Appeal No. EATS/0049/02

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH EH3 7HF

	At the Tribunal
	On 18 March 2003

Before
THE HONOURABLE LORD JOHNSTON
MR A G McQUAKER
MR M G SMITH

RECRUIT EMPLOYMENT SERVICES	APPELLANTS

MS CHRISTINA MARGARET DILLON	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellants	Miss V Von Wachter, Counsel
Instructed by-
Recruit Employment Services
c/o Carlisle Staffing plc
Albany Place
Hyde Way
WELWYN GARDEN CITY
AL7 3BG

	
For the Respondent	No Appearance 
Nor Representation

	

LORD JOHNSTON:

1.	This is an appeal at the instance of the employer against a finding by the Employment Tribunal (Chairman sitting alone) at a preliminary hearing, that the respondent was an employee of the appellants, within the terms of section 230 of the Employment Rights Act 1996 and, accordingly, that the Tribunal had jurisdiction to entertain a claim for unfair dismissal.

2.	It is not disputed that the respondent was placed by the appellants in the employment of Tesco, in its Dundee branch, for a period between 9 November 2000 and 15 February 2002.  Her relationship, to use a neutral phrase, with the appellants, was governed by, what was said to be a contract for services, a copy which was to be found as document A2.

3.	That document contained various express terms including the following:-

“2 …(b):-
“For the avoidance of doubt, these Terms shall not give rise to a contract of employment between Recruit and the Temporary Worker, the Temporary Worker shall be under the direction of the Client for the period of the Assignment.””

4.	It also contained Clause 7 in the following terms:-

“The Temporary Worker is not obliged to accept any Assignment offered by Recruit but if he does so, during every assignment and afterwards, as appropriate, he will:
a)	co-operate with the Client’s staff and accept the direction, supervision and instruction of any responsible person in the Client’s organisation.
b)	familiarise himself with the Health and Safety procedures on each Assignment.
c)	observe any rules and regulations of the Client’s establishment to which attention has been drawn or to which the Temporary Worker might reasonably be expected to ascertain.
d)	unless arrangements have been made to the contrary, conform to the normal hours of work currently in force at the Client’s establishment provided that these do not breach entitlements to rest breaks, daily rest and weekly rest provided by the Working Time regulations 1998.  Work outside the Client’s normal hours does not, in itself, mean that the Temporary Worker is to be paid overtime.
e)	take all reasonable steps to safeguard his own safety and the safety of any other person who may be present or affected by his actions on the Assignment and comply with the Health and Safety policy of the Client.
f)	not engage in any conduct detrimental to the interests of the Client or Recruit.”

5.	Against that background, the arrangement, again to use a neutral phrase, with Tesco, was governed by a handbook entitled “Recruit Employment Services & Tesco” which we were favoured with a copy, containing a number of instructions which the relief or temporary worker was obliged to comply while working for Tesco.  The Tribunal Chairman took the terms of this document materially into account in his decision which is in the following terms:-

“As is well known, for an individual to claim the statutory right not to be unfairly dismissed, he or she must hold the status of “employee”.  Section 230(1) of the 1996 Act defines “employee” as “an individual who has entered into or works under a contract of employment”.  Section 230(2) provides that a “contract of employment” means “a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing”.  It is generally understood that one of the purposes of that definition is to distinguish between those working under a “contract of service” and those working under a “contract for services”.  The contract in this particular case was expressly entitled as the latter.  However, it is equally well known that whilst the intention of the parties is relevant, a contract which is essentially one of employment cannot be altered merely by giving it a different label.  Indeed the possibility exists that where the characteristics and legality of a relationship are plainly that of employer and employee, a document which purports to categorise it as something else may be open to attack as an illegal attempt to contract out of the relevant statutory provisions under section 203 of the 1996 Act. 

The kind of arrangement under which the applicant in this case worked is not uncommon, that is where an employment agency engages or contracts with an individual and supplies his or her labour to a third party – frequently referred to as “the client” –  for work of a particular kind, or for specific engagements, often of a temporary nature, to be carried out typically at the premises of the client.  The duration of such work may be open-ended or for a fixed term, all depending upon the requirements of the client.  There will usually be no identifiable contract directly between the individual and the client who will have a commercial contract with the agency governing the situation and providing for payments to the agency in consideration of the supply of the labour.  The agency pays remuneration to the individual under deduction of Income Tax and National Insurance contributions.  The question then frequently arises – is the relationship of the individual to the agency one of employment within the meaning of section 230 of the 1996?

In recent times, in attempting to answer that question, the issue has focused on the degree of control being exercised by the agency over the individual and, often more particularly recently, on the question of mutuality of obligation as between the individual and the agency. Also, any particular case can be analysed on two levels namely on the “general engagement” (as it is called) with the employment business; and secondly on the “specific engagement” i.e. the assignment to one particular client.  Each type may give rise to a contract of employment. 

In this case it is clear that under the general engagement with the respondents, governed primarily by the “Contract for Services” (Production A2), the applicant was to be paid only when she was in fact assigned to work for a particular client. She is said to have acknowledged that it was in the nature of temporary work that there would be periods when no suitable assignments were available and that the respondents would incur no liability towards her should it fail to offer her any opportunity of work.  When she did work, the applicant was paid an hourly rate which was subject to deductions in respect of PAYE and National Insurance contributions.  However, she did not have any entitlement to any pay when she did not work, nor to any sick pay should she be unable to work through illness. There was no entitlement to join a pension scheme.  In addition, there were no provisions relating to discipline, nor was there a grievance procedure.  

Clause 7 of the contract expressly stated that the applicant was not obliged to accept any assignment offered by the respondents, but if she did so then certain requirements would apply (see above).  If she was not in fact offered work by the respondents, there would not appear to have been any action which the applicant could have taken to require them to provide work. 
As to the applicant’s relations with the client (i.e. any client from time to time) the general contractual conditions under the contract (production A2) made it clear that she was to “accept, direction, supervision and instructions of any responsible person in the client’s organisation”.  It does not appear to be envisaged in these general conditions, that, in carrying out whatever tasks she was assigned, she would be under the exercise of any particular control by the respondents.  Accordingly, in that regard I have come to the view that in her relationship with the respondents, the applicant did not have any general or “global” contract of employment since the essential ingredient of mutuality of obligation is noticeably absent.  There is indeed no requirement on the respondents generally to provide work or “assignments” for the applicant and similarly there is no obligation upon the applicant to agree to perform any particular assignment should she not wish to do so.  Also, in the times when she would not be working, the applicant had no entitlement to any pay at all. 

The second analysis is of the specific engagement to which the applicant had been assigned at the time of the termination of her employment.  In that regard the picture takes on a different colour.  In particular, there were specific and additional requirements introduced in the form of the “Associate Handbook” which patently by its full title and content, are peculiar to the particular engagement of carrying out her work for and at the premises of Tesco.  It is noteworthy that by the time of the termination of her employment she had been engaged upon this specific assignment through the respondents for more than one year – and indeed for 14 months or thereby in total if one includes her period with the previous employment agency used by Tesco.  I do not regard this length of time as coming within the concept of “temporary” and indeed it is of course sufficient for the qualifying period for unfair dismissal purposes.  It seems clear that in all of that time there would have been an obligation upon the applicant to continue to turn up to carry out her work and of course the corresponding obligation upon the respondents to pay her for doing so.  It seems to me that the arrangement involving Tesco, so far as the applicant was concerned, had ceased to be temporary.  

It would seem also that the absence of the obligations to offer or accept future assignments becomes irrelevant when looking at the position from the point of view of the specific engagement. 

Accordingly, this is not a case in which the individual assignment is governed only by the same terms and conditions as any general assignment would have been.   
For the Tesco Contract alone, as noted above, an individual set of requirements was introduced in the Handbook.  It seems to me that that document introduced into the particular engagement at Tesco a great many more of the common features of a contract of employment than are evident in the “ Contract for Services”.  These factors are referred to in more detail above but in any event, are evident from an examination of the document itself which is produced as part of the evidence in this case.  It contained detailed requirements with which she was to comply on a wide variety of matters including – hours, breaks, dress code, lateness, absenteeism, holidays, canteen facilities etc.  In addition there were particular disciplinary issues, e.g. (at page A7) a failure to comply with the dress code “ will result in you being sent home without pay”.  Again, “ persistent lateness will result in dismissal”. 

Again, at page A7, the applicant was enjoined that if for any reason she was unable to attend work “you must telephone Recruit & Services at least two hours prior to the commencement of your shift…. Failure to do so may result in dismissal”.  
Accordingly, there is apparent a far greater degree of control and discipline being exercised by the respondents in this particular engagement than is apparent under the general terms of the “Contract for Services”.  

In any event it seems to me that by her acceptance of this particular assignment, and for the duration of its subsistence, the applicant bound herself personally to provide her service and the respondents bound themselves to pay her for that service at the agreed rate.  As was stated by Lord Justice Stevenson in Nethermere  (St. Neots) Limited –v- Gardiner [1984] IRLR 240, that is the “irreducible minimum of obligation” to create a contract of service.  It seems to me therefore that this particular engagement included the required mutuality of obligation.  That of course in itself does not necessarily mean that there is actually a contract of employment (as distinct from some other kind of contractual relationship).  However, if one has regard also to the Court of Appeal in McMeechan –v- Secretary of State for Employment 1997 IRLR 353, it can be seen that a single assignment may indeed give rise to employee status between the so-called “Temporary Worker” and the agency.  Whether that status will be applied to any particular case will of course depend on its own particular facts and circumstances.  Having regard to the whole facts and circumstances of the relationship in this case, and during the whole of the period of the applicant’s relationship with the respondents whilst working at Tesco I have come to the view that when the various facts and indications are set against each other, and the specific arrangement when working at Tesco is regarded as a whole, it is a general impression of a contract of service between the parties which emerges, regardless of the label which has been put upon it in the contractual document itself. 

Accordingly, I find that for the purposes of this application the applicant is entitled to be treated as an employee and thus entitled to proceed with her claim for unfair dismissal.

6.	Miss Von Wachter of Counsel, appearing for the appellants, submitted that the Tribunal Chairman had misdirected himself, not least, by taking into account the various provisions in the handbook in determining the matter but, furthermore, had not properly considered the relationship possibly existing as one of employment between the respondent and Tesco.  She accepted that McMeechan v Secretary of State for Employment [1997] IRLR 359 could lay a foundation for the status of employee to emerge from what would otherwise be a temporary worker for an agency if a particular assignment met the overall criteria of control, but, equally, submitted that the opposite situation could arise if real control was being exercised by the person for whom the temporary worker was working (Motorola Ltd v Davidson [2001] IRLR 4).  She further submitted that the Tribunal Chairman had misdirected himself on the whole question of mutuality as between the appellants and the respondents.  If the terms and conditions of the handbook were laid aside it was plain, she submitted, that the contract for service, i.e., employment, had never been created between the agency and the respondent with the result that the Tribunal Chairman had reached the wrong conclusion.

7.	Despite the plethora of cases in this area in recent years, the opinion of MacKenna, J in Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433, still rules the matter where he states at page 439:-

“I must now consider what is meant by a contract of service.  A contract of service exists if the following three conditions are fulfilled: (i)  The servant agrees that in consideration of a 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 its being a contract of service.  …  
As to (ii).  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.”

8.	We recognise that in terms of McMeechan supra what was initially a contract for services with an agency can become a contract of employment in relation to a particular assignment if that assignment is being undertaken in terms of the original arrangement between the employee and the agency.  We also recognise that in Montgomery v Johnson Underwood Ltd [2001] IRLR 269 another division of the Court of Appeal questioned the extent to which McMeechan laid down any general rule but it did not seem to negatively notion that what could be regarded as a temporary contract of employment with a particular assignee could be created between the agency and the employee in appropriate circumstances.  This is in fact the decision that the Chairman reached on the facts of the present case.

9.	It has to be recognised that the issue of this type contains a mixed question of fact and law but it is highly material to take into account the particular facts of a particular case.  To that extent the Tribunal of first instance has an advantage over this Tribunal when determining the two bases of the arrangement existing at the material time.  If this Tribunal were to take, in the abstract, a different view from that reached by the Chairman it must only do so, conclusively, if it is satisfied that that was the only option open to the Tribunal at first instance which, accordingly, misdirected itself by going in the opposite direction.  In this particular case we recognise, against the background of McMeechan, properly understood, that although there was no obligation on the part of the respondent to accept any assignment in terms of her contract with the agency, the appellants, she was, if she was going to accept an assignment, thereby bound by Clause 7 to comply with the requirements of the assignee, i.e., Tesco.  While in certain circumstances this might, in itself, create a contract of employment between the employee and the assignee (i.e. Motorola supra) it is equally capable of creating a relationship of employer/employee with the agency for the duration of the particular assignment.

10.	In these circumstances, against the background of the relevant facts, we consider that the conclusion reached by the Tribunal Chairman was one he was entitled to reach upon the evidence before him against the background of the law and the relevant documents.  We do not consider that it was irrelevant for him to consider the contents of the handbook in determining this matter.  We recognise that he, perhaps, might have considered whether or not Tesco could be the employer but since they were not a party to the proceedings it was competent for him to ignore that aspect of the matter unless it was the obvious solution.

11.	In these circumstances, despite the cogency of the arguments presented to us, we consider that the law permits the conclusion reached by the Chairman on the evidence of this particular case and, accordingly, we will not interfere, whatever conclusion we might have reached, if we were sitting looking at the matter de novo.

12.	In these circumstances and for this reason this appeal is refused and the matter will be remitted back to the Employment Tribunal to proceed as accords.