Appeal No.	 EAT/58/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 21 February 2001
Judgment delivered on 2 April 2001

Before
MR RECORDER LANGSTAFF QC
MR D J JENKINS MBE
MR A E R MANNERS

MR PETER McLEAN REID	APPELLANT

NORTH WEST CEILINGS LTD T/A SHOPSPEC	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR TUDOR WILLIAMS
Solicitor
Messrs Tudor Williams & Co
Solicitors
27 Chester Street
Wrexham
Clywd
LL13 8BG	
For the Respondent	MR J R GREGORY
(of Counsel)
Instructed By:
Messrs D C Williams
Solicitors
29 White Friars
Chester
CH1 1NZ	

MR RECORDER LANGSTAFF QC:

1	This appeal raises in stark form the issue of employment status.  
2	By a majority, the Employment Tribunal sitting at Abergele determined in a decision of 25th November 1999 that the Appellant had been self-employed from March 1994 to March 1998 (when it was common ground that he became an employee). In consequence, he had an insufficient period of continuous employment to enable him to present a claim of unfair dismissal against the Respondent.
The Facts
3	The Employment Tribunal set out its findings of fact in Paragraph 2 of its Extended Reasons.  They were that the Applicant was a shop fitter/joiner who, as such, had been employed by BSC (UK) Limited for about 2 years prior to February 1994.  That company went into liquidation.  A few weeks later, the Respondents asked the Appellant to work for them, initially in Moscow.  They knew of the Appellant because the Managing Director of the Respondent, Stuart Hill, had been connected with BSC (UK) Limited.  
4	The Appellant worked on a number of contracts, as a supervisor.  He took breaks, usually a week long at a time.  
5	He worked for no-one else.  
6	The Employment Tribunal found that the Appellant was under the control of the Respondent, that he was not in any way involved in the profits or losses of the Respondent, nor did he negotiate his rate of pay, nor provide a price for the work he was to carry out.  He was paid by the hour at a rate which was prescribed by the Respondent.  He “received full directions as to what work was to be carried out”.  
7	Although the work which the Appellant did may have begun in Moscow, most of the period was spent working for the Respondents in the UK.  The Respondent provided transport and all equipment save for “the tools you would expect a man with his skill to provide for the work he was to carry out.”  
8	The “basis” of the Applicant’s employment was to be “that he would be on what is commonly known as SC60”.  He was provided with payslips, which showed no deductions other than those one would expect in the case of someone employed on the basis of a SC60.  After 31st March 1998, the payslips showed deductions for tax on a PAYE basis, as they did for national insurance contributions.  The Appellant had previously paid national insurance on a self-employed basis.  
9	Holidays were taken by the Appellant as and when required by him.  There were no specific holiday arrangements, nor was holiday pay given (again, until after March 1998).  Nor were there sick pay arrangements before then.  
10	The Appellant dealt with his own tax affairs prior to 31st March 1998, and “would deal with any re-claims that might be necessary as a result of the tax deducted by the Respondents.”
11	For about a year prior to March 1998, negotiations took place with a view to changing the status of the Applicant to one which was accepted as that of employee.  There were three meetings in all.  The Employment Tribunal found that:-
“The Applicant was not initially happy with the original proposed terms.  He was concerned that he would not lose out financially by being subject to PAYE and national insurance payments being deducted on the basis of an employee.”

12	There were other joiner/shop fitters employed by the Respondents who were actually employees subject to PAYE during the period March 1994 to March 1998.  
The Law
13	An employee is, by virtue of Section 230 of the Employment Rights Act 1996, an individual who enters into or works under a contract of employment.  Such a contract is:-
“A contract of service or apprenticeship whether express or implied and (if it is express) whether oral or in writing.”

In Lee Ting Sang v. Chung Chi-Keung [1990] 2 AC 374, Lord Griffiths when delivering the advice of the Privy Council described the question of what was the appropriate English common law standard by which to determine whether a workman was working as an employee or as an independent contractor as one which:-
“…has proved to be a most elusive question”  
He added that 
“…. despite a plethora of authorities the Courts have not been able to devise a single test that will conclusively point to the distinction in all cases.”

14	Various tests have been described in a variety of cases, the perspective of which has differed.  In some, the question has been whether a worker was liable for tax or national insurance.  In others, it has been whether his principal was alleged to be in breach of an employer’s duties in respect of health and safety, whether there was a succession of pieces of work which might arguably be linked to form one employment under an overall “umbrella” arrangement, or indeed whether the simple choice presented as between employee or independent contractor masked the fact that the essential contract with which the case was concerned was not one of service or for services, but of a different character altogether.  The perspective from which the question “employee or not” has been addressed  may have to be kept in mind in appreciating how far each case advanced the search for the decisive criteria which Lord Griffiths termed elusive.
15	In Ready-Mixed Concrete (South-East) Limited v. Minister of Pensions and National Insurance [1968] 2 QB 497, MacKenna J. said (@ 515C):-
“I must now consider what is meant by a contract of service.  
A contract of service exists if these three conditions are fulfilled.  
(i)	The servant agrees that, in consideration of wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.  
(ii)	He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.
(iii)	The other provisions of the contract are consistent with it being a contract of service.”

16	So far as (i) was concerned he said:-
“There must be a wage or other remuneration.  Otherwise there will be no consideration, and without consideration no contract of any kind.  The servant must be obliged to provide his own work and skill.  Freedom to do a job either by one’s own hands or by another’s is inconsistent with a contract of service, though a limited or occasional power of delegation may not be.”

17	As to (ii) he said:
“Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done.  All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant.  The right need not be unrestricted.  “What matters is lawful authority to command so far as there is scope for it.  And there must always be some room for it, if only in incidental or collateral matters.” – Zuijs v. Wirth Brothers Proprietary Limited (1955) 95 C.L.R. 561, 571.
To find where the right resides one must look first to the express terms of the contract, and if they deal fully with the matter one may look no further.  If a contract does not expressly provide which party shall have the right, the question must be answered in the ordinary way by implication.”

18	Mr Justice McKenna continued to examine the third and negative condition which was, for his purpose in that case the important one.  He provided five examples, contrasting situations in which the proper conclusion would be that a worker was an independent contractor and those in which the proper conclusion would be that he was an employee.  Relevant for present purposes are the third and fourth of these (at 516E-G):-
“(iii)	A contract obliges a labourer to work for a builder, providing some simple tools, and to accept the builder’s control.  Notwithstanding the obligation to provide the tools, the contract is one of service.  That obligation is not inconsistent with the nature of a contract of service.  It is not a sufficiently important matter to affect the substance of the contract.  
(iv)		A contract obliges one party to work for the other, accepting his control, and to provide his own transport.  This is still a contract of service.  The obligation to provide his own transport does not affect the substance…”.

19	MacKenna J. continued (@ 516G-517B):
“An obligation to do work subject to the other party’s control is a necessary, though not always a sufficient, condition of a contract of service.  If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract, and the person doing to work will not be a servant.  The Judge’s task is to classify the contract (a task like that of distinguishing a contract of sale from one of work and labour).  He may, in performing it, take into account other matters besides control.”

20	MacKenna J. supported his view that the test of “control” was not necessarily decisive, even though without it there would be no contract of service at all, by citing Lord Wright’s opinion from Montreal v. Montreal Locomotive Works Limited [1941] 1 E.L.R. 161, P.C. where he said:-
“In the more complex conditions of modern industry, more complicated tests” (than that of control) “..have to be applied.  It has been suggested that a four-fold test will in some cases be more appropriate, a complex involving (1) control; (2) ownership of the tools; (3) chance of profit; (4) risk of loss.  Control in itself is not always conclusive…”.

Further support for his view was gleaned from a dictum of Denning L.J. in Bank voor Handel en Scheepvaart N.V. v. Slatford [1953] 1 QB 248:
“…the test of being a servant does not rest nowadays on submission to orders.  It depends on whether the person is part and parcel of the organisation.”.

Although in the view of MacKenna J. this begged more questions than it gave answers, it at least supported his opinion that control was not everything (see [1968] 2 QB 524C).  Cooke J. in Market Investigations Limited v. Minister of Social Security [1969] 2 QB 173 recognised that control could no longer be regarded as the sole determining factor in distinguishing a contract of employment from a contract for services.  He suggested (at 184-185):-
“The fundamental test to be applied is this:  “Is the person who has engaged himself to perform these services performing them as a person in business on his own account?”  If the answer to that question is “Yes”, then the contract is a contract for services.  If the answer is “No”, then the contract is a contract of service.  No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases.  The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.”

21	In Hall v. Lorrimer [1992] ICR 739, at 744 F-H,  Mr Justice Mummery observed, in relation to Cooke J.’s test that:-
“In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person’s work activity.  This is not a mechanical exercise of running through items on a checklist to see whether they are present in, or absent from, a given situation.  The object of the exercise is to paint a picture from the accumulation of detail.  The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole.  It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details.  Not all details are of equal weight or importance in any given situation.  The details may also vary in importance from one situation to another. …..  The decided cases give clear guidance in identifying the detailed elements or aspects of a person’s work which should be examined for this purpose.  There is no complete exhaustive list of relevant elements.  The list includes the express or implied rights and duties of the parties; the degree of control exercised over the person doing the work; whether the person doing the work provides his own equipment and the nature of the equipment involved in the work; whether the person doing the work hires any staff to help him; the degree of financial risk that he takes, for example, as a result of delays in the performance of the services agreed; the degree of responsibility for investment and management; how far the person providing the services has an opportunity to profit from sound management in the performance of his task.  It may be relevant to consider the understanding or intentions of the parties; whether the person performing the services has set up a business like organisation of his own; the degree of continuity in the relationship between the person performing the services and the person for whom he performs them; how many engagements he performs and whether they are performed mainly for one person or for a number of different people.  It may also be relevant to ask whether the person performing the services is accessory to the business of the person to whom the services are provided or is “part and parcel” of the latter’s organisation.”

22	In Lee Ting Sang v. Chung Chi-Keung and Another [1990] 2 A.C. 374, Lord Griffiths, for the Privy Council observed that the matter had never been better put than it had been by Cooke J. in the passage we have cited above.  The Privy Council adopted the test for the purposes of evaluating the facts found by the District Judge in Hong Kong.  That was a case in which a mason, working for a building sub-contractor, fell from a high stool and suffered injury.  His claim for compensation was resisted on the ground that he was an independent contractor, not an employee.  The evidence established that the mason had been told to work at the construction site by the sub-contractor; that the sub-contractor gave him a plan showing him where to chisel, but did not thereafter supervise his work, although the foreman of the main contractor did check it from time to time; that his tools were provided by the sub-contractor; that he had worked at the site some 20 days before his accident; that he was normally paid in accordance with the amount of concrete he chiselled but on occasions, when the concrete was difficult to chisel or the work involved only a small area, he received a wage for an 8 a.m. to 5 p.m. day; that when he completed his work before 5 p.m. he would assist the sub-contractor to sharpen chisels and would, after so doing, be paid for that work on an hourly basis, and that he worked from time to time for other contractors but would, when the work of the sub-contractor was urgent, give priority to him, telling any other employer, for whom he was then working to engage another to finish the work.  The uncontradicted evidence of the mason was that he would be sacked if he disappeared from site.  
23	The proper application of the fundamental test proposed by Cooke J. in Market Investigations Limited v. Minister of Social Security, and the individual indicia referred to in the passage cited above, compelled Lord Griffiths to observe (at p.383) that:-

“Upon these findings of fact their Lordships would have had no hesitation, in sitting as a Court of first instance, in concluding that the Applicant was working for the [sub-contractor] as an employee and not as an independent contractor.  All the tests, or perhaps it is better to them indicia, mentioned by Cooke J. in Market Investigations Limited point towards the status of an employee rather than an independent contractor.  The Applicant did not provide his own equipment, the equipment was provided by his employer.  He did not hire his own helpers; this emerged with clarity in this evidence when he explained that he gave priority to the First Respondent’s work and if asked by the First Respondent to do an urgent job he would tell those he was working for that they would have to employ someone else:  if he was an independent contractor in business on his own account, one would expect that he would attempt to keep both contracts by hiring others to fulfil the contract he had to leave.  He had no responsibility for investment in, or management of, the work on the construction site, he simply turned up for work and chipped off concrete to a required depth upon the beams indicated to him on a plan by the First Respondent.  There is no suggestion in the evidence that he priced the job which is normally a feature of the business approach of a sub-contractor; he was paid either a piece-work rate or a daily rate according to the nature of the work he was doing.  It is true that he was not supervised in his work, but this is not surprising, he was a skilled man and he had been told that the beams upon which he was to work and the depth to which they were to be cut and his work was measured to see that he achieved that result.  There is no question of him being called upon to exercise any skill or judgment as to which beams required chipping or as to the depths that they were to be cut.  He was simply told what to do and left to get on with it as for example would a skilled turner on a lathe who was required to cut a piece of metal to certain dimensions. 
Taking all the foregoing considerations into account the picture emerges of a skilled artisan earning his living by working for more than one employer as an employee and not as a small businessman venturing into business on his own account as an independent contractor with all its attendant risks.  The Applicant ran no risk whatever save that of being unable to find employment which is, of course, a risk faced by casual employees who move from one job to another….”.

Lord Griffiths went on to say that the case was so clearly one of an employee that the decision at first instance was plainly wrong, and could properly be reversed on appeal.

24	Subsequently, in Lane v. Shire Roofing Company (Oxford) Limited the Court of Appeal came to a similar conclusion, although the authoritative judgment of the Privy Council in Lee Ting Sang does not appear to have been cited to them.  The worker there was a builder/roofer/carpenter who had since 1982 traded as a one-man firm.  He had obtained self-employed fiscal status, with a right to the 714 tax exemption certificates issued by the Inland Revenue.  As a one-man firm he solicited work through advertisements, and when engaged by clients would of course be responsible for estimating, buying in materials, and matters of that kind.  But that work dried up.  His public liability insurance lapsed.  He answered an advertisement issued by the Respondent, seeking men to work on a large roofing sub-contract.  When that job was nearly over, he left it at the Respondent’s request to carry out building works involving the re-tiling of a porch roof of a house in Sonning Common.  While he was doing that work, alone, he fell and was injured.  He claimed a breach of the statutory duties imposed upon an employer.   The Respondent denied employment.  

25	The Judge at first instance found that the Appellant was an independent contractor, and not an employee.  His reasons for doing so appear, from the extracts cited by Lord Justice Henry in his judgment when the matter came to appeal, to have been that the Appellant had his own genuine roofing business, so that he was a roofing specialist, and had the benefit of 714 certificates so that he could pay his own tax and was thus paid gross; that he had continued with that system whilst working for the Respondents; that he could work without supervision and was relied upon to do so; that there was no guarantee of continuing work, and that there was no provision for notice or dismissal.  On this basis he was  found to be an independent contractor. 

26	Reviewing – and differing from – the Judge’s conclusions, Lord Justice Henry (with whom Lords Justices Nourse and Auld agreed) said, in relation to the distinction between employees and independent contractors that:-
“…all depends on the facts of each individual case.  Certain principles relevant to this case, however, emerge.  
First, the element of control will be important:  who lays down what is to be done, the way in which it is to be done, the means by which it is to be done, and the time when it is done?  Who provides (i.e. hires and fires) the team by which it is done, and who provides the material, plant and machinery and tools used?
But it is recognised that the control test may not be decisive – for instance, in the case of skilled employees, with discretion to decide how their work should be done.  In such cases the question is broadened to whose business was it?  Was the workman carrying on his own business, or was he carrying on that of his employer’s?  The American Supreme Court, in United States of America v. Silk [1946] 331 US 704, asks the question whether the men were employees “as a matter of economic reality”.  The answer to this question may cover much of the same ground as the control test (such as whether he provides his own equipment and hires his own helpers) but may involve looking to see where the financial risk lies, and whether and how far he has an opportunity of profiting from sound management in the performance of his task (see Market Investigations).”

27	Lord Justice Henry returned, against the background of those principles, to consider the reasons given by the Judge.  He noted that the reasons would apply equally to work being done under a short term single job contract of employment.  It was argued that there was a distinction between a situation where an employer engaged men on “the lump” to do labouring work – as to which Lord Justice Henry observed that “the men are clearly employees, whatever their tax status may be” – and that where a specialist sub-contractor was employed to perform some part of a general building contract.  Lord Justice Henry dealt with the argument, and the evaluation of the facts by the Court of Appeal by saying that he:-
“..would put this case substantially nearer “the lump” than the specialist sub-contractor.  Though the degree of control that Mr Whittaker would use would depend on the need he felt to supervise and direct the Appellant (who was just someone answering the advertisement) the question “whose business was it?” in relation to the Sonning Common job could only in my judgment be answered by saying that it was the Respondents’ business and not the Appellant’s.  In my judgment, therefore, they owed the duties of employers to the Appellant.”

28	Although it can be misleading to reason by analogy, it is instructive to note that, apparently independently, both the Privy Council and the Court of Appeal concluded that the proper application of an appropriate test – whether the “fundamental test” as to whose business it was (Lee Ting Sang), or the “narrow question of control first, but in the case of a skilled employee the broader question whose business it was” (Lane) produced an emphatic answer in favour of the employee.  The facts in each were not far removed from those which the Employment Tribunal here had to consider, and it is plain that each Court regarded the “lump” worker as an employee.

The Decision of the Employment Tribunal
29	Given that a shopfitter/joiner, working as a supervisor and thus almost by definition “part and parcel” of the organisation for which he worked, working solely for that organisation, providing personal services, under its control, and in no way involved in the profits or losses of the business, and receiving full directions as to the work to be carried out, would appear to be almost indistinguishable from the mason in the case of Lee Ting Sang or the roofer in the case of Lane, for what particular reason did the Employment Tribunal conclude that he was nonetheless self-employed?  The reasoning is set out at Paragraph 5 of the decision.  The majority relied upon five factors:-
“(a) There was no Contract of Employment until 31 March 1998
(b)The Applicant produced documentation by way of payslips, which did not show National Insurance number, tax code but did show that tax had been deducted.  The Respondents produced documentation, which clearly showed that the Applicant paid Income Tax under the SC60 scheme.  The Applicant would, under this scheme, be able to recover any tax overpayment at the end of the financial year, via the Inland Revenue.
(c)The Applicant gave evidence that he paid Class II and Class IV National Insurance contributions by direct debit.  
(e)The Applicant was not entitled to holidays or holiday pay entitlement nor were there any arrangements for sick pay.
(f)There were negotiations over a period of about a year, to change the Applicant’s status to that of a direct employee.  These negotiations were finally, mutually agreed about March 1998.”

30	Point (a) is equivocal.  It means either that there was no contract of employment (whether written or oral) until 31st March 1998, or it means that there was no contract of employment in writing until then.  If it was the former, then it begged the question:  that was the very issue the Tribunal had to determine.  If, however, the Employment Tribunal meant that there was no written document purporting to be a contract of employment till then, that, too, does not  advance the argument one iota.  Where the issue is not whether a contract has been entered, but the nature of the contract which has been made, it can only be an irrelevant consideration that it was not in writing.  If the Employment Tribunal instead had meant to say that any person who was an employee would have a written contract, because there is a statutory obligation to provide written terms and conditions in such a case, and that one might reason from its absence that the contract entered into was therefore not one of employment, this would be to ignore the reality that many such contracts are never put into writing – and, indeed, s. 230 Employment Rights Act 1996 acknowledges that such a contract may be oral.

31	Accordingly, not only is there no force in point (a), but it would appear that the majority allowed themselves to give weight to a factor which should have had no weight at all.  

32	Points (b) and (c) require further consideration.  They are allied to point (e).  Mr Gregory, for the Respondents, submitted that the fact that there had been negotiations as to the form of contract to take effect from March 1998 indicated that both the Appellant and the Respondent were arguing on the basis that the new arrangement, to be recognised as a contract of employment, was fundamentally different from the previous one.  They were concerned, he argued, about gains and losses that might be incurred from entering into the formalised status of employee from that date.  What else, argued Mr Gregory, could Mr Reid be giving up other than self-employment if he entered into negotiation about the terms of a written contract of employment?  

33	Put at its highest, the finding that the Appellant was engaged on an SC60 basis, and conducted himself both in respect of the tax and social security authorities and (by entering into negotiations as to whether he should accept a written contract of employment) with the Respondents as though he were self-employed, would suggest that in his own mind that was the view he took, and that this view was shared by the Respondent.

34	The question as to the importance to be given to the view taken by the parties to a contract for personal service to be performed of the status of the worker, or indeed an agreement to that effect, has been considered in a number of authorities.  In Ferguson v. Dawson [1976] 1 WLR 1213 the Court of Appeal considered the case of a general labourer who was orally engaged by building contractors.  He was told that there were no cards, and that they were “purely working as a lump labour force”.  The Judge at first instance found that both he and the building contractors regarded him as working as a “self-employed labour only sub-contractor” and that there tax advantages for both worker and contractor in taking that view. The view of the majority of the Court of Appeal (Megaw L.J. and Browne L.J.) was that the label attached by the parties to the relationship ought to be wholly disregarded.  Megaw L.J. said:
“My own view would have been that a declaration by the parties, even if it be incorporated in the contract, that the workman is to be, or is to be deemed to be, self-employed, an independent contractor, ought to be wholly disregarded – not merely treated as not being conclusive – if the remainder of the contractual terms, governing the realities of the relationship, show the relationship of employer and employee….   I find difficulty in accepting that the parties, by a mere expression of intention as to what the legal relationship should be, can in any way influence the conclusion of law as to what the relationship is.  I think that it would be contrary to the public interest if that were so:  for it would mean that the parties, by their own whim, by the use of a verbal formula, unrelated to the reality of the relationship, could influence the decision on whom the responsibility for the safety of workmen, as imposed by statutory regulations, should rest.  But, as I shall indicate later, I am prepared for the purposes of this appeal to accept a less stringent view of the law on this point, and my decision is therefore not based on that view.”

35	Given this last sentence, this passage in his judgment is obiter despite its logical force.  He continued, however, to say (as ratio):-
“..I am content for the purposes of this appeal to accept, in favour of the Defendants, the less stringent view which appears hitherto to have found favour in a number of cases, that is that the expression of the party’s intention may be a relevant factor, though certainly not a conclusive factor, in deciding what is the true nature of the contract.”

36	Browne L.J. said:-
“Even if the “prime object of the bargain” between the Plaintiff and the Defendants in the present case was the avoidance of the relationship of master and servant, the question is whether they succeeded in that object.  The parties cannot by a label decide the true nature of their relationship…..  But I am afraid that I cannot agree with Lawton L.J. that this was the prime object of the bargain.  The prime object, I think, was that the Plaintiff should work as a general labourer on sites where the Defendants were carrying on their business as building contractors.  It is true that both parties intended that it was to be a term of the bargain that the Defendants should not deduct tax and should not pay for the Plaintiff’s national insurance stamps, but this was only one term.  I agree with Megaw L.J. that there must have been – and were – other terms, and that the Court must look at the arrangements as a whole to decide what the real relationship was.”

He went on to agree with Megaw L.J. that 
“A declaration by the parties ought to be disregarded if the remainder of the contractual terms show that the reality of the relationship is one of master and servant but, like him, I am prepared to assume that the less stringent view adopted by the authorities is right, namely that it is a relevant, but certainly not a conclusive, factor.”

37	In Massey v. Crown Life Insurance Co [1978] ICR 590, Ferguson v. Dawson was distinguished.  That was a case in which the manager of a branch of the Respondent insurance company was advised by his accountants to change his relationship with the company.  In order to do this he registered a new name with the Register of Business Names, and entered into a new agreement with the company – in almost identical terms to the previous one.  As a result of that agreement he said he was no longer a servant, but an independent contractor, and therefore sought to be taxed under Schedule D.  The Inland Revenue accepted it as such.  He ceased to be a member of the company pension scheme.  Lord Denning M.R. said:-
“It seems to me on the authorities that, when it is a situation which is in doubt or which is ambiguous, so that it can be brought under one relationship or the other, it is open to the parties by agreement to stipulate what the legal situation between them shall be.  That was said in the Ready Mixed Concrete case by MacKenna J.:-  “If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention.”  So the way in which the parties draw up their agreement and express it may be a very important factor in defining what the true relation was between them.  If they declare that one party is self-employed, that may be decisive.”

38	Commenting on Ferguson v. Dawson, Lord Denning M.R. said:-
“The man was on “the lump”.  He had had all the benefits of it by avoiding tax.  It was contrary to public policy that, when he had an accident, he could throw over that relationship and claim that he was only a servant.  
In most of these cases, I expect that it will be found that the parties do deliberately agree for the man to be “self-employed” or “on the lump”.  It is done especially so as to obtain the tax benefits.  When such an agreement is made, it affords strong evidence that that is the real relationship.  If it is so found, the man must accept it.  He cannot afterwards assert that he was only a servant.”

39	The reasoning of Lawton L.J. was somewhat different.  He noted that Mr Massey had not only entered into a contract to be a manager but had on the same day entered into another contract with the company to be a general agent.  Freelance agents are common in the world of insurance.  The contract relating to general agency clearly made Mr Massey such an agent.  Lawton L.J. added:-
“The consequence of the two contracts running at the same time was that the Applicant was wearing two hats, one as an employee and the other as a self-employed person.  I can readily understand that by the Summer of 1973 he felt that it was inconvenient for him to wear two hats, and somebody – may be those with whom he worked or his accountant – alerted him to the advantages of wearing only one hat, namely, that of being a self-employed person.”

40	He regarded Ferguson v. Dawson as having clearly established that the parties could not change a status merely by putting a new label on it.  However, he added:-
“But if in all the circumstances of the case, including the terms of the agreement, it is manifest that there was an intention to change status, then, in my judgment, there was no reason why the parties should not be allowed to make the change.  In this case, there seems to have been a genuine intention to change the status, and I find that the status was changed.  It follows that there having been a change of status, the Applicant cannot now say that there was not one.”

41	Lord Justice Eveleigh agreed with both judgments.  

42	In Young & Woods Limited v. West [1980] IRLR 201, the Court of Appeal considered both Ferguson v. Dawson and Massey v. Crown Life.  A skilled sheet metal worker was offered alternative methods of payment.  Either he could become an employee in the ordinary way, or he could go on the books as self-employed.  He chose to be self-employed.  The Inland Revenue treated him as such.  When his work was terminated, he complained that he had been unfairly dismissed.  The company contended that he was not an employee under a contract of service, but was self-employed.  

43	Lord Justice Stephenson pointed out that whereas the Master of the Rolls, on one view of the passage we have cited above, might have been saying that where there was an agreement for a man to be self-employed the man must accept it and cannot afterwards assert the opposite, the passage was ambiguous.  He noted that Lord Justice Lawton had nowhere suggested in his judgment that an agreed change in the status of a person or an agreed choice of status necessarily determined that status, so as to prevent the worker resiling from his choice or pursuing what would appear to be a remedy inconsistent with the choice deliberately made.  

44	On the facts of West he said:-
“I am satisfied that the parties can resile from the position which they have deliberately and openly chosen to take up and that to reach any other conclusion would be, in effect, to permit the parties to contract out of the Act and to deprive, in particular, a person who works as an employee within the definition of the Act under a contract of service of the benefits which this statute confers upon him.”

45	He thought it impossible to regard Mr West, self-employed though he asked to be treated, as being a person in business on his own account as Mr Massey, in very different circumstances, had rightly been regarded.

46	He added that:-
“It is in my judgment the duty of an Industrial Tribunal, once a person goes to it and says “Though I was self-employed, nevertheless I am an employee entitled to enforce my statutory rights”, to see whether the label of self-employed is a true description or a false description by looking beneath it to the reality of the facts, and it must be its duty to decide on all the evidence whether the true legal relationship accords with the label or is contradicted by it.”

47	Lord Justice Ackner, agreeing, said:-
(At paragraph 30) “It is by now well settled that the label which the parties choose to use to describe their relationship cannot alter or decide their true relationship; but, in deciding what that relationship is, the expression by them of their true intention is relevant, but not conclusive.”

48	The objection that an employee might be seen to be both having his cake, by obtaining the fiscal advantages of being self-employed when it suited him, and eating it, by having the advantages in employment protection which employee status gave him when it suited him, would be met by the Revenue being likely to reopen any issue as to tax liability over the years of employment.  

49	It seems clear to us that the question of tax and national insurance liabilities is one which is properly to be determined by the status of the worker concerned, and is not determinative of it.  The liability is consequent upon a decision as to status.  It is not a reason for determining status.  To hold otherwise would be to take the view that that which undoubtedly was a contract of employment could be converted into one for services simply by describing it either as such, or by describing the tax terms which it was anticipated would follow from the work.  

50	Section 203 of the Employment Rights Act 1996, which renders void any provision in an agreement (whether a contract of employment or not) which purports to exclude or limit the operation of any provision of the Act prohibits any agreement to treat the man who is, truly, an employee as though he were not.  It is thus not open to parties to change their relationship by agreement.  

51	In case of doubt or uncertainty, the label which parties give to their relationship may be a useful indicator as to the true nature of that relationship.  Since the authorities which we have reviewed suggest that the weight to be given to individual factual considerations may vary from case to case, it may be entirely appropriate in a finely balanced case that that weight is affected by the agreed intentions of the parties, for those intentions may themselves indicate the emphasis properly to be placed on each relevant factor when reviewing the contract in operation and not just in intention.

52	Accordingly, we think that the reasons given at 5(b), (c) and (e) by the Employment Tribunal are a case of the tail wagging the dog.  Unless there is, on the facts of this case, a close balance of factors both for and against the status of employment such that the declared views of the parties may be persuasive as to the true position, they cannot be reasons for concluding that the relationship was other than it was.

53	That leaves as the sole potentially valid reason to which the majority referred the fact that the Appellant was entitled neither to holidays, nor holiday pay entitlement, nor were there arrangements for sick pay.  We consider that the Employment Tribunal were entitled to have regard to this as a factor.  However, they would have to recognise that there are many contracts of employment, particularly those entered into orally, which contain no such express provisions.  Moreover, the Employment Tribunal found that holidays were taken, both when the Applicant required them and when work was quiet.  There does not appear to have been any objection to this from the Respondent.  The description applied by the Employment Tribunal to the breaks between periods of work is, moreover, “holidays”.  They did not use words indicating gaps between successive contracts for services, as was the case, for instance, in Hellyer Bros. V Mcleod [1987] ICR 526.

54	Mr Gregory submitted that there was no single factor which could be relied upon to distinguish a contract of service from a contract for services.  Not only had this been emphasised in the Ready-Mixed Concrete case, but also in McMeechan v. Secretary of State for Employment [1997] ICR 549 at paragraph 9.  The central question was to be answered by applying a global view, especially in a borderline case: a contract of employment was something which you knew when you saw it.  Authority for this approach was, he argued, provided by Cassidy v. Ministry of Health [1951] 2 KB 343, C.A., relying on the phrase  “within the meaning which an ordinary person will give to the words” (per Somervell L.J. at 352-3).

55	In his Skeleton Argument, he contended that the question of whether there is a contract of service or one for services is a question of fact in each case.  Here the provision of tools, the breaks between contracts, the absence of holiday or sick pay arrangements, provided ample evidence to support the majority decision.  

56	The minority decision, on the other hand, was one which Mr Gregory said did not equate with the facts found.  Where the minority had argued that the Applicant had worked continuously from March 1994, the Tribunal had found that he had taken breaks of about a week at a time.  The minority had said that the Appellant was not free to negotiate hourly rates, yet the fact, as found by the Tribunal, that there was no negotiation about the rate of pay was not the same as a finding that he could not have negotiated had he had a mind to.  The minority emphasised that the Appellant was told where to work, yet even the most independent of contractors would most likely be told the location at which his services were required.  The minority emphasised that there was no question of any substitute being provided for the Appellant, who provided his work personally.  Yet, as Mr Gregory submitted at some length, there was nothing to say that the Appellant was prohibited by the terms of his engagement from providing a substitute, and if he had done, there could have been no contract of employment (Express & Echo v. Tanton [1999] ICR 693).  Similarly, the fact that the Appellant did not work for anyone else did not mean to say that he could not have done so, consistent with his contract.  

57	Finally, Mr Gregory drew attention to the fact that the minority had placed some emphasis upon the fact that no evidence had been led as to mutuality of obligation.  

58	We would merely observe that “mutuality of obligation” is capable of being misunderstood.  Most contracts involve mutual obligations.  Those cases which have emphasised mutuality of obligation as constituting an irreducible minimum for a contract of employment have, as we see it, concentrated upon the nature of the obligations concerned, which in the context of those cases was likely to be determinative.  Yet the phrase itself is as likely to obscure as it is to aid meaning unless the nature of the obligations referred to are clear.  There are different formulations of it:  see Waite L.J. in McMeechan v. Secretary of State for Employment, at paragraph 9 (the obligation on one party to provide work, and the other party to do it); and Sir Christopher Slade in Clark v. Oxfordshire Health Authority [1998] IRLR 125 (a wage on one side, and the servant’s own work and skill on the other.  The House of Lords in Carmichael v. National Power [1999] ICR 1226 viewed the obligations as being one the one hand to provide work, and on the other to do it if provided (per Lord Irvine of Lairg L.C. at 1230 G; Lord Hoffmann at 1233 A-B).    

59	The context in which this approach has been taken must be borne in mind. In any case in which there is no doubt that work is provided, and done, or (adopting the other view of mutual obligations) that work is provided in return for pay or other remuneration, the requirement that there be mutual obligations of a type described in the cases we have referred to will be satisfied, but will not be determinative of whether there is a contract of employment, or some other form of contract.  The test has been applied in cases in which there has been a casual engagement, or a series of pieces of work, in which the issue has been whether or not the overall contract, whether of a general engagement or employment agency type constitutes a contract of employment or not.  The approach has helped to distinguish factors in such cases which McKenna J. in Readymix would have regarded as inconsistent with a contract of employment.  It is not, we think, of direct assistance in a case such as the present where it appears plain on the facts that mutual obligations existed.  

60	Finally, Mr Gardner urged upon us that a decision that a contract was one of employment rather than one for services was a question of fact with which this Tribunal should not interfere, short of perversity.

Conclusions

61	In O’Kelly v. Trusthouse Forte [1983] IRLR 369 the Court of Appeal held that whether or not a waiter was employed under a contract of employment was a question of mixed fact and law, and that the finding of an Industrial Tribunal on that issue from which an appeal lay on a point of law only could only be impugned if it could be shown that the Tribunal, correctly directing itself on the law, could not reasonably have reached the conclusion under appeal.  Reliance was placed, in part, on Edwards v. Bairstow [1956] AC 14.

62	Similarly, in Lee Ting Sang it was recognised that it must be taken as firmly established that the question of whether or not work was performed in the capacity of employee or independent contractor was to be regarded as a question of fact to be determined by the trial Court.  However, the Privy Council drew attention to the words with which Lord Radcliffe concluded his speech in Edwards v. Bairstow (especially at 39), where he said that the duty of the Courts was:  “…no more than to examine those facts with a decent respect for the Tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado.”.

63	It was on that basis that Their Lordships were of the opinion in that case that the facts pointed
“So clearly to the existence of a contract of service that the finding that the Appellant was working as an independent contractor was, to quote the words of Lord Simonds in Edwards v. Bairstow (at page 29) ‘A view of the facts which could not reasonably be entertained’ and is to be regarded as an error of law.”

64	We have already noted that a similar approach was taken in Lane v. Shire Roofing.
We have accordingly, come to the conclusion on three separate bases that the decision of the Employment Tribunal in the present case cannot stand.  First, although the evaluation of whether there is a contract of employment or not is to be treated as one of fact, those facts have to be evaluated in accordance with the law and authority.  We invited Mr Gregory to show us which, if any, recognised approach to the facts the majority had taken.  None is stated.  Mr Gregory pointed out that the various tests to distinguish contracts of employment from those for services set out in Harvey on Industrial Relations and Employment Law had been quoted to the Tribunal.  So they had – but the Tribunal do not say which, if any, enabled them to give particular relevance to the facts they selected.  

66	If the “control” test had been used, the inevitable finding would have been that the Appellant was an employee.  Acknowledging that control may not be enough of itself, if the “fundamental” test of “is he in business on his own account?” had been used, again the same inevitable conclusion must have been reached.  So, too, would the test of whether the Appellant was “part and parcel” of the Respondent’s organisation:  a supervisor would not normally be anything else.  Next, each of the “indicia” identified by Cooke J. in the Market Investigations case, if they had been examined, would have been found to be present.  In short, without the Tribunal indicating what approach it was adopting, it is difficult to see how they could have reached the decision they did.

67	Secondly, as we have pointed out in dealing with the five factors selected by the majority, four are either of no assistance or are, properly analysed, consequences of finding employment status, and not reasons for finding it.  Accordingly, the decision the Employment Tribunal made was one which was reached by taking into account as relevant and determinative factors which were not and could not have been.  That on its own would be sufficient to render the decision flawed.

68	Thirdly, we think it is open to us to adopt the approach of the Privy Council in Lee Ting Sang, and the Court of Appeal in Lane.  We have no hesitation in regarding the decision of the Employment Tribunal here as perverse.  The employee here was indistinguishable from many others who were “on the lump”, and in respect of whom it is now well recognised that they are employees and not independent contractors.

69	We think that it is plain that what most influenced the Employment Tribunal were the income tax and national insurance arrangements.  The Court of Appeal in Young & Woods Limited v. West [1980] IRLR 201 pointed out that there was no reason to assume that as a result of the decision in that case the employee would have both the fiscal advantages of the self-employed and in addition the statutory rights available to an employee but denied to the self-employed.  Since the true legal position was that he was an employee, the Inland Revenue had the statutory duty to reclaim tax deductions which were granted to him as self-employed.  This obiter remark should assuage any concern that the employee in a case like this is “having it both ways”, which may well have been at the centre of the majority’s thinking. 

70	Accordingly, we shall allow the appeal.  Since the findings of fact were clearly made by the Employment Tribunal, and since it is upon them that we base our decision, it is unnecessary for us to remit the case for a further hearing.  On those facts, we have no hesitation in concluding that the Appellant was undoubtedly an employee.

71	Although both advocates urged us to grant leave to appeal in the event of an adverse determination, we decline permission to do so.