Before the Tribunal and before us, the Claimant represented himself and the Second Respondents were represented by Ms A Reindorf of counsel.
Background
The Claimant's claims of victimisation by the Second Respondents were brought under the provisions of s.2 and s.4(2) of the Race Relations Act 1976 and regulations 4 and 6(2) of the Employment Equality (Sexual Orientation) Regulations 2003 . Under and in terms of those provisions an employer acts unlawfully if he discriminates against an employee by victimising him by reason of his having alleged that the employer has committed racial discrimination or discrimination on grounds of sexual orientation. If it is established that the employer has committed such victimisation then the employee is entitled to a remedy, including compensation (see: ss. 54 and 56 of the 1976 Act and regs 28 and 30 of the 2003 Regulations ).
The Claimant worked for the Second Respondents in circumstances where he had been placed with them by an employment agency, the First Respondents. To put it in what is now well recognised language, he was a worker supplied by an agency to an end user and the issue for the Tribunal was that of whether or not he had a contract of employment with the end user. The end user was the Second Respondents and they did not accept that they were the Claimant's employer in a contract of employment.
The Second Respondents provide care and support services to the tenants of the East Thames Housing Association. The Claimant was a care worker and he is of Asian origin. In August 2005, he was placed with the Second Respondents by the First Respondents to work at their Kensington Gardens project. He signed a contract with the First Respondents on 20 August 2005 which was entitled:
the terms of which included:
There then followed a list of various respects in which the Claimant was obliged to conduct himself when on an 'Assignment' including:
The Claimant was also obliged to comply with the First Respondents' business policy and procedure and with the standards of conduct and 'all organised matters' set out in their handbook (see clause 7.1.1). The handbook set out various requirements of the First Respondents including those relating to dress code, punctuality at the client's workplace, refraining from making personal calls from work, notifying the First Respondents if sick or absent for any reason so that they could inform the client and timesheet procedures to be complied with so as to enable the First Respondents to pay their Care Workers promptly. The document also contains a Code of Practice, the introductory paragraph of which states:
There then followed details of the standards that the First Respondents required of Care Workers in many different aspects of their work ranging from respecting the independence of Service Users to recording the administration of medicines promptly and correctly. As regards grievances, the First Respondents' handbook provided:
As to payment of earnings to the Care Workers, the system was, on the Tribunal's findings and as is borne out by the terms of the contract with the First Respondents, that the Claimant was paid by the First Respondents on production of time sheets. Those time sheets would usually have been signed by the Second Respondents. The First Respondents recovered the payments to the Claimant, the PAYE payments and commission, from the Second Respondents but even if they had not done so they were nonetheless obliged to pay the Claimant for hours worked.
There was no written contract between the Claimant and the Second Respondents.
The Claimant was supervised in his work by the Second Respondents' Mr Murray. Three supervision meetings took place on 21 September, 17 October and 9 November 2005. He was subjected to the same appraisal scheme as the Second Respondents' 'in–house' employees.
Problems developed, which are explained in the Tribunal's judgment, regarding the Claimant's work performance, relating in particular to allegations of poor time keeping, sickness, sleeping on shift and dress code. These were all discussed at the meeting on 9 November when Mr Murray made various notes in terms which, the Tribunal accepted, gave the Claimant valid grounds for feeling aggrieved. He followed that up by sending the Second Respondents a grievance letter dated 25 November 2005. He copied his letter to the First Respondents' Mr Singh, one of their managers. The Second Respondents' Ms Devonish was asked by Ms Crouch to investigate the Claimant's grievances.
On 28 November 2005, the Claimant had a meeting with Mr Murray in the course of which he became angry and accused him of being 'a liar, a racist' and 'not fit to be a manager'. Mr Murray spoke to Mr Singh by telephone on 29 November and told him that he did not want the Claimant to attend work for the remainder of his shifts at Kensington Gardens. Mr Singh conveyed that information to the Claimant.
A question arose as to whether or not the Claimant had been paid for shifts beyond the last date he worked at the Second Respondents' project. At paragraphs 90 - 92, the Tribunal state:
The Tribunal make no finding in fact as to whether the Second Respondents ever agreed to paying anything for the Claimant's services beyond the shifts during which he was present at their premises or indeed whether they made any such payments. In short, the finding is to the effect that the Claimant received some pay beyond the last date that he actually provided services for the Second Respondents but not that that pay was funded to any extent by the Second Respondents. The Tribunal makes no finding about who funded it.
The Tribunal found in fact that the Claimant had not, as at 6 December 2005, in fact agreed with Mr Singh that he would accept one week's pay for not going back to the Second Respondents' project. They add, by way of comment, at paragraph 94.2:
On 7 December, Ms Devonish told Mr Singh in no uncertain terms that she did not want the Claimant back working for them. None of the Second Respondents' managers wanted the Claimant to return to work on the project and, on the Tribunal's findings, that was partly because of comments that he made in his grievance letter.
The Claimant did not, in these circumstances, return to work at the Second Respondents' project.
The Tribunal's Judgment
The Tribunal correctly identified that they required to determine whether or not the claimant was one of the second respondents' employees. They concluded that he was. Their reasons for doing so are set out at paragraphs 124 to 125 and were, essentially:
and in these circumstances the way in which the contract was performed was "consistent with an implied contract between the Claimant and the Second Respondents and would be inconsistent with their being no such contract." (para 125). They referred to the cases of James v London Borough of Greenwich [2007] IRLR 168 (EAT) and James v Redcat (Browns) Ltd [2007] IRLR 296 and, as they put it: "cases such as Dacas and Cable and Wireless v Muscat referred to in those cases".
Following a subsequent hearing on remedy, the Tribunal awarded the Claimant compensation of £4,588.36 in respect of his victimisation claims and £314.50 pursuant to s.38 of the Employment Act 2002 for failing to provide the Claimant with a written statement of employment particulars, in terms of a judgment which was registered on 24 September 2007. £314.50 represented two weeks gross pay for the Claimant. He had not made a claim under s.38 and the Tribunal acknowledged that it had heard no submissions thereanent. It determined, however, that:
The figure for compensation for victimisation included a 15 per cent uplift under and in terms of s. 31 of the Employment Act 2002 in respect that the Second Respondents had not followed the statutory procedures, and the view was taken that since it was not uncommon for organisations to structure their arrangements in this way so as to seek to avoid taking on employees, the circumstances in which they had failed to do so were not exceptional. It followed, accordingly, that there should be some uplift. No point is taken on behalf of the Second Respondents regarding this approach and we do not, accordingly, require to consider whether or not the Tribunal erred in taking the view that they did. Our silence on the matter should not, however, be taken as tacit approval, we can see that there could be arguments both ways and the matter would have to be properly debated.
The Relevant Law
The legal principles that apply when considering worker, agency, end - user arrangements have been discussed at some length and clarified over the last few years. That discussion was focussed in particular by Elias P in the case of James v Greenwich LBC [2007] ICR 577 where he drew conclusions that were later referred to and approved by the Court of Appeal ( [2008] ICR 545 ) . We note that the hearing before the Tribunal in this case predated the latter but it did have the former available to it.
The observations contained in paragraphs 53 to 61 of the EAT's judgment in James were specifically approved by the Court of Appeal. We find assistance in, in particular, the discussion contained in paragraphs 57 – 58. It lends support to the approach that was urged on us in this appeal. That is that one should ask firstly whether or not the express contractual arrangements put in place at the outset adequately explain the actual relationship of the three parties involved at that stage. Then, secondly, if they do, ask whether or not any subsequent words or conduct of the parties have changed matters. Then, thirdly, if they have (or if the answer at the first stage was in the negative), ask whether or not in the light of those changes, it is necessary to imply a contract of employment, taking account at that stage of the irreducible minimum mutuality of obligation that is required for there to be such a contract. At those paragraphs 57 -8, Elias P explains:
The relevant principles were summarised further by Elias P, in the case of National Grid Electricity Transmission PLC unrepd UKEAT/0432/07DM (a judgment which postdates James in the EAT but predates the Court of Appeal's judgment in James ), at paragraph 21, is a clear and cogent summary which we gratefully adopt :
Accordingly, only if the express contractual arrangements do not adequately explain the legal relationship of the three parties does the question of whether there might be a contract of employment with the end – user arise and when considering that issue it is essential to ask whether it is necessary to imply such a contract (see also: James v Greenwich LBC [2008] ICR at para 23 per Mummery LJ). It is also plainly important to avoid falling into the trap of implying a contract of employment because the conduct of the parties is consistent with there being such a contract. As Mummery LJ observed in James at para 24:
We would, finally, refer to Mummery LJ's postscript in James where he stresses that the test for implication is one of necessity and that it is not within the power of the courts or tribunals to change the law, the latter comment being made under reference to his awareness of the ongoing controversy regarding the absence of job protection for agency workers. We would respectfully agree with his observation regarding courts and tribunals at para 56:
The Appeal
For the Second Respondents, Ms Reindorf submitted that the Tribunal had erred in law in concluding that the Claimant was employed by the Second Respondents. She referred to the facts found and to the law as explained in the authorities to which we have referred. She also referred to the case of Heatherwood and Wexham Park Hospitals NHS Trust v Kulubowila and others UKEAT/0633/06 for the submission that it is important to guard against judging that a worker is an employee just because he:
and to the case of Wood Group Engineering (North Seas) Ltd v Robertson UKEATS/0633/06, for the passage at paragraph 15 where it is observed that a contract of employment will only be implied where it is necessary to do so:
We were greatly assisted by Ms Reindorf's clear skeleton argument, the content of which we do not propose to rehearse in this judgment. She also made persuasive oral submissions in support of it. Suffice it to say that her essential submission was that it was evident from the judgment that the Tribunal had not applied the correct test. They referred to the law only very briefly. They did not articulate the need to ask whether the circumstances were only consistent with there being a contract of employment between the Claimant and the Second Respondents. Their reference to it being inconsistent with there being no such contract was not enough to elide the clear impression that they had not applied the test properly. That impression was fortified by their having failed to take account of the respects in which the First Respondents had control of the Claimant over and above recruiting him and paying his wages, their failure to consider the terms and effect of the provisions of the handbook, their failure to take account of the fact that Mr Murray spoke to Mr Singh rather than the Claimant when he wanted to bring an end to the arrangement, the fact that Mr Singh was involved in the negotiations to bring an end to the arrangement, the fact that the Claimant's intimation of his grievance to the Second Respondents accorded with his obligations in terms of the First Respondents' handbook and the fact that the Claimant copied his grievance to the First Respondents. Had they been applying the correct test, they would have taken account of these matters since, quite apart from anything else, they indicated that the arrangements put in place at the outset in terms of the contract between the Claimant and the First Respondents, properly and adequately explained the situation.
Ms Reindorf invited us to uphold the appeal and substitute for the Tribunal's judgment a finding that the Claimant was not the Second Respondents' employee, which failing to uphold the appeal and remit the issue to a freshly constituted Tribunal.
In the event that we did not accede to that submission, Ms Reindorf had a separate submission regarding the s.38 award. The Tribunal should not, she submitted, have made any such award without giving the parties an opportunity to make submissions. Had the Second Respondents had such an opportunity, they would have drawn attention to the provisions of s.1(2) of the Employment Rights Act 1996 which affords an employer a period of two months to issue the necessary statement. The Tribunal had made no finding as to the start date for the Claimant's employment and the facts founded on by them as showing that the Claimant was an employee were related to the last two weeks or so of the time that he worked with the Second Respondents. It was not, accordingly, obvious that the two month period had elapsed and without such a finding, it was not open to them to find that there had been a failure to comply with the statutory obligation.
No appeal was taken against the Tribunal's findings that the claimant was victimised on grounds of race and on grounds of sexual orientation. Nor was any appeal taken against the Tribunal having awarded compensation in respect of loss of earnings, injury to feelings and interest in respect of that victimisation. The appeal was confined to an attack on the Tribunal's uplift of 15 per cent under s.31 of the Employment Act 2002 and the award under s.38 of the same Act. We were not entirely clear as to why this approach was adopted; unless the second respondents were the claimant's employers, they could not be said to have committed any unlawful victimisation as is plain from reading s.2 and 4(2) of the 1976 Act together and reading regs 4 and 6(2) of the 2003 Regulations together . If their acts were not unlawful then liability to make payment of compensation under s.56 of the 1976 Act and reg. 30 of the 2003 Regulations would not arise, liability to do so only arising where there has been unlawful discrimination . We would, accordingly, have expected the appeal to extend to the finding of victimisation and the entirety of the compensation awarded. Be that as it may, we have to recognise the restricted scope of this appeal.
The Claimant sought, at the outset of the hearing, to lodge a bundle of emails. He indicated that they would show that he was subject to the Second Respondents' control whilst working with them. They were documents that had not been before the Tribunal and we did not, accordingly, allow them to be introduced. Separately, he objected to the contract between him and the First Respondents being included in the bundle. The issue was whether he was employed by the Second Respondents and that contract was, accordingly, irrelevant. That contract was, however, before the Tribunal and was referred to and relied on by them. Further, we did not accept the Claimant's submission that it was irrelevant. On the contrary, it was highly relevant given the importance of considering whether, at the outset, the relationship of the parties to agency, worker, end – user arrangements are adequately explained by the written contract entered into by the worker at the outset.
Otherwise, the Claimant relied principally on the terms of a document headed "Performance & Development Form". It was a document promulgated by the Second Respondents as part of their normal appraisal procedure, dated 14 November 2005 and signed by the Claimant. It is the appraisal form referred to by the Tribunal at paragraph 125. Much of it is in standard terms. There are several boxes on the first page, the first of which begins "Name of Employee". The Claimant's name is entered against that box. On, it seemed, the basis of that entry, the Claimant submitted that any earlier arrangement was thereby negated. Any contract predating that document was irrelevant. All the case law relied on by Ms Reindorf was, thus, irrelevant. The document was a clear determination that he was an employee of the Second Respondents. His approach was that the document constituted a type of certification that he was confirmed, as of that date, to be an employee of the Second Respondents. He was not an employee of the First Respondents.
On the line of the 'Performance and Development Form' which follows the line relied on by the Claimant, there is a box for "Job Title" and the entry against that is: "Specialist Support Worker (Part Time 18.5 hrs – Agency)". The Claimant made no submissions in respect of that part of the form.
The Claimant also submitted, separately, that he was not employee of the First Respondents. That was a departure from his position before the Tribunal where he had sought to argue that he was employed by both respondents. He submitted that he had to be employed by someone. He submitted that the role of the First Respondents was confined to producing funds but legal control of the release of funds to him lay with the Second Respondents. He posed the rhetorical questions: why would the Second Respondents investigate my complaint if they were not my employers? And why did they not communicate the outcome of their investigation to the First Respondents? Otherwise, he relied on the reasoning of the Tribunal.
Discussion and Decision
We are satisfied that the Tribunal did err in concluding that there was a contract of employment between the Claimant and the Second Respondents. Having carefully considered the whole terms of their judgment, not only are we satisfied that they cannot have applied the correct test but we are left with the distinct impression that they have determined the issue on the basis that the arrangements were simply consistent with the relationship being one of employment. Notwithstanding the bald statement that the way in which the contract was being performed was inconsistent with the absence of a contract of employment, their reasoning reads as showing that their approach was that since the Claimant looked like an employee and acted like an employee, he was an employee, thus falling into the trap identified by HHJ Peter Clark in the Heatherwood and Wexham Park Hospitals case. That is the wrong test.
It seems that the point at which the Tribunal's approach first fell into error was at the outset. It did not consider the express contractual arrangements. The Tribunal arrived at its conclusion without first going through the important exercise of examining whether, on the evidence, the relationship was adequately explained by the contractual arrangements that were put in place at the outset. The failure may well be explained by the fact that this issue was the last in a series of complex issues that the Tribunal had had to determine in this case and they jumped too quickly to a conclusion but that explanation does not of course alter the fact that they have adopted an erroneous approach.
The Tribunal did not, unfortunately, look fully at the contract between the Claimant and the First Respondents. Had they done so, not only would they have applied the first stage of the correct test but would, we are satisfied, have been bound to conclude that there was no question of the parties' relationships not being adequately explained by the initial contractual arrangements that had been put in place.
There is much more to those arrangements than the role of the First Respondents being "limited" to recruiting the Claimant and paying his wages, as is stated by the Tribunal at paragraph 124. As is shown by the terms of the contract to which we have referred, the First Respondents retained quite substantial and significant control over the Claimant's standards of conduct in terms of the handbook (clause 7.1. 1(a)), they required the Claimant to intimate any grievance he had to the client in the first instance, the First Respondents were obliged to pay the Claimant for hours worked irrespective of whether or not they had received payment from the Second Respondents for those hours, the Claimant required to inform the First Respondents of sickness or other reason for absence so that the First Respondents could then advise the Second Respondents of his unavailability and although the Claimant was subjected to day to day control by the Second Respondents that was in the context of him having contracted with the First Respondents to co-operate with the client's reasonable instructions and accept the direction, supervision and control of any responsible person in their organisation (clause 7.1.(a)).
The Tribunal then required to ask whether or not the facts and circumstances of the way in which the parties' relationships worked were adequately explained by the contract. It did not, however, do so. Had it done so, it could only have observed that they were. We have in mind not only the general conduct of the working relationships as explained in the findings in fact but, in particular that the Claimant's intimation of his grievance to the Second Respondents is explained by the requirements of the First Respondents' handbook, that he also intimated it to the First Respondents, that when matters came to a head, rather than intimating their desire for the Claimant to work no further shifts to him, the Second Respondents contacted Mr Singh of the First Respondents, and that Mr Singh was involved in the negotiations about the termination of the arrangement for using the Claimant's services. These are all readily explicable by reference to the contract between the Claimant and the First Respondents.
As regards the Performance and Development form, we note firstly that the Tribunal refer only to the part of the form where the Claimant's name appears against the term "Employee". They did not consider the form as a whole and for reasons which we explain below we are not at all persuaded that its terms do actually conflict with the contractual arrangements providing an adequate explanation of the working relationships.
Further, we have given consideration to but reject the Claimant's case that it shows that there was a change as at 14 November 2005 and that it, in effect, certified that he was employed by the Second Respondents . On the contrary, it is clearly able to be explained under reference to the express contractual arrangements entered into. The Claimant was obliged in terms of his contract with the First Respondents to co-operate with the client's reasonable direction, supervision and control (clause 7.1.(a)) and the form is but an example of circumstances in which such direction, supervision and control was taking place. Far from being evidence of change, it provides evidence of compliance with the contract between the Claimant and the First Respondents. As regards the use of the term "employee", the purpose of the document was not to record any agreement about the Claimant's status and the term should not be taken out of context. When read together with the following entry it is plain that the Claimant is recognised as being an agency worker.
Disposal
We will accordingly, pronounce an order upholding the appeal, find that the Claimant was not an employee of the Second Respondents and set aside the judgment of the Tribunal against the Second Respondents of 24 September 2007 insofar as it awarded the Claimant the sum of £598.48 under s.31 of the Employment Act 2002 and £157.25 under s.38 of that Act.
Award under s.38 of the 2002 Act
Since we are upholding the appeal, it is not necessary for us to deal specifically with the s.38 award in respect of the failure to provide particulars of employment. We should, however, state that we do not consider that it was appropriate for the Tribunal to deal with the issue in the way that they did. The terms of the overriding objective and the possibility of seeking a review do not afford justification for considering and determining an issue which was not raised by either party and in respect of which neither had had the chance to present submissions. As a matter of principle, that is not an approach which ought to be followed. Looking at the particular circumstances of this case, the folly of that approach is underlined by the fact that the Tribunal appear to have overlooked that s.1(2) of the 1996 Act gives an employer two months to comply with the obligation to provide particulars and they could not, accordingly, be satisfied that there had been a failure without first identifying when the contract of employment that they found to have existed, commenced. They had, however, made no findings in fact which enabled them to pinpoint the start date and a question arose whether, in those circumstances, they could find the Second Respondents to have been in breach of the statutory requirement at all. That is a matter to which Ms Reindorf would, we are advised, have drawn their attention had the Second Respondents had a chance to make submissions.