Appeal No.UKEAT/0052/04/MH

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 April 2004
Judgment delivered on 2 July 2004

Before
HIS HONOUR JUDGE PETER CLARK
MR D SMITH
MS P TATLOW

MR S P BUNCE	APPELLANT

(1) POSTWORTH LTD t/a SKYBLUE  
(2) GREAT RAILWAY MAINTENANCE LTD t/a CARILLION RAIL	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR A HOGARTH QC
(of Counsel)
Instructed by:
Messrs O H Parsons & Partners
3rd Floor
Sovereign House
212-214 Shaftesbury Avenue
London WC2H 8PR	
For the Respondent	MR J BOWERS QC
(of Counsel)
Instructed by:
Messrs Clarks 
Solicitors
No 1 Forbury Square
The Forbury
Reading RG1 3EB

SUMMARY

Contract of Employment

Definition of employee

Agency contract - lack of mutuality of obligations - contract for services - no unfair dismissal/breach of contract jurisdiction.

HIS HONOUR JUDGE PETER CLARK

1	This is an appeal by Mr Bunce, the Applicant before the Sheffield Employment Tribunal, against that Tribunal’s Decision, promulgated with Extended Written Reasons (EWR) on 16 September 2003, that he was not an employee of either (1) Postworth Ltd t/a Skyblue (Skyblue) or (2) Great Railway Maintenance Ltd t/a Carillion Rail (Carillion), so that the Tribunal had no jurisdiction to entertain his complaints of unfair dismissal and breach of contract against either Respondent.  

2	As appears from the Tribunal’s EWR, his contention that he was an employee of either Respondent failed on the grounds that:

(1) there was no mutuality of obligation between the Applicant and Skyblue, an employment agency with whom he was in contractual relations between 10 November 2001 and 19 December 2002 under the terms of a written Associate’s Agreement (the Agreement), signed by both parties.
(2)  Alternatively, looking at the various indicia on the facts, this was a contract for services, not a contract of service. 
(3) There was no relevant transfer of the Applicant’s employment from Skyblue to Carillion.  

3	This appeal does not challenge the finding that the Applicant was not employed by Carillion.  Accordingly the only question before us is whether the Tribunal erred in law in finding that the Applicant was not employed by Skyblue within the meaning of section 230 Employment Rights Act 1996.  

Mutuality of obligation
4	It is now well established on the highest authority that one of the irreducible minima of a contract of service is that there be mutuality of obligation, the employer to provide work and the employee to do it.  Carmichael -v- National Power Plc [1999] ICR 1226; Montgomery -v- Johnson Underwood [2001] IRLR 26 (CA).  

5	Why did the Tribunal find that this element was missing here?  They looked at the Agreement made between the Applicant and Skyblue, in particular this clause under the heading “Associate’s Agency Agreement”:
“3  Assignments
(a) The Employment Business [Skyblue] shall endeavour to obtain suitable Assignments for the Associate [Mr Bunce] with clients to work as assistant welder at an hourly rate of £12 …..
(b) The failure by the Employment business to obtain suitable Assignments for the Associate shall not give rise to any liability on the Part of the Employment Business and the Associate recognises that there may be periods between Assignments when no work is available.
(c)  The Associate shall not be obliged to accept an Assignment offered by the Employment Business.”
The effect of that contractual provision is summarised at paragraph 7 EWR.  

6	Having directed themselves to the need to find mutuality of obligation as a requirement of a contract of service, the Tribunal concluded, at paragraph 14 EWR:
“Were the irreducible minima met in this case?
We find not.  We cannot detect the element of mutuality of obligation.  On the facts that we have found the applicant was not entitled to expect a constant stream of work and did not do so.  Conversely the first respondent or subsequently the second respondent could not rely upon or insist upon the applicant’s acceptance of assignments offered to him.  Accordingly on this ground alone we would find that the applicant was not an employee of either respondent.”

7	In challenging that finding Mr Hogarth QC submits that the Tribunal misunderstood the nature of the test.  He draws a distinction between the mutual obligations, the employee to provide his personal service in consideration of the remuneration paid by the employer, referred to by McKenna J in Ready Mixed Concrete [1968] 2QB 497, 515C, and the requirement for mutual obligations over a period of time,  See McMeechan -v- Secretary of State for Employment [1997] ICR 549.

8	In McMeechan there was no master agreement regulating the general terms of engagement between the employment agency and its temporary workers.  That position must be contrasted with the Agreement in the present case.  Instead the temporary worker was required to complete a “job sheet” in respect of each job worked for a particular client, containing certain terms.  The Court of Appeal held that whether or not a general contract of service existed between worker and agency, the objection that there was lack of mutuality did not apply to the last specific engagement of the Applicant, a period of four months with the last client of the agency for whom he worked.  That was sufficient to found his claim for payment of wages owed by the agency, then insolvent, out of the redundancy fund administered by the Secretary of State, Respondent to his claim.  

9	We return to the facts of the present case, as found by the Tribunal.  Carillion carried on the business of railway maintenance and civil engineering.  It was a company associated with Skyblue.  The Applicant commenced working for Carillion on about 10 November 2001, having been supplied by Skyblue and worked regularly for Carillion until his engagement by Skyblue was terminated orally by Skyblue on 19 December 2002.  

10	In these circumstances, contends Mr Hogarth, the Applicant was employed by Skyblue for a continuous period in excess of twelve months under what he describes as an “umbrella” or “global contract” (see Clark -v- Oxfordshire Health Authority [1998] IRLR 125) and thus qualified for unfair dismissal and breach of contract rights as against Skyblue.

11	In response, Mr Bowers QC points to the need to look at the terms of the contract between the parties.  Here, unlike McMeechan, there was a single written agreement relating to the general engagement of the Applicant by Skyblue.  The point depended upon a proper construction of those written terms.  See Stevedoring & Haulage Services Ltd -v- Fuller [2001] IRLR 627 (CA).  The facts of the present case were, so far as is material, indistinguishable from those in Brook Street Bureau UK Ltd -v- Dacas [2004] EWCA Civ 217 5 March 2004, Court of Appeal, reversing the EAT decision referred to by this Tribunal (reported at [2003] IRLR 190) .  In Dacas the Applicant worked as a cleaner from about April 1996 until April 2000 exclusively at a mental hospital run by Wandsworth Council.  She worked regular hours, five days a week and day-to-day control over her was exercised by the Council, which provided her with materials and equipment.  Her services were supplied by Brook Street, an employment agency.  She had entered into a written contract with Brook Street which, apart from declaring that the contract was one for services (as in the present case), contained this clause:

“2. Assignment . 
 (a) Brook Street will endeavour to obtain suitable assignments for the Temporary Worker to work as a Temp 
 (b) The Temporary Worker acknowledges that it is in the nature of temporary work that there may be periods when no suitable work is available and agrees: 
(i) that suitability shall be determined solely by Brook Street and, 
(ii) that Brook Street shall incur no liability towards the Temporary Worker should it fail to offer opportunities to work in the category specified in (a) above or in any other category . 
(c) The Temporary Worker is not obliged to accept any offer (or deemed offer) to enter into a contract for services with Brook Street.”

12	In giving the principal judgment of the Court, with which Sedley LJ and Munby J agreed in the result, Mummery LJ referred to McMeechan (paragraph 57), as being helpful to Mrs Dacas, but also to Montgomery v Johnson Underwood in which it was held that the Applicant was not employed by an employment agency, which exercised no control over the work to be done by her as a part-time receptionist/telephonist for the end user.  The absence of mutuality of obligation and control by the agency was fatal to her contention that she was an employee of the agency.  

13	The position in Dacas was helpfully summarised by Mummery LJ (paragraph 64) in this way:
“On Brook Street's appeal I would hold that the Employment Tribunal correctly concluded that the express contract between the employment agency and Mrs Dacas was not a contract of service. Brook Street was under no obligation to provide Mrs Dacas with work. She was under no obligation to accept any work offered by Brook Street to her.  It did not exercise any relevant day to day control over her or her work at West Drive.  That control was exercised by the Council, which supplied her clothing and materials and for whom she did the work. The fact that Brook Street agreed to do some things that an employer would normally do (payment) does not make it the employer. Nor am I able to find that although, as was conceded on behalf of Mrs Dacas, there was no "umbrella" contract of service between. Brook Street and her, she had a contract of service with Brook Street governing the specific assignment at West Drive and separate from the Temporary Worker Agreement. There was only one contract. There was no basis in the documents or in the evidence for finding another contract between Brook Street and Mrs Dacas governing her work at West Drive and holding it to be a contract of service. The role of Brook Street was not that of an employer of Mrs Dacas. Rather it was that of an agency finding suitable work assignments for her and, so far as the Council was concerned, performing the task of staff supplier and administrator of staff services. The real control over the work done by Mrs Dacas at West Drive and over her in the workplace was not exercised by Brook Street.  Although contractual labels are not, of course, conclusive, the Employment Tribunal did not err in law in taking account of the express provision in the Temporary Worker Agreement that the contracts between Brook Street and Mrs Dacas in respect of specific assignments were to be contracts for services. The Employment Tribunal found as a fact that there was no other contract between Brook Street and Mrs Dacas. I would allow the appeal by Brook Street.” 

14	In our judgment the submissions of Mr Bowers are to be preferred to those of Mr Hogarth.  McMeechan turned on the terms of the specific engagement relating to the final end user of the agency’s services.  In Clark, the bank nurse was not employed by the Health Authority under a contract of service, as the Tribunal found.  The EAT were wrong to interfere with that finding, so the Court of Appeal held.  The terms of the written Agreement in the present case place it in the same category as those in Dacas and Montgomery, where no contract of service was held to exist.  Questions of an implied contract between the Applicant and Carillion as end user, discussed by the Court of Appeal in Dacas and in Franks -v- Reuters Ltd [2003] IRLR 423, do not arise in the present case.  It follows that the Applicant’s case that he was employed under a contract of service by Skyblue “founders on the rock of absence of mutuality”, to borrow the phrase used by the Employment Tribunal in Carmichael -v- National Power Plc  (see per Lord Irvine of Lairg, LC, 1231).

The Tribunal’s alternative finding
15	Strictly, this alternative finding (EWR paragraph 15) does not now arise for determination.  However, in deference to the arguments addressed to us by Counsel we again prefer those of Mr Bowers.  The Tribunal weighed up the factors listed at paragraph 15 and concluded, overall, that they pointed away from a contract of services made between the Applicant and Skyblue.  That was a permissible finding.  In particular, the minimal control exercised by Skyblue (as opposed to Carillion), taken with the other factors considered, militates against a finding that he was employed by Skyblue.

Conclusion
16	It follows that this appeal fails and is dismissed.