THE INDUSTRIAL TRIBUNALS 

CASE REF:	2467/02

APPLICANT:	Colin Hopkins

RESPONDENT:	Department of Employment and Learning

DECISION

The unanimous decision of the tribunal is that there did exist between the company, D Hopkins & Sons Limited (in liquidation), and the applicant a contract of service, and accordingly the applicant was an employee for the purposes of Article 3 of the Employment Rights (Northern Ireland) Order 1996.

Appearances:
The applicant appeared and represented himself. 
The respondent was represented by Mr B Mulqueen, Barrister-at-Law, instructed by the Departmental Solicitor’s Office.

THE ISSUE

1.	In the applicant’s originating application the applicant appealed against the refusal on the part of the Department of Employment and Learning (Redundancy Payments Service) to pay to him redundancy payment in connection with his dismissal from the firm D Hopkins & Sons Limited (in liquidation) The applicant contended that he was a qualifying employee and was thus entitled to such a payment.  In the respondent’s Notice of Appearance, it was contended that the applicant’s claim was rejected as the Department’s view was that the applicant was not an employee as defined by Article 3 of the Employment Rights (Northern Ireland) Order 1996.  Accordingly, the tribunal had to determine this issue.

THE TRIBUNAL’S FINDINGS

In consequence of the written and oral evidence adduced before it, the tribunal found the following facts:-

2.	D Hopkins & Sons Limited, a company of limited liability (“the company”), was incorporated in Northern Ireland in 1943.  The company remained in existence until it was wound up by Order of the Court dated 13 June 2002.  A Liquidator was appointed with effect from 19 September 2002.  The company was at all times primarily a family concern.  At the time of the liquidation, there were three directors.  These were the applicant, the applicant’s cousin, Alan Hopkins, and the applicant’s uncle, Samuel Hopkins.  At the material time the applicant held a minority shareholding in the company.  This was equivalent to 8.75% of the issued shares.  These shares had devolved to the applicant upon the death of his late father who had also been a director and shareholder.

3.	The applicant had entered into the employment with the company in 1977 at the age of sixteen years, directly from school and in the capacity of a junior clerk.  The company was engaged in the manufacture, sale and distribution of furniture.  The applicant’s involvement with the company at all times appears to have been very much ‘hands on’.  Throughout this time, the applicant performed various functions including that of a salesman and a delivery driver.  It appears that the applicant was appointed a director of the company towards the end of the 1980s, but otherwise his day to day activities remained unchanged.

4.	In the early 1990s a decision was taken to incorporate a sister company in Northern Ireland, Trustyle Limited, to become engaged in the retail arm of the business.  The applicant was appointed a director of that company and was concerned with the running and management of Trustyle Limited from the 1990s until 1994 when the assets and undertaking of Trustyle Limited were transferred to the company and the applicant recommenced working with the company.  Trustyle Limited then became a dormant company but was not removed from the Register of Companies.  The applicant continued to be a director both of Trustyle Limited and of the company up until the liquidation of the company occurred.

5.	There was no written evidence of a statement of terms and conditions of employment nor of any director’s service contract applicable to the applicant.  It appears that applicant’s terms involved his working a basic working week of thirty-nine hours.  For that ht was paid a gross wage of £195.00 per week.  The company made statutory deductions of income tax and National Insurance from that gross wage.  The company also paid £50 per month into an occupational pension scheme on behalf of the applicant.  The applicant was apparently entitled to twenty-nine days holiday per year with pay.  The applicant appears to have regularly worked additional weekly hours for which he was not paid, nor does he appear to have sought payment. 

6.	Regarding banking arrangements, the applicant was an appointed signatory for company cheques.  In 1996, in consequence of a change of banking arrangements, the applicant, together with his fellow directors and also a Mr Richardson signed joint and several guarantees.  In a personal capacity the applicant thus became guarantor of the liabilities of the company to the Northern Bank.  Subsequently when the company encountered financial difficulties Mr Richardson and the applicant met with and discharged company liabilities to the Bank.  The applicant was the only director of the company to do so, as Mr Richardson was not a director.  It appears that his fellow directors did not personally meet any guarantee liability, the stated reason being that Samuel Hopkins was rather elderly and there was a desire not to unduly worry or concern him, and that Alan Hopkins did not have the means to meet any guarantee liability at the time.  The applicant made a payment of £3,200.00 in settlement of his guarantee liability.

7.	Regarding management, company board meetings were held, but in an informal way.  The day-to-day management of the company appears to have been shared between the applicant and Alan Hopkins.  However, Samuel Hopkins did attend the business premises every day and also he also attended board meetings especially when important business was to be dealt with.  On one particular occasion the applicant, who was opposed to Sunday trading, was out-voted by the other two directors in a decision to engage in Sunday trading.  The applicant went along with that majority decision, with some reluctance apparently.

8.	The directors, including the applicant, were put on written termination notice by letter dated 7 September 2001 from the company.  In the applicant’s case, the letter confirmed a notice period of twelve weeks and the letter also confirmed computation of redundancy pay stated to be due and a figure for pay for untaken leave.  The applicant’s final day with the company was 13 October 2001.  The applicant then submitted to the respondent a claim for redundancy pay consequent upon what he stated to be his dismissal from employment.

THE TRIBUNAL’S DECISION

9.	The applicant claimed that he was an employee of the company.  Having considered all the facts given in evidence and the submissions, the tribunal considered those facts that would tend to be persuasive of or to indicate that there was a contract of service between the company and the applicant and those persuasive of the contrary.  Looking at some of these, against the applicant’s contention were the facts that:-

(a)	there was no evidence of any written contract of employment nor of any director’s service contract as required by law;

(b)	the applicant was a shareholder in the company, albeit a minority shareholder;

(c)	the applicant was a director of the company and took an active part in the decision making process;

(d)	the applicant was a cheque signatory;

(e)	the applicant worked additional unpaid hours without seeking payment;

(f)	in his day-to-day work the applicant was not under any direction or instruction;

(g)	the applicant guaranteed the company’s liabilities to the Bank and, indeed, the applicant was the only director to discharge any such guarantee liability personally;

(h)	the company accounts designated the applicant’s wages as “director’s remuneration”.

However, set against this, and in favour of the possible existence of a contract of service between the company and the applicant were the facts that:

(i)	there appears to have been in existence an arrangement between the applicant and the company having very many of the characteristics of a contract of service, although this was not committed to any formal contractual document;

(ii)    the applicant was not a majority shareholder, but very much in a minority, being a
         8.75% stakeholder;

(iii)	although a director, the applicant was very much “hands on”, being actively engaged    at all times in performing numerous functions and tasks in the day-to-day running of the business of the company.  The applicant had been employed by the company since the age of sixteen and his job duties and functions over many years had apparently remained largely unchanged despite his status as a director and a shareholder;

(iv)	whilst the applicant’s job junctions were not guided or supervised by anyone on a day-to-day basis, nonetheless the applicant was not entirely autonomous and he was accountable at company board level;

(v)	the applicant could be out-voted at board level in regard to operational decisions such
as the example given of proposed Sunday trading, where the applicant felt himself obliged to accept the direction and control of the majority of the board;

(vi)	whilst the applicant did sign a bank guarantee, so also did a non-director and non-
shareholder, Mr Richardson, thus the fact of the guarantee is not of itself determinative;

(vii)	despite the classification of the applicant’s remuneration in the company accounts, the applicant was paid on the basis of a weekly salary (as opposed to a director’s fee) and was treated as an employee for tax purposes by the company, and the applicant also appears to have been entitled to paid annual leave..

10.	The determination of this matter, as is the case also in the leading authorities, is very much based upon determinations of fact.  Examining some of the authorities cited by the parties in argument, the tribunal notes that the facts of this matter are to an extent materially distinguishable; in some respects the situation of the applicant is rather different.  By way of a couple of illustrations, firstly in regard to the matter of controlling shareholding, in the case of Secretary of State for Trade and Industry -v-Bottrill [1998] IRLR 120 Mr Bottrill was the managing director and a holder of the sole issued share in the company in question.  In the case of Fleming –v- Secretary of State for Trade and Industry [1997] IRLR 682, Mr Fleming was a substantial majority shareholder.  In regard to the matter of bank guarantees, in that latter case, whilst Mr Fleming had personally guaranteed company obligations, he was also in a position to decide not to draw his own salary when the company finances suggested that course.  Whilst it was the case that the applicant had performed a certain amount of unpaid labour on behalf of the company by working the additional hours, the facts are to a degree distinguishable from Fleming where all wages were waived.  The tribunal noted that many persons working under undisputed contracts of service do make particular commitments to their employers, including working additional unpaid hours, stemming from a variety of motivations. The tribunal was able to view neither the matter of the bank guarantee nor indeed of the unpaid hours as being in themselves sufficient to negate the suggestion of a contract of service.  In many of the authorities in this area the issue of an exclusive or of a substantial majority shareholding in a company, or of being in some other type of unassailable position, appears to be a determinative factor, suggesting as it does that in such a position a person shall be in a position to exercise authoritative, and often exclusive, control, thus countering any suggestion of their being under a contract of service.  It cannot be said, in the tribunal’s opinion, that the applicant was in such a position.

11.	Looking at all the facts and weighing these facts in the balance, the tribunal is unanimously of the view that there did exist between the company and the applicant a contract of service, and accordingly the applicant was an employee for the purposes of Article 3 of the Employment Rights (Northern Ireland) Order 1996.

Chairman:

Date and place of hearing:  11 March 2003, Belfast

Date decision recorded in register and issued to parties: