Appeal No. EAT/609/02/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 14 February 2003

Before
HIS HONOUR JUDGE J McMULLEN QC
MR P R A JACQUES CBE
MRS M McARTHUR

MRS M J BURTON	APPELLANT

FRANCES HIGHAM 
T/A ACE APPOINTMENTS	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR M NEGISHI
Free Representation Unit
Peer House
4th Floor
8-14 Verulam Street
London WC1X 8LZ	
For the Respondent	MR K A CURL
K C Consultancy
49 Falklands Road
Boyton Hall
Haverhill
Suffolk CB9 0EA	

JUDGE J McMULLEN QC:

1	This case is about the small business exemption from disability discrimination.  We will continue to refer to the parties as Applicant and Respondent.

The proceedings  
2	It is an appeal by the Applicant in those proceedings, Mrs Burton, against a decision of an Employment Tribunal sitting at Stratford East, Chairman Mr J.N. Leonard, promulgated with Extended Reasons on 29 May 2002.

3	The Applicant was represented there and here by Mr Negishi of Counsel through the Free Representation Unit and the Respondent by Mr Curl of Counsel, now Consultant.  The Applicant claimed unfair dismissal and disability discrimination.  The Respondent denied both.  The essential issues before the Employment Tribunal were to determine whether the dismissal by was unfair and whether the Applicant was entitled to make a claim under the Disability Discrimination Act 1995.

4	The Employment Tribunal upheld the claim of unfair dismissal, due largely to very fair concessions made on behalf of the Respondent by Mr Curl but, in the light of the Applicant’s condition of osteo-arthritis in the knee, awarded no compensation.  There is no appeal from that decision.  The Tribunal also decided the disability discrimination claim could not be made because Section 7 excluded claims in relation to an employer who has fewer than 15 employees.  

5	The sole issue before us, in a Skeleton Argument presented by Mr Negishi in very clear and cogent terms, is whether or not the Tribunal was right in its construction of the exemption. Unusually we and the Employment Tribunal were engaged in construing a contract of a person not a party to or represented in the proceedings.

The facts
6	The Respondent is, a small employment agency employing six persons.  The agency has on its books a large number of people who are engaged under a contract called a “Temporary Workers Contract”.  In any given week the Respondent will send to its clients between 130 and 200 temporary workers.  Sadly, the business suffered as a result of the loss of major client no longer and the Applicant was chosen for dismissal, which was unfair.  

7	The Applicant was employed as a secretary / receptionist and during the course of her work was required to move up and down stairs which she found painful.  The Tribunal made findings in relation to the remedy for unfair dismissal, which we will rehearse here, since they do have some bearing on the issue of discrimination.  She had suffered from a progressive condition of osteo-arthritis in her knee and, in due course, was advised to have knee replacement surgery and which was due to take place in June 2002. We have been told today that Mrs Burton’s operation, after initial complications, has been successful, although she still has some pain.  The disability which she suffered in her claim was made more difficult because of her husband’s disability as well.  It was conceded at the Employment Tribunal that the Applicant is a disabled person within the meaning of section 1 of the Disability Discrimination Act 1995.

The legislation
8	The relevant statutory provisions, for the purposes of this appeal, are as follow in the Disability Discrimination Act 1995:

“4  Discrimination against applicants and employees
(2) It is unlawful for an employer to discriminate against a disabled person whom he employs –
 (d) by dismissing him, or subjecting him to any other detriment.”
...
7  Exemption for small businesses:
(1)  Nothing in this Part applies in relation to an employer who has fewer than 15 employees.
...
68  Interpretation:
(1) In this Act -
‘employment’ means … employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions are to be construed accordingly.”

9	By the Disability Discrimination (Exemption for Small Employees) Order 1998 SI 1998/2618, the barrier was lowered from 20 to 15 employees. It is to be noted as background that, following a number of challenges to this exemption for small businesses, the provision remains in place until legislation is brought forward to repeal it.  Draft Regulations are extant for consultation and it is anticipated that Parliament will repeal this provision on 1 October 2004, as a result of concerns expressed by the Disability Rights Commission and in order to accommodate the EU Equal Treatment “Framework” Directive 2000/78.  At the same time, consultation is going on with a view to implementing protection for agency workers following the European Parliament’s acceptance of a revised Commission proposal for a temporary workers Directive on 21 November 2002.

10	We approach this issue as one of strict construction. This is an exemption from the right to claim under the Act and as such it must be clear and free of argument. The Applicant is disabled, was an employee and was unfairly dismissed prior to surgery. She is entitled to a hearing on her complaint of unlawful discrimination unless it is clear that her right is excluded by statute.  

11	The finding by the Tribunal drew attention to and is expressly based upon Section 230 of the Employment Rights Act 1996, which provides:

“230 Employees, workers etc.
(1) In this Act ‘employee’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
(2) In this Act ‘contract of employment’ means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.
(3) In this Act ‘worker’ (except in the phrases ‘shop worker’ and ‘betting worker’) means an individual who has entered into or works under (or, where the employment has ceased, worked under) -
(a) a contract of employment, or
(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;
and any reference to a worker’s contract shall be construed accordingly.
(4) In this Act ‘employer’, in relation to an employee or a worker, means the person by whom the employee or worker is ... employed.
(5) In this Act ‘employment’ – 
(a) in relation to an employee means ... employment under a contract of employment, and 
(b) in relation to a worker, means employment under his contract;
and ‘employed’ shall be construed accordingly.”

The Employment Tribunal decision
12	The Tribunal thus failed to address itself to Section 68 of the Disability Discrimination Act.  It was, of course, quite correct to do that in respect of the claim for unfair dismissal, about which no contentious matter was raised.  However, the Tribunal erred in law in failing to deal with the submission made by Mr Negishi that the definition of “employment” was regulated for the purposes of the Disability Discrimination Act by that Act and not by the Employment Rights Act.  That would be sufficient to dispose of this appeal.  It would have to go back for the Tribunal.  We will, however, deal with the substance of the argument because we have sufficient material available to us, and that is what the parties want.

13	The Tribunal decided that the headcount of temporary workers on the Respondent’s books should not be included within the figure of 15 for purposes of Section 7 of the Disability Discrimination Act.  

Construction of the contract
14	It is therefore necessary to look at the relationship formed between the Respondent and its temporary workers.  The specimen contract is between the Respondent, called “the Employment Bureau”, acting as agent for the temporary worker. Relevant provisions of the contract are as follows:

“1.	DEFINITIONS
‘Assignment’ means the period during which the Temporary Worker is supplied to render services to the Client.
‘Client’ means the person, firm or corporate body engaging the services of the Temporary Worker.
Commencement date ................................. .

2.	THE CONTRACT
2.1  The Temporary worker hereby appoints the employment bureau to act on his behalf in arranging assignments with clients.  The Employment Bureau will not charge a fee to the temporary worker for its introductory service to its clients.
2.1.1  The Terms herein constitute a contract for services between the Employment Bureau and the Temporary Worker and upon being signed by the temporary worker they govern each and every assignment undertaken by the Temporary Worker.  In the event of the temporary worker declining to accept any offer of an assignment or not attending an assignment for any reason, no contract shall exist between the parties hereto.
2.1.2  For the avoidance of doubt, these Terms shall not give rise to a contract of employment between the client or the Employment Bureau and the Temporary Worker.

4.	REMUNERATION
4.1  The Employment Bureau shall pay to the Temporary Worker on behalf of the client remuneration calculated at a MINIMUM hourly rate of £ ............ for each hour worked during an assignment to be paid weekly in arrears subject to deductions for the purpose of class 1 National Insurance contributions, PAYE, and any other deductions which the Employment Bureau may be bound by law to make.
4.2  Subject to any statutory entitlement under the relevant legislation, the Temporary Worker is not entitled to receive payment from the Employment Bureau or Clients for time not spent on Assignment, whether in respect of holidays, illness or absence or for any other reason unless otherwise agreed.

8	CONDUCT OF ASSIGNMENTS
8.1  The Temporary Worker is not obliged to accept any Assignment offered by the Employment Bureau but if he does so, during every Assignment and afterwards where appropriate, he will:-
(a) Co-operate with the Client’s staff and accept the direction, supervision and control of any responsible person in the client’s organisation;

9	TERMINATION
9.1  The Employment Bureau or the Client may, without prior notice or liability, instruct the Temporary Worker to end an Assignment at any time.
9.2  The Temporary Worker may terminate an Assignment by giving reasonable notice to the Employment Bureau.”

15	Also within Clause 8, many detailed requirements are imposed upon the temporary worker to observe the directions of the client.  

16	There are express references to the Working Time Regulations, dealing with working hours and leave, and we asked Mr Curl: against whom would any claim for breach be made?  He assured us that such claim would be made against the Respondent.  

17	The reference to the Working Time Regulations is in our view instructive, since it was submitted by Mr Negishi that an analogue could be found in the Working Time Regulations, which provide as follows:

“2 Interpretation
(1) In these Regulations -
‘worker’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) –
(a) a contract of employment; or
(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.”

18	This provides an expanded approach to the definition of a person protected by these Regulations.  They deal with worker and not the more restricted definition of employee within the Employment Rights Act.  It is also to be noted that the language is different from the Disability Discrimination Act because, for example, the person who undertakes to perform personally any work has to do it for the other party to the contract under Working Time Regulations, whereas the link to another party to the contract does not appear in the Disability Discrimination Act.  

19	The submissions relating to the Regulations are relevant also in our approach to construction. Since it is accepted that the Respondent is liable to the Temporary Worker for breach, s/he must be within the definition in Reg 2.  So the worker on this analysis performs personally any work or services for another party to the contract ie the Respondent. 

20	It was Mr Curl’s submission that the Respondent did not engage the temporary workers as employees and had no obligation to them, under employment protection legislation, because the services were being provided to the client.  This would be the person who is described separately in the Disability Discrimination Act as “the principal”.  Under Section 12, a person is entitled to protection against discrimination if they are in a position as a contract worker.  So, Mr Curl argues, the fact that the work is performed not for the Respondent, but for the client, is a relevant distinction.  We disagree.  As we have pointed out, the expression “another party to the contract” does not appear in the Disability Discrimination Act and Mr Curl’s submission does not meet that point.  Since there is no difference between do and perform, the language common to the Disability Discrimination Act and the Working Time Regulations 1998 is  a contract …  personally to do/perform any work. Even if we accepted Mr Curl’s point, the irreducible features of the contract as applied to the Working Time Regulations 1998 are within the section 68 definition.

21	The second submission to deal with, therefore, is to consider whether or not those persons affected by the Temporary Worker contract are to be regarded as being within the meaning of employees under Section 7 of the Disability Discrimination Act.  In our judgment the language of the contract is telling.  These are temporary workers.  They do work.  They cannot substitute another person to take their place.  That work is done for a client of the Respondent but, in practical terms, the contractual relationship is exclusively between the temporary worker and the Respondent.  It requires the temporary worker, when accepting an assignment, to do work.  That it is performed for the client seems to us not to take it outside the scope of Section 68.  It is irrelevant to that consideration, because all that is required is for there to be an obligation to do work.  

22	This is not a case where the Tribunal is required to consider whether there exists during the down-time some form of relationship between the Respondent and the Applicant, so as to constitute a global or umbrella contract of employment as has been put in the leading authorities eg McMeechan v Secretary of State for Employment [1997] ICR 549 CA.  But it is of interest to note that in that case, agency workers were held at least during their assignment to a client to be employees of the agency for the purposes of enforcing a claim for wages (against the Secretary of State under Employment Rights Act 1996 Part XII) when their agency employer became insolvent and failed to make payments for the last assignment. Part XII is regulated by the section 230 definition of employee.   Waite LJ, giving the sole judgment, asked the “familiar but elusive question - what marks the difference between a contract of service and a contract for services?” (at 355C) and found its answer important and not easy (565H). Nevertheless the Court held that the answer, at least in respect of single assignments, was determined by construction of the contract, and did not remit the case to the Employment Tribunal for that task. 

23	We are only concerned with, whether on the date of the Applicant’s dismissal there were 15 employees as defined by section 68. There were clearly six employees like the Applicant and those people affected by the Temporary Worker Contract would seem to us to fit the wider definition and that is the simple answer to the legal point in this case.

24	A number of other points were raised because the Tribunal went on to consider the definition of contract workers as opposed to employees within Section 12.  In our judgment that was unnecessary.  Section 12 contains a code which outlaws discrimination by principals, here “clients” so that those persons may be protected from discrimination while on assignment, but it is not relevant to the correct meaning of Section 68.  

25	The Tribunal then went on to consider at Mr Curl’s invitation the degree of control which the Respondent exercised over its temporary workers as compared with that of the client.  Again, this matter would not arise unless there was consideration of there being a contract of service.  Traditionally, the approach is to consider the degree of control amongst a range of factors set out in Ready Mixed Concrete South East Ltd v Minister of Pensions and National Insurance [1968] 2QB 497 as recently followed and upheld in Montgomery v Johnson Underwood Ltd [2001] IRLR 269.  Here, the Court of Appeal decided the safest starting point is that there must be a mutuality of obligation between the employer and employee;  there must be a sufficient degree of control by the employer of the employee and the other provisions of the contract are consistent with it being a contract of service.  Thus, only if the Tribunal was concerned to identify a contract of service did it become necessary to apply that test.  The correct answer is to look simply at Section 68 and to make an assessment of whether or not the Temporary Worker contract fitted within that definition.  In our judgment it did.  

26	It is not necessary, therefore, to examine the other tests for establishing whether a contract of service or a contract for services existed.  The language of the Temporary Worker contract excludes the relationship of a contract of employment as between the Respondent and the worker but, viewing the contract as a whole, the simple issue to decide is whether or not the obligations set out in it correspond to those envisaged in Section 68.  In our judgment they do and for that reason we hold that the Tribunal has jurisdiction to deal with Mrs Burton’s disability discrimination claim.

Further steps
27	Having considered with the Applicant the way forward, we note that the Respondent fairly conceded that the Applicant was disabled. The Applicant does not wish to present any more medical evidence and so we will remit the case to the same Employment Tribunal unless, in the judgment of the Regional Chairman, that is impracticable.  The parties estimate a day for this hearing and, there being no other directions, we thank both Counsel for their submissions, and also thank Mr Curl for his kind comment that we have been fair in our approach to this case.