fees paid to him by the Respondent (clause 9.1) as an independent contractor (clause 10).

9.	His performance was to be reviewed annually by the Respondent (clause 12.6).

10.	He was liable to meet his own expenses (clause 13).  He set his expenses off against his earnings from the Respondent (£80,853.00 for the year ending 31 March 2010) for tax purposes (Reasons paragraph 19).

11.	He received 18% of the price paid to the Respondent by each patient whom he treated (clause 4 and the Schedule to the Agreement).

There is no suggestion in this case, and no finding by the Employment Judge to the contrary, that the Agreement was other than a genuine statement of the terms and conditions of service agreed between these parties.  It reflected the reality of their relationship.

The Employment Tribunal Decision
5.	The Employment Judge considered a number of cases, then most recently Autoclenz  Ltd v Belcher & Others [2010] IRLR 70 Court of Appeal, since affirmed by the Supreme Court [2011] IRLR 820 (see paragraph 26), and rejected the contention that the Claimant was an employee of the Respondent (paragraphs 28-30).  As to worker status, the Employment Judge found that the Claimant was “clearly in business on his own account, and was engaged under a contract for services as a self-employed independent contractor” (paragraph 30).  He was engaged personally to carry out the work himself, as the Respondent conceded; he had no right to delegate the work to others.  He was engaged by the Respondent because of his skills (paragraph 31).  

6.	Section 230(3) of the ERA provides:

“In this act, worker...means an individual who has entered into or works under (or, where the employment has ceased, worked under)
(a) a contract of employment; or
(b) any other contract, whether expressed 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 any reference to a worker’s contract shall be construed accordingly.”

7.	In this case I am concerned with the definition of the so-called “limb (b)” worker, and in particular, the exception created by the words:

“[…] 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.”

8.	As to that element of the case, the Employment Judge said this, at paragraph 32:

“As to the third limb of the Autoclenz test, I find that the claimant's work was not done for the respondent with the respondent in the capacity of client or customer of the claimant.  The patients treated were the clients or customers of the respondent, and the claimant was paid a percentage of the agreed rate which the client or customer of the respondent paid to the respondent.  The claimant was an independent contractor in his own right, engaged by the respondent who in effect introduced their patients to him, and the respondent was not a client or customer of the claimant.  Accordingly I find that the claimant was a worker under “limb (b)” of section 230 of the Act, and that this tribunal does have jurisdiction to hear his claims relating to unlawful deduction from wages and for accrued holiday pay.”

9.	It followed from the Employment Judge’s findings on the limb (b) worker definition under the ERA, that he accepted that the Claimant worked under a contract personally to do any work, for the purposes of the Age Discrimination Regulations, at paragraph 33.

The appeal
10.	The appeal is directed solely to the Judge’s finding that the Claimant was a limb (b) worker for the purpose of section 230(3)(b) ERA.  Ms Donnelly submits that having found that the Claimant was engaged by the Respondent as a self-employed contractor (paragraph 30) the Employment Judge fell into error in concluding that the Respondent was not a client or customer of the Claimant (paragraph 32) so that the limb (b) exception did not apply.  She argues that that conclusion is not reasoned, save for a reference to patients being introduced to the Claimant by the Respondent which, she contends, is an irrelevant factor.  The Employment Judge failed to take proper account of the terms of the Agreement.

11.	In fairness to the Employment Judge, I am told that the principal issue before him was whether the Claimant was a limb (a) employee of the Respondent.  The limb (b) worker contention was very much an alternative submission on behalf of the Claimant.  This, it seems to me, is reflected in the range of authorities to which the Employment Judge was referred (see paragraph 26).

12.	In particular, the Employment Judge was not referred, as I have been, to cases such as Byrne Brothers (Formwork) Ltd v Baird & Others [2002] IRLR 96 (EAT.  Mr Recorder Underhill QC); Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 (EAT Langstaff J) and James v Redcats (Brands) Ltd [2007] IRLR 296 (Elias P, as he then was).  Had those cases been cited, I am satisfied that the Employment Judge’s conclusion that the limb (b) exception did not apply to this relationship, would have been reinforced, not altered.  I say so for the following reasons.

13.	In Cotswold, Langstaff J, having referred to the well-known analysis by Mr Recorder Underhill QC in Byrne Brothers, paragraph 17, and the Court of Appeal observations on that reasoning in Redrow Homes (Yorkshire) Ltd v Wright [2004] IRLR 720, not directed to the limb (b) exception question, said this at paragraph 53.

“53. It is clear that the statute recognises that there will be workers who are not employees, but who do undertake to do work personally for another in circumstances in which that “other” is neither a client nor customer of theirs – and thus that the definition of who is a “client” or “customer” cannot depend upon the fact that the contract is being made with someone who provides personal services but not as an employee.  The distinction is not that between employee and independent contractor.  The paradigm case falling within the proviso to 2(b) is that of a person working within one of the established professions: solicitor and client, barrister and client, accountant, architect etc.  The paradigm case of a customer and someone working in a business undertaking of his own will perhaps be that of the customer of a shop and the shop owner, or of the customer of a tradesman such as a domestic plumber, cabinet maker or portrait painter who commercially markets services as such.  Thus viewed, it seems plain that a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal’s operations, will in most cases demonstrate on which side of the line a given person falls.”

14.	In James v Redcats, Elias P said at paragraphs 49-50:

“49. What the Courts must essentially try to do here, it seems to me, is to determine whether the essence of the relationship is that of a worker or somebody who is employed, albeit in a small way, in a business undertaking. In Cotswolds Developments Construction Ltd v Williams [2006] IRLR 281, para 53, Langstaff J suggested that the focus is upon "whether the purported worker actively markets his services as an independent person to the world in general…..or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations." 
50. I would agree that this will often assist in providing the answer.”

15.	That approach seems to me to find an echo in the observations by Aitkins LJ, to which Ms Donnelly referred me, in Autoclenz v Belcher [2010] IRLR 70, in the Court of Appeal, paragraph 77, where he said this:

“The third requirement relates to the status of the other party to the contract.  That other party must not, by virtue of the contract, have the status of a client or customer of any profession or business undertaking carried on by the individual who is to perform the work or services.  No further explanation of what is meant by a client or customer of a profession or business understanding is given, but, in most cases at least, it is easy enough to recognise someone who has this status.  It includes, for example, the solicitor or accountant’s client or a customer who seeks and obtains services of a business undertaking such as from an insurance broker or pensions adviser.”

Pausing there, it is clear that the various examples given by Aitkins LJ are all of professionals or businesses offering services to the world at large.

16.	It is common ground between the advocates appearing before me that the opinion of the Supreme Court delivered by Lord Clarke in Autoclenz, does not bear on the issue presently before me.  Applying that consistent approach it is absolutely clear to me that Dr Westwood was not, by virtue of the Agreement, performing work or services for the Respondent as a client or customer of any profession or business carried on by him.  

17.	Under the Agreement the Claimant agreed to provide his services as a Hair Restoration Surgeon, exclusively to the Respondent (see Clause 7).  He did not offer that service to the world in general.  He was recruited by the Respondent to work for it as an integral part of its operations.  The Respondent introduced the patients who the Claimant saw and treated at the Respondent’s Birmingham premises, using their equipment.  That work was wholly separate from his work as a General Practitioner at his surgery in Cheshire.  It had nothing to with his work giving advice on transgender issues, at the Albany clinic (see Reasons paragraph 18).  In short, it is plain that he did not fall on the limb (b) exception side of the line.

Conclusion
18.	For these reasons, I am satisfied that the Employment Judge’s conclusion that the limb (b) exception did not apply to this Claimant was plainly and unarguably right.  He was a worker.  This appeal accordingly fails and is dismissed.